In the 1980s, Ayu watched his parents transform their three-story home in Wenzhou into a hub of industry. Using small machines to hand-craft leather shoes inspired by Italian designs sent by relatives, they grew the operation into a 700-person factory. This rise, often called the Wenzhou model, characterized a broader trend where family-run workshops, fueled by underground financing and personal networks, drove China’s economic expansion. And in the decades that followed, the tiny family-run workshop transformed into a 700 person factory, their relatives in Europe would send photographs of designer products from Italy for the workers to base their designs on. Piece by piece, using small machines,” Ayu recalls of watching his parents work in the 1980’s, i watched them make shoes by hand. It was a system that saw small companies secure finances through family connections and operate underground factories to produce cheap goods that would end up on the busy streets of China and beyond. “The network is very difficult to inherit,” Ayu says. “You have to build it yourself.
Today, these manufacturing pillars face an uncertain future. Many founders are now retiring, yet their children often feel ill-equipped to manage the intricate systems their parents established. Ayu, who currently operates an e-commerce platform, argues that the primary hurdle is not a lack of interest, but the reality that the foundational knowledge and commercial connections underpinning these firms are nearly impossible to transfer.
Hanqing Fang, an associate professor at the Missouri University of Science and Technology, notes that while legal ownership—such as shares—can transition quickly, the actual operational management is far more personal. The successor is often inheriting an entity that functions less like a modern corporation and more like an extension of the founder’s private life. Consequently, many heirs find themselves overseeing empty shells where the critical workforce begins to depart shortly after the leadership change. “Shares can be passed to a son or daughter overnight,” Fang says. “But the heir is being asked to take over something that looks like a company on paper but, in practice, is closer to the founder’s personal belongings.”. “Most young people dream of getting rich overnight, but I know there’s no such thing.
Statistical data highlights the scale of this impending shift. Research from HSBC Life indicates that two-thirds of wealthy individuals in China lack a formal legacy plan. Furthermore, a University of Ningbo study found that only 10 out of 114 private companies surveyed were under the management of a second-generation family member.
The pressure is compounded for younger potential successors. Wu, a marketing professional in Hong Kong whose family operates a snack processing factory in Shanwei alongside retail outlets in Shenzhen, expresses significant anxiety. He cites the burden of managing complex, deep-rooted interpersonal and financial relationships as a primary deterrent. For many young people, the heavy responsibility of maintaining these legacy firms outweighs the prestige of ownership.
China’s private sector is vital to the national economy, contributing over 60% of GDP and more than half of its total tax revenue. Economists warn that if thousands of these firms fail to transition successfully, the nation’s long-term growth could be jeopardized. The danger lies not in the complete disappearance of the businesses, but in the permanent loss of the specialized knowledge, supplier networks, and personal trust that were embedded in the original founders.
While Wu admits that he will likely take the helm of his family’s business eventually, he remains hesitant. He acknowledges that he is not currently ready to shoulder such complex duties. To him, the prospect is not as simple as inheriting wealth; it is a profound professional challenge that requires a level of capability he is still working to develop. Additional reporting for this account was provided by Yu-chen Li in Taipei, using given names only.
