For ultra high net worth Chinese families, the ongoing economic globalization is undoubtedly an unprecedented challenge, but also an opportunity. With the rapid globalization of the Chinese economy and the deepening of reform and opening-up, the top echelon of financially successful Chinese families need to have a clear understanding of the domestic and international situation so they can apply a globalized vision in deciding the future direction of their development.   

At present, excess supply constitutes a principal contradiction in the global economy. In industrial production in particular, a global aggregate demand deficiency is the main problem for both upstream raw material exploitation and midstream manufacturing and processing. In the 1970s and 1980s, the global population was still rising rapidly and that provided an important basis for the investment demand per capita of emerging countries, of which China is a leading representative, 20 years later. However, a gradual deterioration in population structure has resulted in a shortfall in total demand.            

Will this situation improve in a few years? That’s a question asked by many entrepreneurs. After all, based on the cyclical changes traditional industries have gone through in the past 20 years, this recessionary economy shouldn't last long, either. But unfortunately, traditional industries are not going through a simple periodic variation this time, but a shock caused by competition from new business models. Such a structural change will introduce creative destruction to many traditional industries.

Accordingly, ultra high net wealth families will have to experience this new economic normal. In contrast to the 10-12% annual growth previously enjoyed, China’s GPD growth rate will drop to 5-7%. With the increasing industry competition, many family enterprises are suffering from overcapacity, and they’ll have to transfer from “old economy” to “new economy” industries. Thus, these enterprises will face great challenges in the process of reforming.

In the complex and volatile international environment, the COVID-19 epidemic isn't over yet and the US economic recovery remains to be confirmed. Furthermore, the structural rebalancing in China and the massive impact of the emergence of new technologies and industries all over the world are placing new demands on high-wealth Chinese families.

In the 5 to 15 years to come, about 90% of the first generation of Chinese wealth creators will be faced with the challenge of preserving and growing their family wealth. As the first generation to pass down their wealth, they have no precedent or previous experience to follow. This is as big a challenge as any they've overcome in the past 40 years to accumulate their wealth and create business miracles.

If they can negotiate this challenge smoothly, it will help them lay a solid foundation for their business empire. Otherwise, what they've created may disappear.

Fortunately, with the development of information globalization, ultra high net worth Chinese families now can access experience in preserving and growing family wealth from other countries. Some rich families in North American and Europe have broken the long-believed curse that “a rich family can’t maintain its wealth for more than three generations” and have passed down their wealth to the 6th and even the 7th,8th generation. Undoubtedly, the inheritance system established in the process will help preserve and grow their family wealth for more generations in the future. Despite the different political and economic situations of different times, there are some common rules for global rich families to follow to build a sustainable family succession structure.

Since 2012, we have visited the US many times to communicate with prominent families there. Now,we have successfully introduced the American Family Office business model into China, tailoring it to meet the current economic environment in China and local clients’ demands perfectly. With the customized and comprehensive solutions provided to ultra high net worth Chinese families, HMCFO is devoted to becoming their close partner to ensure their family wealth and tradition are properly preserved and help them to “create a family legacy and establish an everlasting enterprise”.

We believe that only with our help, with focus on preparing at the source and systematic planning for the long term, can successful Chinese families pass down their family wealth smoothly and harmoniously from generation to generation. And only in this way can they properly deal with all the predictable and unpredictable factors that will arise in the process of inheritance and make sure their family achievements last as long as possible.