Chinese family firms hold key to future of Asian economy

Chinese family businesses (CFBs) need to change fundamentally the way they work if Asia's importance as an economic

A new report from Andersen Consulting and the Economist Intelligence Unit (EIU), Beyond the Bamboo Network, says that the traditional strengths of CFBs - the role of middleman and the reliance on personal relationships - will matter less than their ability to build markets and acquire new customers. Radical change will be needed, with a focus on strategic thinking, marketing and effective management ofhuman capital.

CFBs control an extremely large percentage of Asia's economic wealth and their success will have significant implications for their country's economy on the eve of China's potential accession to the World Trade Organisation (WTO).

"The elimination of trade barriers among the Asia Free Trade Agreement (AFTA) members will make Asia an attractive region for outside investors - an understanding of how CFBs operate and are changing will be important for multinationals, should they decide to build alliances in the Asia-Pacific region," said Joseph Lobbato, a partner in Andersen Consulting's organisation and human performance practice in Asia.

"The practices and values that have made multinational businesses strong will become much more important to CFBs as globalisation opens up Asian markets to competition from overseas."

Ken Davies, chief economist at EIU Asia, agreed."As globalisation and e-commerce significantly alter the business environment, these businesses will enter into commercial engagements with multinationals at a much faster rate; he said.

Li Ka-Shing, one of the wealthiest businessmen in Asia, is transforming his "family empire" into a multinational organisation. His Orange telecommunications business was sold to Mannesmann and subsequently to Vodafone Airtouch. His Hutchison Group has established 3G alliances with several multinational corporations.

"Foreign investors must recognise the changes in Asia, as CFBs will be a key entry point to help expand their ventures into Asia," Lobatto said.