Samsung ... identified as Asia's biggest family business.
Samsung ... identified as Asia's biggest family business. Photo: Reuters
It must be tough keeping tally of billionaires in China.
The Hurun magazine, which ranks China's wealthy, counted 271 US dollar billionaires in this year's rich list, more than double last year's total. Liang Wengen, a 55-year-old construction equipment magnate from Hunan, topped the rankings with an estimated fortune of $US11 billion. At this rate it won't be long before China surpasses America's billionaire count of about 400.
India lags China in billionaire numbers - 57 according the latest rich list published by Forbes - but it boasts more tycoons in the world's top 100. India-born businessmen fill seven places on that list compared with just one from China - the internet entrepreneur Robin Li, who came in at number 95. India even had two citizens in the Forbes top 10 - the London-based steel magnate Lakshmi Mittal and industrialist Mukesh Ambani, owner of the world's most expensive house.
Asia's bulging cohort of billionaires is one indicator of the region's growing economic might - it now has more billionaires than Europe.
But another factor is the success of Asia's big family-owned companies. Credit Suisse studied more than 3500 listed family-controlled firms with market capitalisations of more than $50 million in 10 major Asian economies and found they made up about half of all listed companies.
The total market capitalisation of the family firms studied was equal to 34 per cent of Asia's total nominal gross domestic product.
The biggest family business identified in the study was South Korea's Samsung, which accounted for 10.3 per cent of the country's market capitalisation. Second was Mukesh Ambani's conglomerate Reliance.
The researchers concluded family businesses "are the backbone of the Asian economies". They found listed family firms outperformed local benchmarks in seven of the 10 countries studied and that total market capitalisation of Asian family businesses expanded about six-fold between 2000 and 2010.
Asia's big family companies have some common traits. Many are large conglomerates like India's Tata Sons, which controls more than 100 companies across a host of sectors including steel, vehicles, telecoms, beverages and IT.
Credit Suisse said Asia's family businesses avoided high-risk investment strategies and favoured borrowing from banks rather than issuing corporate bonds.
Many management decisions were also underpinned by "Asian values", especially the tradition of passing on leadership to heirs.
But the study also identified some significant differences.
In the Philippines family businesses accounted for 83 per cent of total market capitalisation compared with just 11 per cent in China, where state-owned enterprises dominate the economy.
In India family firms with market capitalisation of more than $50 million made up 67 per cent of listed companies, the highest proportion in Asia. China had just 13 per cent.
Tax payments underscore the influence of big family businesses in India. They contribute about 40 per cent of corporate tax and 18 per cent of all tax revenue collected.
The Godrej Group is typical of many family-owned conglomerates in India. Its core business is consumer products, especially whitegoods, but it also has an array of spin-off businesses including engineering, agribusiness and a fast-growing property development business. The chairman, Adi Godrej (net worth nearly $US7 billion), says big family conglomerates make sense in a country like India.
"It creates financial stability and the opportunity to introduce the best business management practices," he told me in a recent interview. "We have married best practice with very focused companies within a group that is able to add a lot of value in a developing country."
Will Asia's dynasties be able to maintain their clout?
The complexity of international finance means they are relying increasingly on professional managers. Inheritance is difficult to manage and many big family firms struggle with succession.
The influence of family-controlled businesses is likely to fade eventually. But they will produce plenty more billionaires in the meantime.