The first generation built their businesses and accumulated wealth; the second generation studied abroad in the U.S. and the U.K. to broaden their horizons, then returned to take over the family business.
Now, the time has come for the “second-generation factory owners” to take the reins.
They are locked in heated arguments with their parents over order scheduling, factory relocations, and production line upgrades; they seek out peers on social media to vent about the challenges they face in taking over the business.
To put it somewhat dramatically, the future of China’s manufacturing sector now rests in the hands of the “second-generation factory owners.”

And the focus of investment promotion will shift accordingly.

Zhang’s “New Battleground”

In 2022, due to his father’s poor health, Xiao Zhang—who had just returned from studying in the UK—temporarily took over the family business. He spent his days at the factory, overseeing the machinery operations.

To his surprise, he discovered that despite the factory covering several thousand square meters, the books showed only a few hundred thousand yuan in assets, while the company was over a million yuan in debt.

Data management was still stuck in the Excel era. Although financial and production software had been purchased three or four years prior, everyone preferred to keep records by hand, and Zhang couldn’t even see how much inventory was left.

More importantly, since his father still held the reins of power, Zhang couldn’t get many people in the factory to do as he asked.

He couldn’t even get Old Liu, who was in charge of the production line, to do what he wanted. When urgent orders came in, Xiao Zhang had to humble himself and “beg” him. Old Liu would always make snide remarks: “Put whatever you’re working on down first. We’re doing this for the young master—you’re not allowed to leave until it’s done.”

About half the factory staff were older than Zhang—his uncle in charge of sanitation, his maternal uncle in charge of maintenance, and his aunt in charge of finance. As a young man fresh off the boat from studying abroad, his authority was practically nonexistent.

Later, as his father’s health gradually improved, Xiao Zhang found room to step back. He temporarily withdrew from production and shifted his focus to sales.

However, even on this new front, the clash between Zhang’s views and those of his elders showed no signs of easing.

Recently, a major client planned to build a smart factory and needed to purchase a large batch of equipment. Not only were the production processes extremely complex, but the dimensional requirements were also extremely strict. Looking at the blueprints the client sent over, Xiao Zhang hesitated: The factory didn’t have much experience in this area, but this order was a rare opportunity. Should he take it on?

He went to his father’s office and tentatively asked, “Why don’t we make a few samples first to test the waters?”

“No, no. We need to play it safe for now.” This was Old Zhang’s seasoned judgment: the client was currently just requesting a quote, and even if they produced samples, there was no guarantee they would land the final order.

“Hurry up and draft that proposal from yesterday—that’s the safe bet.”

Zhang Jr. returned to his office, silently opened the chat window, tapped a few keys, then immediately deleted what he’d typed. In the end, he sent the client a reply stating, “We cannot produce this.”

He understood his father’s reasoning: although yesterday’s project might ultimately yield zero profit and be quite tedious to handle, it offered fast payment terms and ensured they could pay salaries on time.

This is a compromise manufacturing companies have no choice but to make. Payment is received in installments only after product delivery and acceptance, but expenses for intermediate steps—such as purchasing raw materials, hiring workers, and maintaining machinery—must be covered upfront.

However, while upstream suppliers have short payment terms, downstream customers often pay on terms of over a year, with payment primarily made via accepted bills of exchange. The time gap between these two payment cycles easily leads to massive cash flow pressure, sometimes making it impossible to pay wages on time.

With the overall economic climate being tough, Old Zhang wants to “play it safe and weather the storm.”

But Young Zhang, who is better educated and has a broader perspective, thinks less about “stability” and more about “change.”

Their factory is located in a remote area; even a trip to a restaurant requires a two-kilometer walk, let alone other recreational activities, so recruiting workers has become increasingly difficult.

Xiao Zhang has long been planning to relocate and renovate the factory. But Old Zhang flatly refused, arguing, “Our profit margins are already very thin. Rent for a new facility is too high, and moving costs would be 500,000 yuan—and there’s no guarantee it would solve our recruitment problem.”

Another idea that was rejected was exporting their products overseas.

He joined several WeChat groups for “second-generation factory owners” on Xiaohongshu and attended a number of in-person gatherings, where he discovered that 20% of orders for many machinery peers came from overseas.

Old Zhang’s stance, however, was: “If delivery and inspection aren’t handled properly, they simply couldn’t afford the consequences of contract breaches or returns.”

Old Zhang’s “Old-Fashioned Thinking”

After working together for a long time, Xiao Zhang gradually came to understand his father.

A few days ago, a client they’d worked with for over a decade came to Dongguan on a business trip. Old Zhang brought Young Zhang along and chatted warmly with the client: “They’ve never once delayed payment to us at the end of the year.”

The client nodded: “Old Zhang has helped me a lot over the years. If he’s in trouble, I’ll support him even if it means I don’t make a profit.”

Old Zhang told the client two stories.

The first was about an investment promotion negotiation. An investment officer from Hunan wanted Old Zhang to relocate his factory there.

Old Zhang said, “He walked around the factory twice and estimated my fixed assets—very professional.” Instead of just reciting a script, the representative analyzed the local industrial chain’s upstream and downstream sectors from the perspective of long-term business operations, even presenting a list of preferential policies and running the numbers for Old Zhang on the spot.

Old Zhang was somewhat tempted, but he still couldn’t bear to leave Guangdong. “If I were to relocate, my first choice would be Foshan. However, they’re holding a promotional event there this month, so my son and I will go take a look.”

The second instance occurred during a flight. Old Zhang noticed that the trash chute in the airport restroom was exquisitely crafted. He crouched there for over an hour, studying its structure and construction, constantly pondering where the seams of this industrial product were. He was so engrossed that he didn’t even hear the in-flight announcement and nearly missed his flight.

The client laughed and said, “Everyone in the industry knows there’s a Mr. Zhang in Dongguan whose pursuit of quality is truly admirable. You treat your products as works of art.”

Old Zhang’s experience is something Young Zhang cannot replicate in a short time.

As a traditional factory, they don’t acquire many new clients each year, so maintaining relationships with existing ones is crucial. Just learning how to communicate with different clients was a headache for Young Zhang for a long time.

When he first took over the business, Young Zhang would instinctively try to come across as professional, rigidly listing the pros and cons of the products. But his father always told him he needed to understand the ways of the world. Once, when he accompanied his father to visit a familiar client, he shouted “Uncle!” during the formal meeting. His father took him to a dinner gathering and asked him to go out and buy a pack of cigarettes; he didn’t realize his father was telling him to step aside.

It wasn’t until he accompanied his father on many client visits that he realized: when the older generation meets new clients, they chat about personal hobbies, local customs, and everyday gossip. Only by establishing rapport and closing the distance can they move on to deeper discussions about cooperation.

Old Zhang often argued with clients.

Once, production had already begun on an order when the client suddenly requested a design change. Old Zhang immediately sent the client a WeChat message: “The blueprints were finalized, and the workshop has already started work. Now you want to change it? In that case, I’ll refund the deposit and cancel this order.”

The client replied: “Calm down, calm down—harmony brings prosperity. Let’s just produce according to the original design; no changes.” Old Zhang felt quite proud of this, believing that “as long as I do my work well and with precision, I have the right to choose my clients.”In the first half of 2023, Xiao Zhang and Old Zhang faced a difficult period—customer demand was declining, and there were far fewer bidding opportunities. They primarily supplied equipment to new factories, so as the number of new factory constructions dropped, their business naturally contracted. Old Zhang remained calm; he believed that as long as they maintained their edge in production quality, they could weather this cycle.

But while these cyclical issues were just part of the routine for his father, they constantly weighed on Young Zhang’s mind. Taking over the family business as a “second-generation factory owner” was far from easy.

A “New Direction” for Investment Promotion

When a company is just getting started, it’s full of vitality, and many business owners assume it can operate this way indefinitely.

But they gradually realize that, let alone their children, sometimes even they themselves can’t take over the reins.

As times change, the complexity of business management continues to rise. Without upgrading, the business cannot survive; yet constant upgrades further complicate the succession process.

This is why many entrepreneurs continue working until they are 70 or even 80 years old. It’s not that they don’t want to step down—it’s that they simply can’t.

At this historic moment of succession for the “second generation of factory owners,” as old and new ideas collide and power shifts from the old to the new, the focus of investment promotion efforts will also shift accordingly.

First, we must target key individuals.

At this stage, although some “second-generation” entrepreneurs have successfully taken over, the majority are still learning and gaining experience, and the “first generation” still holds the ultimate decision-making power.

Therefore, when following up on projects, investment promotion staff must clearly identify who holds the real decision-making power within the company.

At critical junctures, every effort must be made to influence the ultimate decision-maker with the authority to “make the final call,” ensuring a decisive resolution to avoid indecision and prolonged deadlock.

However, compared to the “first generation,” the “second generation” tends to think more broadly. Progressive ideas—such as relocation, renovation, and upgrading—that involve “expanding the business” are more likely to emerge from the minds of the “second generation.”

Building relationships with the “second generation” and having them influence the “first generation” may prove more effective than investment promotion officers taking the lead themselves.

Second, we must understand the mindset of the “second generation.”

In the future, the “second generation” who successfully take over will inevitably replace the “first generation” entirely and assume control of the company.

How should investment promotion staff reach out to the “second generation” and influence their site selection decisions? This may be a key challenge for the next phase of investment promotion efforts.

First, platforms like Xiaohongshu and Douyin—which the older generation finds less appealing—are actually gathering places for the “second generation.” They not only share their thoughts and feelings on social media but also find ways to promote their own products on these platforms.

If investment promotion campaigns fail to establish a presence on these new media platforms, it may become difficult to keep pace with the “second generation.”

Moreover, this new generation of entrepreneurs, having been exposed to foreign business philosophies and corporate cultures, places greater emphasis on science and professionalism, and has a somewhat different understanding of social conventions compared to the past.

Consequently, investment promotion staff must shift their focus from relationship-building to deep industry expertise.

Implementing a “chain leader system”? Establishing a dedicated industrial chain investment promotion team? Mapping out an investment promotion landscape? Compiling a list of investment projects?

When dealing with the “second-generation factory owners,” even these measures may not be enough.

You must become a quasi-expert—not only must you be well-versed in industry trends, but you must also understand the upstream and downstream segments of the industrial chain and the distribution of market channels to have a chance of successfully brokering projects.

Third, for the vast number of manufacturing enterprises lacking core competitiveness, if they cannot embrace new business philosophies, ensure a smooth generational transition, and complete transformation and upgrading, their elimination is highly likely.

It’s certainly a pity, but this is the reality of the business world.

Local governments cannot, of course, directly participate in corporate operations, but they can foster an excellent business environment.

A truly excellent business environment does not mean meeting all corporate demands at any cost or without conditions; rather, it means creating a business environment governed by the rule of law, where enterprises of different sizes, industries, and ownership structures can compete fairly and undergo natural selection.

It doesn’t require more preferential policies—it simply requires true fairness.

A small factory that seems insignificant today may, after a smooth generational transition and empowered by new management philosophies, rapidly scale up, go public, or even make it onto the Fortune Global 500 list, contributing significantly to regional economic development.

We are all part of this, so we naturally understand.