This article was first published in the Hong Kong Economic Times on 2026 Feb 13.
Author: Prof. Winnie Qian Peng, Director of the Roger King Center for Asian Family Business and Family Office, HKUST
The Chinese ver. is available at: https://mp.weixin.qq.com/s/ZpePgRIdtyI9z3D4-rSYxQ

In December 2025, I visited a remarkable food enterprise in Harbin: Churin Leadfoods— a century-old family business now stepping in its sixth generation. Founded in 1900 as the Churin & Co. by a Russian merchant Ivan Yakovlevich Churin (1833–1895), the company produced China's first Harbin red sausage(哈爾濱紅腸). It later became a state-owned enterprise, then was restructured into a private family business. Under the leadership of the fifth-generation operator, Ms. Zhong Zhaomin, and her daughter Ms. Lin Jiaxu, the company was transformed from a near-bankrupt small factory into a well-known Harbin enterprise.

One remark by Ms. Zhong has stayed with me ever since: "We may never make the Fortune 500 — but we intend to last 500 years."

That statement raises a profound question: should a business owner pursue scale and dominance, or depth and longevity? My years of research into family enterprises have revealed a consistent pattern: the founders and leaders of century-old businesses tend to exercise a strong, deliberate discipline over growth. I recall presenting on this theme at a family enterprise forum in Beijing in September 2025. Afterward, a Mainland entrepreneur approached me to express his gratitude — he said that no one had ever raised the importance of growth control with him before. The reason is not hard to understand: founders often lack the long-horizon perspective that underlies multigenerational businesses, especially in high-growth environments. Charging ahead, driven by confidence and momentum, they expand and borrow without recognising the severe financial vulnerabilities this creates. When the economic cycle turns, over-leveraged enterprises can collapse with alarming speed.

Three Pillars of Disciplined Growth

Business leaders must therefore be clear about the direction they are choosing: Is the goal to grow large, or to grow lasting? If the answer is the latter, how does one practise intentional growth control? I offer the following three principles for consideration:

First, honour the boundaries of the firm's values. Values are the highest governing principle of a business. They must be upheld without compromise — integrity above all. Integrity is the foundation upon which a strong organisational culture and an enduring external brand are built. Once eroded, the damage can be profound and lasting. A firm must first and foremost hold the line on its values.

Second, set boundaries for the financial growth. Financing and the pace of expansion must be kept within what the business can genuinely sustain. This means never crossing financial red lines — for instance, establishing a ceiling on debt ratios and ensuring the firm can meet its obligations as they fall due, regardless of the economic climate.

Third, recognise the boundaries of core competence. A business should not extend into industries it does not understand, nor should it chase trends and enter unfamiliar markets. In other words, firms should consciously resist the temptation to follow the crowd, limiting expansion to areas of genuine expertise as a means of maintaining rational, sustainable growth.

The 'Valuation Adjustment Mechanism' and the Risks of Listing

Let us take the question of whether to pursue a public listing as a lens through which to examine these principles. In recent years, certain companies — eager to IPO — have signed so-called "valuation adjustment mechanisms" (VAMs, commonly called 對賭協議 or "bet-on agreements") with major PEs or investment institutions. Under such arrangements, the investor and the target company agree to conditional terms: if the listing failed or specified milestones are not achieved, the investor can demand a valuation adjustment, share repurchase, or financial compensation.

Companies seeking an IPO often structure the VAM around successful listing. If the listing proceeds, no harm would be done. But if it fails, the enterprise may face punishing interest payments or compensation obligations, plunging it into a severe debt spiral from which recovery is difficult. There are certain cases of Chinese entrepreneurs who signed VAMs premised on listing, only to find the listing unsuccessful — triggering clauses that left them carrying enormous liabilities.

It is evident that companies entering into listing-related VAMs are exhibiting excessive confidence in their readiness to list, and are lacking precisely the disciplined growth awareness described above. This can draw a business into a vortex of over-expansion and unmanageable risk. Entrepreneurs must approach VAM agreements with the utmost caution.

The Double-Edged Sword of Listing

To be clear, listing offers genuine benefits: access to capital, enhanced governance standards, and greater professionalisation. But for many enterprises, going public is a double-edged sword. Listed companies must regularly disclose quarterly, semi-annual, or annual financial statements, presenting their operating performance to shareholders. If results fall short of expectations, investor confidence may falter — even when the underlying financial health of the business is sound and operations are stable. In the absence of short-term growth catalysts, a company may be misjudged by the market or sold down by investors seeking quick returns, eroding the firm's asset value. This pressure frequently pushes executives toward a focus on near-term profit maximisation, or even imprudent expansion.

At its heart, the double-edged nature of listing reflects a fundamental tension between long-term stewardship and short-term profit seeking. For enterprises committed to lasting, steady growth, a public listing may not serve their long-term interests. Lee Kum Kee, Hong Kong's century-old family enterprise, has consistently chosen to remain private — and it stands as one of the most instructive examples of this philosophy.

Further Reflections on Going Public

In the current market environment, where most investors prioritise short-term returns, firms committed to the long view face distinctive challenges. For many family enterprises, the right path may simply be to work alongside a small number of like-minded, long-term partners focused on lasting value and impact — rather than rushing into public markets.

A head of a Hong Kong family office focused on impact investing shared a compelling observation: the pressure on listed companies to deliver short-term performance can exacerbate the phenomenon of "involution" — where firms feel compelled to offer an ever-growing array of products that society does not truly need, consuming precious resources without generating commensurate value.

That said, listing is not solely about short-term gain. Particularly in the context of Hong Kong's ambitions as an international financial centre, listing can open funding channels, elevate brand visibility, and strengthen governance transparency and professionalism through market discipline.

Ultimately, however, listing is a decision of profound strategic consequence. Entrepreneurs must honestly ask themselves: Is this listing intended to lay the foundation for a century-long enterprise — or merely to satisfy the short-term expectations of capital markets? If an entrepreneur can hold true to the founding vision, clearly communicate a philosophy of long-term value creation, and build the governance architecture to support it, then listing can indeed become a catalyst for sustainable development. The key is to maintain disciplined growth awareness after listing, and to avoid being pushed off course by market pressures. This demands adherence to financial discipline, a clear understanding of competence boundaries, and a dynamic balance between the pace of growth and the quality of operations.