Analysis of Zhongshun Jierou's Professional Manager Reform: A Typical Case of the Dilemma in Family Business Transformation

Based on the searched information, I will conduct a systematic and comprehensive analysis for you.

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Zhongshun Jierou Paper Co., Ltd. (Stock Code: 002511.SZ) is a key enterprise in China’s household paper industry. Founded by Mr. Deng Yingzhong, who started with a RMB 500 loan in 1979, the company gradually grew into the first A-share listed company in the industry [1][2].

• In April 2021, founder Deng Yingzhong and his son Deng Guanbiao stepped down from the positions of chairman and general manager, respectively
• Liu Peng, a professional manager with a financial background (formerly president of Industrial Bank’s Jiangmen Branch and Zhongshan Branch), was introduced to take over as chairman
• Deng Yingzhong stated at the time that this move was aimed at “diluting the family management style and building a modern enterprise system”, and said that he and Liu Peng “are highly aligned in philosophy, like soul father and son” [1][3]

Indicator	2020	2021	2022	2023	2024	First Three Quarters of 2025
Operating Revenue (RMB 100 million)	78.24	91.50	85.70	98.01	81.51	64.78
Net Profit Attributable to Parent (RMB 100 million)	9.06	5.81	3.50	3.33	0.77	2.30
YoY Change in Net Profit	—	-35.85%	-39.76%	-4.86%	-76.80%	+329.59%

After Liu Peng took office, the company’s net profit slid sharply for four consecutive years, plummeting from a peak of RMB 906 million in 2020 to RMB 77.18 million in 2024, a staggering drop of 91.5%. Although there was a rebound in the first three quarters of 2025, this was mainly due to the industry-wide cost dividend from the decline in pulp prices, rather than an effective recovery of endogenous growth momentum [1][2][3].

Since the implementation of “de-familyization” in 2021, nearly 10 directors, supervisors, and senior executives have resigned from Zhongshun Jierou one after another, covering core management positions such as marketing, production, financial auditing, etc. From December 2025 to January 2026, Liu Peng resigned from the positions of president and chairman within a single month. Gao Bo, the chief financial officer, took over as president, and Deng Guanbiao, the vice chairman, performed the duties of chairman on an interim basis [1][2][3].

• Raw Material Cost Pressure
  : Pulp accounts for 40%-60% of production costs. The average price of imported wood pulp from 2021 to 2023 rose by about 35% compared to the 2020 benchmark, while terminal paper prices remained flat. This price scissors seriously eroded the company’s gross profit margin [3]
• Overcapacity in the Industry
  : In 2024, the production capacity of household paper increased by 10.77% YoY, while market demand only rose slightly by 0.61%, exacerbating the supply-demand imbalance [1]
• Impact of Channel Transformation
  : As the proportion of online channels increased, the low-cost customer acquisition and traffic competition on e-commerce platforms further compressed the industry’s profit margin [3]

During Liu Peng’s tenure, he vigorously promoted a comprehensive transformation from “household paper” to “household products” (covering care, maternal and child, and home cleaning products). However, in the first half of 2025, the revenue from personal care and other businesses was only RMB 49.65 million, accounting for just 1.15% of total revenue, which has not yet formed effective support [2].

Despite the promotion of “de-familyization”, the Deng family still maintains strong control at the equity level:

• Guangdong Zhongshun Paper Group holds a 29.32% stake
• Zhongshun Company holds a 20.72% stake
• Deng Yingzhong and his sons Deng Guanbiao and Deng Guanjie are the actual controllers
• Deng Guanbiao still oversees the operation and management of core brands such as Duolemi [3]

: Under the governance framework led by professional managers, how to achieve strategic synergy between family shareholders and professional management teams has become a core issue in corporate governance.

Zhongshun Jierou is not an isolated case. According to relevant research [4][5]:

Dimension	Data and Findings
Succession Success Rate	In Western countries, the second-generation succession rate is about 30%, and the third-generation rate is less than 15%
Current Situation in China	Approximately three-quarters of family businesses faced succession issues between 2017 and 2022
Governance Challenges	Prestige, leadership, and charisma cannot be directly inherited

• Double Star Group
  : A control dispute broke out between founder Wang Hai, his son Wang Jun, and daughter-in-law Xu Ying, which ended with “severing ties”. Wang Hai then advocated for “capable person succession” and “professional manager succession” [6]
• Shanxi Haixin Group
  : After the second-generation Li Zhaohui took over, the company eventually fell into a debt quagmire, and 843 accounts receivable went unsold at auction [4]

1. The decline in performance cannot be entirely attributed to the governance model

• External factors such as rising raw material costs, overcapacity, and price wars are systematic risks faced by the entire industry
• Peer enterprises such as Vinda and Tempo also face similar pressures, but some have achieved relatively stable profits by sticking to the mid-to-high-end route [3]

2. Positive Signals in the Reform Process

• The performance rebound in the first three quarters of 2025 indicates that cost-side pressure has eased
• The first phase of the 300,000-ton pulp-paper integration project in Dazhou was put into operation, improving pulp self-sufficiency capacity
• Gao Bo’s appointment as president marks the continuous optimization of the governance structure [2][3]

3. Deep-seated Dilemmas in Family Business Transformation

• Growing Pains of Power Restructuring
  : The founder’s personal heroism often leads to nepotism in the organizational structure and stagnation in system construction
• Intergenerational Value Conflicts
  : The growth experience of “second-generation enterprise heirs” is completely different from that of their parents, leading to different business philosophies and values
• Tension Between System and Blood Ties
  : Although the professional manager system can introduce professional capabilities, it is difficult to replicate the founder’s prestige and leadership

The case of Zhongshun Jierou shows that the transformation of family businesses to a modern enterprise system is a complex systematic project, which cannot be simply equated with “introducing professional managers”:

1. Optimization of governance structure
   is a necessary condition, but not a sufficient one
2. Clear strategic positioning
   is the core competitiveness – Zhongshun Jierou has been criticized for “lacking a clear market positioning” [3]
3. Synergy between the family and professional managers
   requires institutional arrangements, rather than simple power handover
4. Cultivation of endogenous growth momentum
   is more critical than short-term performance rebound

The transformation of family businesses is not an overnight process, and requires systematic changes in multiple dimensions such as governance structure, strategic positioning, and talent mechanisms.

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[1] Sina Finance - "Professional Manager Resigns, Has the “De-Familyization” of the Paper Giant Changed? (https://finance.sina.com.cn/roll/2026-01-11/doc-inhfxrmr7724879.shtml)
[2] Cailian Press/Investing.com - "Performance Growth Under Pressure, Diversified Transformation Fades, Will Zhongshun Jierou’s “Change of Leadership” Bring Changes? (https://cn.investing.com/news/stock-market-news/article-3159341)
[3] Sina Finance - "Zhongshun Jierou Promotes “De-Familyization”, Financial Background Executives at the Helm Face Growth Dilemma (https://finance.sina.com.cn/jjxw/2025-12-27/doc-inheepat7524340.shtml)
[4] Sina Finance - "Can “Second-Generation Enterprise Heirs” Take Over? (https://finance.sina.com.cn/wm/2024-08-17/doc-incixiyc9797637.shtml)
[5] Data from China Private Economic Research Association
[6] Southern Metropolis Daily/China News Service - "The “Double Star Endgame” of the Shoe King Father and Son (https://www.chinanews.com.cn/cj/2026/01-07/10547642.shtml)