Although Xiao San was only Master Five's grandnephew, he had grown up with Master Five since his other relatives had passed away when he was young. He was like a biological grandson to Master Five.
When Master Five's biological son got married, he had followed the government's family planning policy and undergone a vasectomy once his daughter was born. After Master Five figured out the penalty for violating the one-child policy and found a place for them to hide from the government, he turned around and realized the giant mistake that his son had made, one that deprived him of a direct male descendant who would have continued his lineage. By then, the ship had sailed, so there was nothing that he could do but to surrender to fate.