When Charity Finance conducted a survey late last year in the UK, it was found that a sizeable amount of the general public have never heard of the term social enterprise. Similarly, it might not be surprising that the concept of social enterprise is yet to be widely known or covered by mainstream media in other countries. According to a cover story on the Stanford Social Innovation Review, this is clearly the case in China. In spite of that, the concept of social enterprise is emerging in the country and through an understanding of the culture, significant events, and institutional change will show why this is a growing movement.
A Brief History
Back in the 1980s when China began economic reform, the government started to ease away from managing activities in the social sectors. Social services including education and healthcare were being transitioned to civil society. However, these non-profit, non-governmental institutions struggled to address social and environmental problems left uncared for by both government and business. Meanwhile, China has to deal with a rising number of problems, from abusive labor practices to environmental pollution and a growing number of people with drug-addiction as foreign trade increased. The concept of social enterprise was introduced several years ago as an alternative solution to address these issues. In other words, China has seen the rise of nonprofits, philanthropy, and social enterprise in just a few decades.
To comprehend how the social enterprise sector is developing in China, we must first understand the terms that are used. The words “social”, “enterprise”, and “social enterprise” have different meanings in Chinese just as social enterprise and social business could refer to social networks in English. The three typical terms in the sector are: social enterprise, social startup, and startup for public good.
Since the 1980s, the term “social enterprise” started appearing in the media to describe a private sector enterprise rather than an enterprise for society. In addition, the word “social” does not connote nonprofit, charity, or philanthropy and the word “enterprise” has little implication of innovation, risk taking, or venture. In fact, enterprise is widely understood as a for-profit company. To accurately describe what the social enterprise stands for in Chinese, the terms social startup and startup for public good are complementarily used.
In Chinese, “startup” indicates more clearly innovation and venture. With younger generations looking up to billionaire Robin Li, who co-founded Chinese search giant Baidu, as a hero, there is desire among the Chinese to start a business. The Chinese are also more familiar with the terms “public good” adopted from the nonprofit sector. However, if the term “public good” is used it will raise some eyebrows. In China, there is a sharp distinction between charitable and economic activities but social enterprises tend to incorporate both. It is difficult for them to accept practitioners that talk about social cause and business issues.
One reason for the pushback may come from the reality that nonprofit organizations already have low accountability and trust, leading to doubt and inability to distinguish social enterprises from for-profit enterprises. As an example, the Red Cross Society of China came under scrutiny when a photograph depicting a young woman with expensive sports cars was released online which accompanied her self-claim as commercial general manager of the organization. Allegations questioned whether the funds from the organization were used to pay for lavish expenses. China’s National Audit Office subsequently published a report that revealed irregularities in Red Cross’ accounts including a contract overpaid by $650,000 US.
But there may be a positive outlook. Such scandals have led to the loosening of the dual administration system that hinders the function of NGOs. It required charitable organizations to acquire two regulators – typically from the department of civil administration (a registration administration) and the department of government (a competent business unit) – to legally register. Now, NGOs that fall under categories of “public charity” (公益慈善), “social welfare” (社会福利) and “social service” (社会服务) can register directly under the civil affairs department.
A Timeline of Growth
While terminology is used to promote the concept of social enterprise, its growth since the mid-2000s is thanks to a number of significant events. More specifically, people started to write about social enterprises and founded such organizations.
In July 2004, the Global Links Initiative became the first organization to promote social enterprise in China. Founded in the UK, British social entrepreneurs visited China and hosted the first social enterprise forum. A few years later, the China Social Entrepreneur Foundation and the Non-Profit Incubator were founded.
In 2006, leading Chinese business publications released articles on the concept and practice of social entrepreneurship. David Bornstein’s How to Change the World: Social Entrepreneurs and the Power of New Ideas was released in China.
The presence of social enterprise is seeping through the country.
As mentioned earlier, relaxed policies will allow NGOs to register as an organization more easily. The government is also stepping up support of programs from Non-Profit Incubator and the China Social Entrepreneur Foundation. Meanwhile, it is estimated that the rising middle and upper class in China, and generally, are fueling the growth of the social enterprise movement.
Younger generations in China have clear understanding of what is social enterprise. They have an educational background and belief that innovative approaches should be used to solve social problems, as the traditional charity model does not work well in China. In addition, those who led charities were retired government officials or people with personal encounters with social issues. Now, the practitioners are increasingly the young and well-educated.
One challenge remains. The government remains very much intertwined with social innovation and can stop activity at any time. Yet as we have seen occurring around the world, the time has come for social enterprises to fix the world’s most pressing problems. Chinese social enterprises have the opportunity to work in various areas including philanthropy and environmental protection.
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