Sunday, February 24, 2013

The Emergence of Social Entrepreneurship in China

Social entrepreneurship has only begun to take hold in China in recent years. According to a report by the “Foundation for Youth Social Entrepreneurship”, the social enterprise movement was catalyzed in 2004 with the publication of the Chinese editions of David Bornstein’s How to Change the World: Social Entrepreneurs and the Power of New Ideas, and Charles Leadbeater’s The Rise of the Social Entrepreneur. Both of these books sparked discussion and research on the concept. Also in 2004, the Global Links Initiative, the first membership organization that promotes social enterprises in China, organized a Sino-British Symposium on Social Enterprise and NPO. In 2006, the concept of social enterprise showed up increasingly in magazines, academic journals, and forums. For instance, the 21st Century Business Review, a leading Chinese business magazine, published about ten articles exploring the concept and practice of social entrepreneurship. In 2007, the Global Entrepreneurship Research Center of Zhejiang University, the Skoll Centre for Social Entrepreneurship of Oxford University, and the Entrepreneurs School of Asia organized the first International Forum on Social Entrepreneurship. Comparative Economic & Social Systems published special issues on social enterprise in 2007, 2009, and 2010.


China has also witnessed the introduction of social enterprise incubators and curricula in the past few years. In 2007, two organizations were established to promote social enterprise in China and provide resources to support the development of start-ups in the sector: the China Social Entrepreneur Foundation (友成企业家扶贫基金会) and Non-Profit Incubator (NPI). In 2008, the Foundation and the British council held a social entrepreneurship training workshop. A year later, Peking University launched an elective course titled “Social Entrepreneurship and the Practice of Social Innovation”.


What is the generally accepted definition of social entrepreneurship in China?

In China, the terms社会创业 (social startup) and 公益创业 (startup for public good) are used most often to refer to social enterprises. The literal translation of social enterprise (社会企业) refers to businesses in the private sector, to distinguish them from businesses with government affiliations. The Chinese see social startups (we will still refer to them as social enterprises for the rest of this article to avoid confusion) as independent organizations involved in commercial activities. This could be a nonprofit using a revenue-generation model or a for-profit business with a social focus, but the use of market forces is a definite prerequisite.

Why is social entrepreneurship emerging now?

In an article published in the Stanford Innovation Review, Meng Zhao attributes the lack of a strong social enterprise sector in China to the obstacles embedded in the country’s political, institutional, and cultural environment. The state’s tight regulation over the social sphere and suspicion of independent non-state actors has not provided much space for the experimental process of social enterprise development. For example, complex registration laws constrict activity in the social sector. The dual administration system requires grassroots groups to register both at the Ministry of Civil Affairs or its local agency and at a professional supervisory agency, a government office. The supervisory agency usually rejects requests from nonprofits, especially those working in politically sensitive areas. Because of the difficulties of registering as a non-profit, many organizations register as a for-profit company but lack a sustainable business model. The government also sets up its own NGOs, referred to as Government-Organized NGOs (GONGOs). As Daryl Poon noted in his work, “The Emergence and Development of Social Enterprise Sectors,” the Chinese government’s overbearing presence and excessive regulation has hindered the natural process of experimentation, failure, and improvement necessary for social enterprises to develop.

In recent years, as the government came to see that independent actors pose little threat to political stability, political institutions began opening up opportunities to allow for the growth of the third sector. In 2009, the Non-Profit Incubator partnered with the Bureau of Civil Affairs in Shanghai to organize the first Shanghai Community Venture Philanthropy Contest. This was the first time the Chinese government publicly supported grassroots social entrepreneurial initiatives. At the 12th “Five-Year National Economic and Social Development Plan” released in 2012, the Ministry for Civil Affairs (MCA) articulated its intentions to promote a more favorable environment for social organizations. It aims to develop new rules to lessen barriers to registration and make the sector more transparent and better governed, among other initiatives. In addition, the minister and the vice minister of the Ministry of Civil Affairs , and the vice mayor of Shanghai advocated the nationwide adoption of NPI’s incubation model. The NPI has also proposed a “New Privatization Movement” for China, likening this movement to the privatization of businesses in the 1980s and emphasizing both as top-down phenomena backed by the government, with social entrepreneurs as the primary players in this new movement. The NPI has been asked by the Bureau of Finance of Shanghai’s Pudong District to draft a “Guideline on Government’s Purchasing Social Organization Services” to elaborate on its vision.

As the political and institutional changes provide more opportunity for the growth of social enterprises, the cultural environment is also becoming more conducive to fostering social entrepreneurs. Traditionally, Chinese culture has emphasized self-interested pursuit of profit. Philanthropy was rare, and non-profits were not well-trusted. However, China has begun to witness the transplant of ideas from abroad.  Social problems are gaining priority in the eyes of the government and the people, where the focus has historically been on economic development. News and writings on the devastation caused by the Sichuan Earthquake in 2008 and the challenges of the rural poor and rural migrants are shared with an ever wider population online and have heightened the public’s awareness of social issues. Ideas of social enterprise and philanthropy are being transferred to China from abroad, through translations of foreign works, efforts by foreign agencies, and individuals and university students who have studied abroad. Incubators and university curricula are also beginning to reflect the growing consciousness of the roles social enterprises can play in China’s future.

What happens next?

 Based on the observed trends, it appears that social entrepreneurship will continue to blossom in China. With a large population, a plethora of social ills to be addressed, waves of young people with a business education, and the government’s increasing openness to organizations in the civil society sector, China is primed for the rise of socially-minded entrepreneurs. As the new crops of social enterprises demonstrate their sustainability and profitability, others will come to realize that a wealth of new opportunity is waiting to be explored and the existing institutions will be further motivated to embrace the movement. The social enterprise sector in China may be somewhat young compared to that of other countries, but will likely catch up soon. 

N. Trinh, Wharton '15

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