Why China must build a supportive ecosystem for its new crop of NGOs

Social Enterprise

Why China must build a supportive ecosystem for its new crop of NGOs

Young entrepreneurs are driving social enterprise in China. Photo: kevinschoenmakers (flickr)

China’s fast-growing mass of social entrepreneurs are being held back by government regulation and a lack of funding, according to a new report by Hong Kong-based FYSE.

China’s story seems to mirror that of other fast-growing economies: a deepening urban-rural divide, environmental degradation and increased middle-class activism on social issues. However:

China’s economic rise has led traditional foreign donors to reduce their donations to China, yet new donors such as Chinese foundations and philanthropists are not yet filling the funding gap. Therefore, a number of NGOs are embarking towards marketization and commercialisation ... to achieve financial sustainability.

This hasn’t always worked, and social enterprise in China has been more successful as business than nonprofit. In fact, because there is no special legislation to separate social enterprises from other organizations, 66 percent of those included in the survey were actually registered as for-profit companies. However, the current laws also seriously affect the ability of social enterprises to scale up:

71 percent of respondents generate less than 500,000RMB [$80,000 USD] in annual revenues and even mature social enterprises remain relatively small. For example, only two social enterprises surveyed achieved a turnover above RMB 10 million.

Young entrepreneurs are driving social enterprise in China—63 percent of them are 31-40 years old—and the potential for job creation through social enterprise equals that of the U.K. or India. To do their work, they need more support ecosystems and new laws that help them thrive, rather than stifling them.

Read the full report here.

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