Abstract

In recent years, the mainland Chinese government has encouraged the development of the nonprofit sector in China. This development has been accompanied by the emergence of the “social enterprise” as a concept in China. Despite its novelty, there has been increasing recognition of the potential for social enterprises to tackle social problems such as unemployment, discrimination and low income.

This article reviews the emergence of the social enterprise as a new social entity in China, examines its vaguely defined legal status, and explores deficiencies in the relevant legal frameworks. The author recommends the introduction of a distinct category of organizational structure for social enterprises, to rectify some of the existing inadequacies in social enterprise law. These changes in turn will modernize the legal and regulatory framework for social enterprises in China. It is hoped that such measures will facilitate regulations of social enterprises and support a stronger, more sustainable and more socially inclusive economy.  
 

I. Introduction

In recent years, the mainland Chinese government has encouraged development of the nonprofit sector in China. A primary example of this is seen by the drafting of the Charity Law. The resulting increased number of charity organizations in China has also contributed to the growth of social enterprises, albeit the total number of social enterprises remains small. A decade ago, “social enterprise” as a concept was still novel in China. Today, it has gained widespread attention and acceptance. The concept was introduced to China in 2005, after the world-acclaimed texts “Banker to the Poor” and “How to Change the World” were translated into Chinese. As discussed in Part II of the article, the focus on developing regulations for social enterprises has become a prominent trend, brought about by a change in the structure of government funding for the nonprofit sector. The government recognizes the benefits of establishing social enterprises to tackle social problems such as unemployment, discrimination and low income. There is a need to employ new initiatives, such as social enterprises, to respond to some of the unmet needs of vulnerable sectors of society. This is especially true with the issue of work integration, where the elderly, disabled individuals, women, and unskilled workers are excluded from certain labor markets. Unemployment of these groups poses the risk of social exclusion as well as the possibility of social and political instability.

This article proceeds with a brief discussion of the emergence of social enterprises in China in Part II. It then provides an overview of the different categories of organizational structures into which social enterprises have been placed under the current legal regime and examines their deficiencies. The author concludes in Part II that social enterprises in China exist in obsolete organizational structures that rest on vague legal definitions, and operate in legally and institutionally deficient environments, and that these problems have hindered the development of social enterprises in China. Part III highlights the importance of creating a specific category of organizational structure for social enterprises to guarantee its legitimacy as a coherent type of institution, distinct from other social organizations. This would give social enterprises more space for expansion and improvement. Part IV concludes that while mere transplantation of a Western social enterprise structure may not be feasible in China, an effective variant is possible. The English model can serve as a good point of reference for the government to update and modernize its legal framework. This modernization would constitute the government’s crucial first step towards recognizing its own role in enabling social enterprises to promote a financially sustainable and socially inclusive economy