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5 trends in the Chinese social enterprise landscape for investors to stay in touch with the ground

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Xuan Xia

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5 min read

China Charity Fair, a non-profit organization established in 2012 under the guidance of the Ministry of Civil Affairs, has been certifying social enterprises (SEs) since 2015. Over the past 4 years, a total of 234 SEs have been certified out of 1,351 applicants, showing a strong year to year growth: 7 SEs certified out of 67 applicants in 2015, 16 certified out of 154 applicants in 2016, 106 certified out of 510 applicants in 2017, and 109 certified out of 620 applicants in 2018.

To provide funders and resource providers a better understanding of the Chinese SE landscape and its investment opportunities, Star of Social Innovation, the execution entity of China Charity Fair assessing and certifying social enterprises, shares 5 key trends in the ecosystem.

Locations of SEs are spreading across China with a higher concentration in larger cities

Certified SEs are now spread out in 27 (indicated by dark blue in the map) out of a total of 34 provinces/municipalities/special administrative regions of the country. There are a larger number of SEs in Tier 1 cities (Beijing, Shanghai, Guangzhou, and Shenzhen) and growing activities in Tier 2 cities such as Hangzhou, Chengdu, Suzhou, and Kunming. The concentration in bigger cities is attributable to the relatively developed social, economic, and cultural environment and supporting policies in these cities.

 

 

Two thirds of SEs are registered as a business

Of the 234 certified SEs, 154, or 65%, are registered as a business, with the rest 80, or 35%, registered as a social-purpose organization (SPO).

Nine out of ten SEs have clearly defined social missions

More than 90% of the certified SEs have legalized their social objectives either through Articles of Association or through a written commitment. 44% of the SEs also commit to spend no less than 50% of their profit on social-purpose activities.

75% of SE revenues come from a sale activity

Based on the financial data of 2016, 85% of the SEs were financially sustainable, among which 19% made a profit and 66% broke even. The revenues of SEs come from 4 sources: market revenues, services purchased by governments, donations from governments, and donations from the society.

Of the 112 SEs whose financial data are available, 67% have the majority of their revenues coming from the market and 10% from government purchased services. In other words, 77% of the SEs gain their revenues from a sale activity.

Beneficiary group has extended to a wider population

Sectors in which SEs are engaged have also expanded over the years, from disability services dominating in 2015 to a more diversity of activities in 2018 reaching elderly care, children and youth service, rural development, environmental protection, social finance, and community development. The top 3 beneficiary groups for which certified SEs carry out their activities are: disadvantaged groups (e.g. integration of ex-offenders, left-behind children in rural regions, and low-income groups), children and youth (e.g. early childhood education, innovative education, nature education, and education to develop a fuller personality), and people with disabilities (e.g. employment, rehabilitation, and empowerment). In addition, a large number of SEs work in community development, philanthropic support, and elderly care.

Policy support plays a pivotal role in SE development

Support from the government provides a favorable environment where SEs can grow and develop at an unprecedented rate. For instance, Chengdu Administration Bureau of Industry and Commerce issued a series of policies in April 2018 officially integrating growth of SEs in its overall urban-rural development plan. SEs focusing on community services and rural development are given a priority with taxation benefits. Correspondingly, SE certification in Chengdu in 2018 grew the fastest in the country with 12 SEs certified, half of which engaged in servicing communities and rural areas.

What’s Next?

Investors seeking investment opportunities across Chinese social enterprises can embrace great opportunities as the market is growing quickly. A combination of various financial tools has to be compatible with the different stages of social enterprise. In addition, the capital has to be patient and allows for a sufficient time to see both the financial and social yield of their investment.

To facilitate ecosystem development, Star of Social Innovation has been providing a range of financial and non-financial support to certified social enterprise to help them move up their development trajectory and working with forward-looking municipal governments to create a more conducive policy environment for social enterprises to excel. We welcome more funders and resources providers to join us in this movement by sharing their knowledge and experiences in innovative funding tools and capacity building practices, and ultimately driving more capital into the sector.

References

A. Environmental Stewardship
To protect the environment, we organize programmes like mangrove nursery and Reforestation, Coastal and River Clean-Up, Community Based Environmental Solid Waste Management, Environmental IEC Campaign and Eco-Academy

B. Food Security and Sustainable Livelihood
To ensure a sustainable livelihood for the community, eco-tourism include Buhatan River Cruise Visitor Center Buhatan River Mangrove Boardwalk are run by the community. Others include Organic Vegetable and Root crops Farming, Vegetable and Root crops Chips and by-products Processing and establishing a Zero waste store.

C. Empowered Communities
To empower the community, we provide product and Agri-Enterprise Development Training, Immersion and Learnings Exchange Program, Earth Warrior Training and Community Based Social Entrepreneurship Training

Author

Xuan Xia

Xuan XIA is the founder of Star of Social Innovation and Executive Director of the China Charity Fair Social Enterprise Certification Center. With more than 14 years of experience in sales and marketing including 8 years in the public welfare sector, Xuan is a champion in social enterprise development in China.

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