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Priming the pump of impact entrepreneurship and social finance in China

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Abstract

In recent years, a significant revolution has begun in social entrepreneurship, with public funding organizations and private investors beginning to pursue social purpose. At the heart of the revolution is the ambition of these entities to use innovation and entrepreneurship to sustain and scale impacts in support of social and environmental objectives. This article provides a framework that conceptualizes social innovation and finance as a multi-level and evolving complex system. Two trajectories of transformation, niche-regime and within-regime, are used to frame a broad range of examples of impact entrepreneurship and social financing. Social finance is viewed as the key to release the ‘lock-in’ of social innovation, as it is able to gather and coordinate capital, resources, knowledge and ability. Using meta-analysis, the article explores the characteristics, dynamics and ecosystem of social innovation, impact entrepreneurship in China. The study maps the landscape of social finance in China and estimates there are untapped social finance opportunities worth from US$93 to US$208 billion.

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Fig. 1

Source (Geels 2002)

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Source (Freireich and Fulton 2009)

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Notes

  1. For example, there were two million social enterprises operating in India in 2016 and a total of 59 champions were identified by the three global advocators of social entrepreneurship from 2007 to 2017.

  2. The literature review is taken from the Web of Science Core Collection between 1990 and 2019 (retrieved on Feb. 28th 2019). The terms “social entrepreneurship”, “social venture”, “social enterprise” or “social innovation” were specified in parataxis with “China”. Only articles in English were considered. The indexes included SCI-EXPANDED, SSCI, A&HCI, CPCI-S, CPCI-SSH, BKCI-S, BKCI-SSH, ESCI, CCR-EXPANDED, IC.

  3. Different English translations have been used for the Chinese expressions, for example, social associations (for social groups) and civilian-run non-enterprise units (for social service organizations) in existing studies (Yu 2011).

  4. This gap was filled on Feb. 7th, 2018 with an amendment to Article 26 of “The Enterprise Income Tax Law”. Nonetheless, preferential taxes are only available to registered non-profit organizations in which the average salary of staff is no more than twice the salary of other employees in the region they are registered. This greatly undermines incentives for people to work for non-profit organizations.

  5. The BC program ceased operating in China in 2016, leaving behind a great legacy in the development of social enterprises in China. More information is available at: https://www.britishcouncil.cn/en/uk-china-social-enterprise-social-investment-partners.

  6. Information retrieved from: https://www.chinatoday.com.cn/english/society/2014-10/13/content_644277.htm; https://english.cri.cn/12394/2014/09/11/53s843716.htm.

  7. The studies conducted by Yu (2014) and Lane (2013) both focused on the period 2009–2012. The first study explored in-depth the governance of social enterprises and while latter looked at social enterprises from a broader perspective. Given the small number of indicators used in Yu (2014), the study by Lane (2013) was selected for further analysis.

  8. CSESIF was founded in 2014 and convenes a community of social enterprises and philanthropic foundations (starting with 17 founding institutions). CSESIF organizes annual meetings. Through its extensive network of members, CSESIF conducts canvas surveys at the national scale to identify good practices by social enterprises.

  9. For example, in 2018, TPG, a leading global private investment fund, led an investment of US$140 million of series C equity financing in the China Foundation for Poverty Alleviation (CFPA) Microfinance Management, a Chinese social enterprise that provides microcredit in more than 100 impoverished counties in China. Information source: https://press.tpg.com/node/7396/pdf.

  10. Environmental, social and governance (ESG) refers to the three central factors in measuring the sustainability and social impact of an investment in the private sector. It was also developed into a set of standards for a company’s operations that socially conscious investors can use to screen potential investments. Environmental criteria examine how a company performs as a steward of nature. Social criteria examine how a company manages relationships with its employees, suppliers, customers and the communities in which it operates. The results of the evaluation were obtained per personal communication with Mr. Pei-yuan Guo (SynTao), and background data are available on the website: https://www.syntaogf.com/Menu_CN.asp?ID=42.

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Acknowledgement

The author acknowledges funding support from National Natural Science Foundation of China (71573209; 71661147001), National Key Research and Development Program of China (2016YFD0201303), National Social Science Foundation (16ZDA021) and Chinese Academy of Agricultural Sciences (CAAS-ASTIP-2016-AII). The author also appreciates support and help from Swiss Agency for Development and Cooperation (SDC) and the China Office. The study has benefited from communications and discussion with a variety of institutions, e.g. UBS, Hystra, SynTao Green Finance, Youcheng Foundation, China Social Enterprise and Impact Investment Forum, China Charity Fair Social Enterprise Certification Center.

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    Xiangping Jia

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Appendix

Appendix

See Tables 6, 7, 8, 9, 10.

Table 6 Laws, regulations and sectoral policies related to social and impact entrepreneurial organizations and finance
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Table 7 Entrepreneurial finance and simulation of social investment
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Table 8 Investment of public–private partnerships in China, 2014–2018
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Table 9 Expenditure by public finance institutions and the civil/social sector in China, (billions of US$)
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Table 10 Assets under the management of companies listed in China before Sept. 20, 2018
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Jia, X. Priming the pump of impact entrepreneurship and social finance in China. Agric Hum Values 37, 1293–1311 (2020). https://doi.org/10.1007/s10460-020-10130-9

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