The Emergence of Social Enterprises in China: the Quest for Space and Legitimacy

In recent years, the mainland Chinese government has encouraged the development of the non-profit sector in China. This can be evidenced by the drafting of a Charity Law in China. The growth of charities in China has also contributed to the growth, albeit still slow, of social enterprises. Social enterprises in China mainly take the form of self-self community groups that provide job opportunities to women, the disabled and under-employed. Despite the concept of “social enterprises” is still relatively new in China, the potential of social enterprises in tackling social problems such as unemployment, discrimination and low income has been increasingly recognized. It is generally perceived that social enterprises can promote a strong, sustainable and socially inclusive economy.

Notwithstanding these apparent benefits, the development of social enterprises in China is still at an embryonic stage. The legal status of social enterprises in China is unclear. There is also a lack of a coherent legal and regulatory framework governing them.

Given these problems and challenges, this paper first provides an overview of the existing legal framework for social enterprises in China. It then assesses its merits and demerits, with a view to recommending detailed laws and regulations that can be considered in promoting social enterprises in China. In particular, it considers certain pertinent legal issues relating to the recognition and development of social enterprises in China, and to offer suggestions from a comparative perspective on how similar issues have been tackled by other jurisdictions. These issues include the legal identity of social enterprises, the legal and regulatory framework that can support their growth, etc. Overseas experiences, such as the UK government’s approach to affording legal identity to social enterprises and pioneering studies on the development strategies of social enterprises, will be discussed where appropriate.

At the same time, the discussion will highlight some innovative practices of social enterprises and support policies specifically designed for them. It will be considered how these can supplement the existing inadequacies.

In conclusion, it is hoped that the analysis will assist the development of a legal and regulatory framework governing social enterprises in China that will help create an enabling and sustainable environment for social enterprises.