Giving Thoughts

The Development of Social Enterprises and the Future of Chinese Philanthropy

By Fan Li, Co-Founder and Executive Director, Global Links Initiative

“Making money was not easy. But until I established my own foundation, I had no idea that giving money away was going to be even harder, ” stated a renown Chinese philanthropist at a recent China-US philanthropy workshop in Hawaii. And he is not alone.

Dynamic economic development and increasing social gaps stimulated the rapid growth of the philanthropy sector in China: charitable giving nationally rose from $6 billion in 2007 to $13.8 billion in 2011. A boom in private foundations, led by the richest and most influential people in China such as the top ten Chinese billionaires and former Premier Zhu Rongji, has brought new blood to the philanthropy sector.

While more resources have been made available for charitable purposes, small giving by the general public has not increased apart from that triggered by massive natural disasters. Angered by scandals involving the China Red Cross and other large public foundations, there is concern that donations would be misused or flow back to the government.

While the boom in philanthropy is relatively recent, the concept of social entrepreneurship came to China in 2004. In 2005, my organization worked with 21 Century Business Review to publish the first special report on social enterprise.

Inspired by stories of Grameen Bank and the Big Issue, Chinese NGO leaders and those who want to make a difference see social entrepreneurship as a powerful tool to help people help themselves. With the growth of the philanthropic sector, more resources such as “seed funding” or “patient capital” are available for social enterprises in their early stages. However, the most successful social enterprises in China were launched and bloomed before the philanthropy boom. Many foundations, including newly established private foundations, are reluctant to support grassroots activities because it seems to be too much work for a limited impact by small organizations.

There are many reasons why philanthropy has not been able to give a strong push to social entrepreneurship in China. First, philanthropy in China is still in a nascent stage. Resources are flowing rapidly into the sector with no system to distribute them effectively. The sector lacks talented people with expertise and experience. Wealthy people want to give but don’t know how.

Second, there is a need to modernize philanthropy culture in China. Philanthropy is commonly understood as a mix of traditional moral code that emphasizes a rich person’s duty to help the poor, with a deep-rooted tendency to count on the government to take care of everything. In addition, the lack of trust in Chinese society makes it harder for the rich to do the right thing: it is assumed that rich people who give have their own agendas. Yet these people are also criticized if they don’t give.

Finally, an underdeveloped legal and tax framework makes it difficult for foundations to increase or maintain the value of their assets.

How then can philanthropy in China develop so that it has a bigger and deeper impact?

• First, invest in people, not “projects”. Building 100 schools in rural areas is an admirable project, but it’s more important and efficient to support people (social entrepreneurs) who have ideas about how to solve a problem from its roots.
• Second, philanthropy is not just about donating money. Geniuses at making money change when they enter the philanthropic world. Concerned about how the public will judge them, they are very cautious when thinking about “investments” versus “mercy money.” Their talent, business experience and network can be more valuable.
• Third, take risks. Don’t play it safe. Philanthropists and foundations can fuel innovation because they are free to experiment to find the best solution. Success in philanthropic giving is not making zero mistakes, but in seeing proven innovations scale up by the market or the state.

Pioneering social entrepreneurs and their strategic partners/ funders have made amazing progress over a decade of hard work. One example is Fuping Development Institute (FDI), an organization I’ve been working with very closely for six years. Aiming to address some of the most pressing social crisis in China, FDI has established and invested in two micro-finance companies, a vocational school that helps thousands of rural women find jobs every year, an organic farming joint venture to rebuild trust between urban consumers and farmers, and a high-quality, affordable pre-school for migrant children. FDI’s latest effort is to bring the Social Venture Partner model to China to help potential philanthropists identify and invest in change makers nationally.

Chinese society is at a transition point, and philanthropy has a unique role to play to create and accumulate social wealth. Philanthropic leaders need to take the initiative and modernize philanthropy culture by motivating and empowering the majority of Chinese to become part of the solution. Philanthropy in China needs to shift from a rich man’s club to civil engagement, and to move beyond mercy money to promoting positive social change.

This piece was first published on the Skoll World Forum. The video below, also taken from the Skoll World Forum, features Dr. Wang Zhenyao, Dean of Beijing Normal University China Philanthropy Institute, discussing his goal of creating a culture of philanthropy and volunteerism in China.

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About the author:

Fan is co-founder and Executive Director of Global Links Initiative. Established in 2003, GLI is a nonprofit organization that aims to foster practical links among social entrepreneurial people around the world. In 2004, GLI first brought the concept of social entrepreneurship to China and continues to play a key role in promoting the practices of social innovation in China as well as East Asia. Fan is founding member of the China-US Strategic Philanthropy Partnership, a leading network promoting research, exchange and collaboration between the philanthropic sectors of China and the US since 2010. She also serves as an advisor for many leading nonprofit organizations and social enterprises in East Asia.