Initiative for U.S.-China Dialogue on Global Issues

China’s welfare system is troubled by three major problems. First and foremost, it is largely biased in favor of the urban dwellers despite the fact that China’s rural residents comprise about 45 percent of the national population. While urban households receive about 20 percent of their income from social benefits, rural households receive merely 2 percent (Ringen & Ngok, 2013). Secondly, access to social welfare is far from being universal. Migrant workers are often excluded as a result of the household registration system (hukou), the number of whom reaches perhaps 250 million people. Even in those places where they have access, the Minimum Subsistence Guarantee is plagued by poor management, with very limited anti-poverty results being achieved (Gao et al. 2009). Last but not least, while the central government has the absolute power in implementing social welfare system, its intentions may be locally mismanaged, ignored, or sabotaged by local authorities. All things considered, the disadvantaged people in China, including the rural population, migrant workers, and the poor, have not enjoyed the fruit of China’s rapid development because of the immature social welfare system.

China’s case is typical of developing countries which have experienced fast economic development but lagged behind in terms of social well-being. The cause behind this, in my view, is central government’s excessive control over the social welfare system, making it insensitive to the real market demands. Therefore, to address the problems in the status quo, I suggest the government outsource a significant portion of welfare services to social enterprises. This measure may not be a panacea, but it is a promising approach to fulfilling unmet needs of the disadvantaged people and enhancing social well-being. Social enterprises, borrowing the definition from Social Enterprise Alliance, are organizations that address a basic unmet need or solve a social problem through a market-drive approach. That is to say, entrepreneurs step in where governments and NGOs have stumbled, create business that not only aim to solve big problems but improve people’s lives and create wealth and jobs. The concept of integrating social aims with profit-making has been an emerging trend in the world today, taking root in public policy. The target group of the enterprise is no longer simply “customers,” but disadvantaged people who desperately need a hand.

However, social enterprises in China are a relatively recent phenomenon that emerged around 2004, and they face a number of impediments from political, social, and institutional environment. Politically, the political arena in China is characterized by a very strong state presence, particularly in social issues. The pervasive government control over the social sector often restrict the formation and activities of such organizations as social enterprises. Socially, while interest in social issues from the public is growing substantially, the effectiveness of the government in addressing many of these issues have in some senses prevented the private sector and civil society from playing a larger role in this area, leading to only a few emerging social entrepreneurs. Institutionally, the institutional environment supporting the social enterprise sector in China is still underdeveloped, because there are only a few enterprise incubators, consulting firms, financing sources, or research institutions within the country. All of these factors contribute to the lack of vitality in social enterprises.

Things are different in the United States, where a supportive ecosystem of academic institutions and private foundations established a range of measures and supporting services ranging from research on nonprofit management to business plan competitions. Such supports are crucial in facilitating the development of social enterprises, as they provide best practices and resources for entrepreneurs to gain experiences. Furthermore, the U.S. government is more supportive of the development of social enterprises. In 2013, for instance, during Global Entrepreneurship Week, the U.S. Agency for International Development (USAID) rolled out a new $15 million to support entrepreneurs who are alleviating poverty through market-based solutions, such as the Securing Water for Food proposals, which generate both economic return and social impact. Therefore, considering the dynamic and continually evolving environment in China, U.S. social entrepreneurs should be actively brought into the Chinese market to speed up the construction of a supportive ecosystem around for China’s social enterprise. This could be achieved via setting up agencies and platforms to help U.S. enterprises build up their local operations in China as role models and instructors. Meanwhile, the domestic enterprises need to absorb foreign expertise in building a strong local institutional environment, similar to the “open-up” in the 1980s. This requires the Chinese government to further remove regulatory barriers, use economic measure to encourage social enterprise start-ups, and create an open, receptive social atmosphere for investment.

The cooperation between China and United States will further benefit the global community given that there is a huge demand in the world market. After all, there are an estimated 700 million people around the world in need of something as simple as clean water to maintain their basic life or corrective glasses so they can see, learn, and earn income for their families. And their needs are still unmet. Social enterprise has not yet solved big social challenges on a large scale given the limited power of one enterprise within a single country. If the United States and China, two big powers in the current world, can work together, social enterprises will not only remain at a national scale to improve social well-being, but expand to help out more disadvantaged people in Africa, South America, and, beyond that, in the whole world.