Social Investment in China

presented by China Social Enterprise and Social Investment Forum (CSESIF)

JIAWEI ZHANG
Secretary Team of CSESIF
AVPN Conference
April 20

1Why CSESIF was founded

Development of Social Enterprise and Social Investment is in the market construction phase in China

Policy
Enhanced role

Talent
Along with

Capital

Support

Oversea Social

Like NPI ,more

Awareness
SE and Social

of social

British Council

Investors are

grassroots or

Investment are

Development

training

looking for

government

reported by

programs, more

projects in

incubators for

more key media

programs for SE

China

SE are emerging

Transformation
of government

is emerging

function

Local Social

SE courses are
Government
procurement

emerging in

Some local
governments
start to support
SE

SE can access to

various service

Institutions are

emerging

by three party

conducting SE
study & report

Banks,
Community of

Research

Investors are

university

becomes more
systematic

Universities and

Impact

Investment

Investment

Social

Banks etc are

Advisory are

Social Enterprise

entrepreneurs is

interested in

emerging

and Social

forming

impact
investment

More events on

Investment are
More global
communication

held

1 Why CSESIF was founded

China Social Enterprise and Social Investment

Forum (CSESIFjointly initiated by Mr Xu
Yongguang , President of Narada Foundation and
Mr Zheng Weining, President of Canyou Group
was founded as a member network by a group of
organizations dedicated to the development of
social enterprise and social investment in China
Goals

Working Areas

Annual
Forum

Facilitate the Cross-border

communication and
collaboration

Platform

Promote the growth of SE and

SI industry
Build up favorable external
environment for the industry

Research

CSESIF

Member
Service

Advocacy

CSESIF Founding Member

JACK MA
Foundation

2About 2015 Annual Forum

CSESIF will hold a large annual forum every June, which will become the most
prestigious social enterprise and social investment event in China

Number of Participants More than 500 guests from China and overseas
DateJune 18-19 2015
Venue Intercontinental Hotel Shenzhen, China

3Highlights of 2015 Forum

Biggest Highest-level Social Enterprise and Social Investment event in China

Famous Entrepreneur Speaking on Social Innovation
Open and Cross-border breakout sessions on 5 themes
Special arrangements on networking and exhibition
Overseas Study and Workshops after the forum

CSESIF Launch Event

CSESIF Press Conference

Mr Zhang JIAWEI
TEL86 13801998858
Emailjiawei@csesif.org;
jiawei@serc-china.org
Wechat: 13801998858
Websitewww.csesif.org

Social Enterprise Sector in China: Fragmentary Innovation Stage

Overview of global social enterprise development stage

Features of each stage

Fragmentary Innovation Stage

Stage Quite few SE cases showed up here

1
and there, and without a supporting
environment
China, African countries
Industry Emerging Stage
Stage
Number of SEs grow rapidly
2
Growing policy support, capital,
talents, and research in the
sector
India, Japan, Korea

Stage3

Stage2

Stage1

Insufficient Data

Maturity Stage
Stage
Clusters of SEs in different fields
3
Policy and regulations, social
investors and impact assessments
standards are gradually matured
US, UK
2

China: From Fragmentary Innovation to Industry Emerging Stage

Total number of SEs < 1000

54% of the SEs < 3 years old
No supporting environment: A few social
investors with insufficient and unsustainable
funds

Central and local government show supportive

attitude to social innovation
Increasing intermediary organizations
Increasing patient capital go into the market
Leading foundations like Narada Foundation
transiting from operating to grant-making

Social Investment in China

Limited number of appropriate investment targetsVery few
social enterprise is mature enough or ready to take the investment
Most of the investees are in the early stage: A lot of social
investors were involved in the incubation, capacity building and
consulting process before investment.
Emergence of players along investment chainCapacity building,
intermediary and financial services provider for SEsBritish Council,
NPI, Avantage Ventures, DBS Bank Limited
4

Social Investors in China

Social Investors
LGT Venture
Philanthropy

4 investees with investment less than $1million, two of them are

grants

Chuangqi99

Investing 3 social enterprises with total investment of $700,000

Transit

Investing 7 tech social enterprises with total investment of $500,000

Avantage Ventures

Investing 3 social enterprises with one failure case

Yu Venture
Philanthropy

Investing 3 social enterprises with total investment of $1,200,000

China Impact Fund

Unknown

Zengai Foundation

Investing 1 social enterprise with total investment of $80,000

Leping Foundation

Investing/nurturing 5 social enterprises since 2002, with total

investment of $17 million
5

Challenges: Incomplete Eco-systems

Lack of government and policy support
Lack of intermediary organizations
Lack of patient capital, most of the foundations are operating
foundations
Underdevelopment of impact assessment

Leping Foundation: SE Investor-Turned Manager

Since 2002, 17m USD investment + main shareholder in 5 SEs
2 micro-credit companies servicing farmers
1 professional training school for farmer laborers looking for
jobs in cities
1 R&D company aimed at improving education in rural
kindergartens
1 eco-agriculture company to save Chinese farmland from
massive use of chemicals

As a SE Investor-Turned Manager: Our Challenges

Capital:
Considerable time spent on networking/exchange with
investors
Human Capital:
Significant difficulty in locating SE management
High turnover rate for certain key positions
Insufficient professional capabilities of team
Shared service hard to pool
Insufficient internal resources
Scarce external resources

As a SE Investor-Turned Manager: Our Takeaways

Capital: growing number of investors seeking innovative ways
to support social innovation
Human Capital: more capable business professionals turn to
philanthropy
More faith in our own value:
Provide kick-start capital
Provide continuous flow of operating cash
Proper governance ensures value on track
Internal shared service: a must-have
Impact Assessment: trial in micro-credit company

From Investor-turned Manager to Venture Philanthropist

Trend, albeit not in a year or two
Launching SE Venture Capital Fund
Carry forward innovations that can unleash social strengths
Financial tools to prompt investors interest
Encouraging SE entrepreneurship, esp youth
Giving circle vs. SEs (eg SVP China)
Shared service circle
Volunteerism

10

Thank You

11

Chinas Social Investment

Environment and Innovation
Mechanism
Wang Zhenyao
China Philanthropy Research Institute
of Beijing Normal University

Outline
Four significant elements of Chinas social
investment
The internal logic of Chinas social innovation
The future of Chinas social investment

Four Significant Plates of Chinas

Social Investment

1. Government-Led Poverty Alleviation SystemSince 1986

The amount of expedition on poverty alleviation is more than 70 billion RMB per
year.
Government-led: The State Council established as lead agency for developmentoriented poverty alleviation (all related government organs contribute).

A trinity pattern of poverty alleviation:

specialized poverty alleviation,
poverty alleviation by industry, and
poverty alleviation by society, including:
the party, government, military, civil service, industry, commerce and academia
all participated in poverty alleviation by contributing funds for industries,
technologies and projects, including farmland and irrigation system
construction, industries with local advantages, water safety, transportation,
education, healthcare and others.

Achievements: The number of impoverished population reduced from 250 million

in 1978 to 29 million by the end of 2003.
4

Central Governments Financial Budget

Financial arrangements for poverty alleviation funds can be
divided into the following parts:
Development fund
Cash-for-work fund
Minority development fund
Three Westspecial subsidies for agricultural construction
State-owned impoverished farm poverty alleviation fund
State-owned impoverished forest farm poverty alleviation fund
Poverty alleviation loan interest subsidy fund

2013 Central Governments Final Accounts

poverty alleviation) unit: 100 million RMB
Administrative Operation
General Administrative Matters
Authorities Service
Rural infrastructure
Production Development
Social Development
Poverty Alleviation Loans and Interest Subsidies
"Three West" special subsidies for agricultural
construction
Poverty Alleviation Agencies
Other Cost on Poverty Alleviation

Budget

Actual Cost

725.67

841.00
16.31
10.15
0.76
343.79
194.78
6.82
24.81
3.34
1.62
238.62

Social Poverty Alleviation Mechanism: all organizations

participate in poverty action

Social poverty alleviation: collaboration between targeted

poverty alleviation by government bodies and east-west
poverty alleviation.

In 2002, the central government bodies, enterprises,

institutions and social organizations directly invested 850
million RMB in the targeted poverty alleviation units. The
amount of the investment in 2012 was 1.9 billion RMB,
increasing by 1.2 times with an average annual increase of
8.4%. There were 310 units participating in target poverty
alleviation, with a full coverage of 592 key counties.

2. Social Welfare Enterprises

60000

Peak Value
55,509

50000
40000
30000

55,509

20000

Peak Value
910,000

10000

Peak Value
16.93 billion

Units

1978
920

1982
1704

1987
27793

1992
49836

1997
55509

2002
35758

2007
24974

2013
18227

Disabled Personshundred)

350

640

4330

7780

9100

6830

5630

5390

Amount of Profit(million)

80

80

880

3260

6630

14830

16930

10690

Data Sources: 2013 China Civil AffairsStatistical Yearbook

3. Private Non-enterprises
Private Non-enterprises since 1999
300
254.67
250
190.479

200

204.388

173.915
147.637

150

124.491

100

82.134

50
5.901
0
1999

2001

2003

2005

2007

2009

2011

2013

Data Sources: 2013 China Civil AffairsStatistical Yearbook

The Category of Chinas Private Non-Enterprises

(NGO/NPOs)
There are 225 thousand private non-enterprises in China by the end of 2012
with 2.8 million employees and RMB 99 billion in profits. The chart below
provides a breakdown of the different categories:

Category

Amount

Category

Amount

Technology and research

13,729

Sports

10,353

Ecology and Environment

377

Legal

511

Education

145,210

Business Service

2,335

Health

21,234

Religion

94

Social Service

36,698

Agriculture and Rural

Development

1,617

Culture

11,694

Employment

1,162

Global Affairs

Others

9,652

10

4. Foundations, Corporations and Academic Institutions

Foundations and Corporations are the important
suppliers in the social investment

Academic institutions provide supports such as

policy advocacy, evaluation, consulting and capacity
building.
CFPA Microfinance: Annual amount of lending is
almost 3 billion RMB

11

The Internal Logic of Chinas Social

Innovation
Starting from government leading the society and to social
restructuring

12

Government-led Social Innovation

Connected government with the problem of

poverty
Developed a mechanism where governmental
officials directly intervened in villages to alleviate
poverty.
Poverty alleviation by production: encouraged
employing the impoverished people, including
the disabled people.

13

The Non-governmental Social Innovation

Definition of the private non-enterprises (eg.
social organizations engaged in non-profit social
services, operators of non-state-owned assets by
enterprises, social groups and other social
forces, and individuals.
Modern philanthropy has developed since 2005.

Social innovation run by a financial support

system.
14

Increased Social Re-structuring in Depth and Breadth

Social re-structuring has been promoted since
2012 and has led to a split of social affairs from
the governmental affairs.
Social organizations under the jurisdiction of the
government become more socialized.

15

The Future of Chinas Social

Investment space
How does society lead and support the governments
reforms

16

The Future of Chinas Social Investment

Involved in social service which could make social innovation and
social investment more powerful and dynamic
- Social Innovation Fund
- Social Impact Bond

Link the four plates of social innovation through supporting services

- Ratingestablish evaluation system, promote social values and
influential cases
- Consultingprovide professional consulting services for investment
organizations and social enterprises/social purpose organizations
- Research summarize Chinas current social innovation practices,
develop Chinas own model as well as build the channel for
international exchanges
- Trainingfoster innovative model of social entrepreneurs and guide
social awareness of innovation.
17

Thank you!
Beijing Normal University China Philanthropy Research
Institute
/Tel+86-10-58801928
/Fax+86-10-58801966
/Add191003A
100875
Rm.1003A Jingshi Building, No. 19 Xin Jie Kou Wai
Street, Haidian District, Beijing, China100875


www.cbucf.org


www.cbucf.org

What skills do entrepreneurs need

to participate in social investing?

3 Types of
Social Investing

Social Investing
Philanthropic
Commercial

Four Forces of
Social Investing

Transferability

Strength of Implementation Framework

Social
Impact

Surplus

Resources

Social
Needs

Capital

Management Capabilities

Sustainable Platform

5 Levels of
Social Investing

Individual

Team

Industry Society Integration

Lin Feng


Thank you


Collective Sharing of Capital

Dezhi Lu
Chairman, Huamin Charity Foundation
Vice Chairman, International Confucian Association
Vice President, China Social Security Society


I. Understanding of Capital

Capital is omnipotent

Capital is evil

Welfare Capitalism

New view of capital: capital is the wealth that can
reproduce wealth from itself

In sum, the more developed capital is, the richer the

material benefits, to a greater extent it will benefit the
majority, the more progress the society will achieve,
and the more civilized the society will be.


II. The Necessity of Collective Sharing of Capital

Two important categories in human development:

The majority vs. the minority

Equality vs. Efficiency


Traditional views of capital in main social forms:

Traditional socialism view of capital

Traditional capitalism view of capital

Main

view:

The more developed a society is, the mode developed

the capital will be. The more developed the capital is, to
a greater extent it will serve the majority, and the more
civilized the society will be.


III. Approach and Trend of Collective Sharing of Capital

Philanthropy is an important approach toward collective

sharing of capital

Collective sharing on the domestic scope: the minority

bears a little more to achieve the benefits of the
majority (modernized literati spirit)

Collective sharing on the global scope

With capital and the majority in mind, China will rise

peacefully. A stronger China will not pose threats to
others, but firmly safeguard the worlds peace, stability,
and development. Philanthropists should be clear on
this.


Conclusion

Western civilization has made a significant contribution

Eastern civilization should also come into play
Let oriental wisdom play a great role in the collective sharing
of capital