[8th ILO SSE Academy]: Legal framework of social economy in China

SSE Organisation
Social Finance / Impact Measurement
Governance / Eco-system
Public Policy / Legal Framework

Presented at: 8th ILO SSE Academy

Organisation: Shanghai Jiatong University

Date: June 28, 2017

Presenter: Mr. Xu Jia Liang (professor)

Contacts: xujial@sjtu.edu.cn


XU Jialiang explained how the social economy and public procurement are developing together in China. Furthermore, presented the problems they have in the context of China and suggestions for their further development.

In China, only 'social welfare enterprises' and 'rural cooperatives' are recognized as 'social enterprises', and these social enterprises are included as part of the public procurement system.

Public procurement in China firstly initiated in 1995. Since 2010, Beijing and Guangdong began to purchase many services from NGO. Since then, more and more states and cities have introduced outsourcing procedures for public services, and in 2013 a special budget was set up for procuring public services from the NGOs to the provincial government.

The characteristics of public procurement services in China are as follows.

  1. From local government to the central government (Bottom-up approach)

  2. From East to West (Developed areas first, then the underdeveloped)

  3. From ‘rule-oriented government’ to ‘service-oriented government’ (Changes in government functions)

  4. From limited service providers to increase in the number of service provisions (NGOs' participation in public service provisions)

Chinese law has multi-layers such as laws (national congress), regulations (central government), and normative documents (local governments & departments). The law on the procurement of government was first passed in 2002, and in 2013, the government received the opinion and enforcement regulations, and laws were promulgated in 2014. Such services were for government only, but in the same year, they were turned into another type of public services.

The law related to social enterprises is the Act on the Protection of Persons with Disabilities, which was enacted in 1990. In China, it is a fundamental law that governments and societies should commit to creating employment by establishing welfare enterprises for the disabled and other welfare institutions such as blind massage facilities. These social welfare enterprises were issued by the ministry of civil affairs.

However, public procurement systems in China has shown the following problems. First, the government prefers 'incremental purchase' to 'stock purchase'. The second is the absence of an integrated platform for the purchase of services. The third is slow funding, and the fourth problem is NGO's passive attitude. Lastly, it is a shortage of evaluation agencies and experts themselves. When it comes to social enterprises, the first problem is that there is no legal concept for social enterprises. There are social welfare companies and local cooperatives in China, but a considerable number of them have disappeared. This is because there is no law that protects their legal rights as an established legal entity.

Another problem is that the boundaries of social enterprises aren’t clear. The range is wide and unidentifiable. As such, it is impossible to grasp a legal definition of social enterprises even though it is inbetween the NGOs and the enterprise. Therefore, it is difficult to identify how many social enterprises are in China.