Philanthropy with Chinese Characteristics: The potential of giving as a political and financial agent for social change

Abstract

This study approaches the question of why firms give to charity in order to determine how policy may be best formulated to target corporate philanthropy as a welfare-maximizing and profit-maximizing agent for social change. By approaching the research question from a political economy and financial perspective, the study adds to the literature by understanding the giving decision by the firm in an interdisciplinary context. A model for accounting for corporate philanthropy is formalized as a social investment to be itemized on the balance sheet of the firm and depreciated over its useful life, in which the financial and social returns to invested capital are maximized, allowing for domestic and foreign policy to be structured around incentivizing investment in social capital. Giving as a social investment is particularly relevant to China in the political mandate of the Chinese Communist Party to maintain economic growth, especially the midst of the China slowdown, and in the concentration of wealth among entrepreneurial individuals with the means and interest to revolutionize the way firms conduct philanthropy. The result will be philanthropy with Chinese characteristics. Through an international accounting framework, the United States can adopt cooperative, rather than countering, foreign policy towards a rising, yet socially inept, China as the international system undergoes paradigm shift.