Full steam ahead for ‘charity’ even as brakes are applied to NGOs
Civil Society | Governance and Social Policy
A high-level international symposium on charity legislation, held in Beijing this summer, underlined the Chinese government’s determination to mobilise charitable giving even as the authorities were tightening their surveillance and control of the informal NGO sector.
Some 30 foreign experts, including senior managers from non-profit regulators in Canada, the United States and the United Kingdom, met from June 12-14 with an equal number of Chinese participants who were mainly drawn from the Ministry of Civil Affairs (MOCA) and other government agencies but also included some academic researchers and foundation practitioners.
With presentations from foreign experts far outnumbering those from local participants, the event appeared to be a study exercise for the symposium hosts, the MOCA Legislative Affairs Office. Foreign experts described the legal and tax regimes in their own countries but also, according to one Chinese observer, commended the virtues of self-regulation and warned against government attempts to micro-manage the charitable sector.
Over the last two years the MOCA Legislative Affairs Office has expanded fast, adding staff, engaging in comparative studies of international charity law and making study trips overseas, with a view to drafting a comprehensive legal framework for China’s non-profit sector. However, according to sources in the Ministry, the State Council and National People’s Congress have not yet programmed time for consideration of new charity legislation, which suggests that it will be at least 2-3 years before any new law is enacted.
The MOCA Legislative Affairs Office appears to have taken the regulatory baton from the MOCA department responsible for registration and supervision of “people-established organisations” (民间组织, often loosely translated as “NGOs”), which in the past played a leading role in developing rules for “social organisations” (社会团体), “people-run non-enterprise units” (民办非企业单位) and foundations. Over the last two years the MOCA Disaster Relief Department, headed by Wang Zhenyao (王振耀), has also been pro-active in comparative studies of the charitable sector, hosting conferences to promote charity and, at the beginning of this year, establishing a China Charity and Donation Information Centre (中民慈善捐助信息中心) and website. (See earlier report.)
However, the Department and Charity and Donation Information centre were notable by their absence from this event.
A long way to go
One of the relatively few Chinese presentations to the symposium came from Xu Yongguang (徐永光) who, from 1988 to 2005, led the China Youth Development Foundation’s flagship Project Hope, which has raised more than CNY 2.5 billion (USD 320 million) in donations, mainly to support basic education.
Xu welcomed the March 2007 Law on Corporate Income Tax, which raised the permissible level of tax-deductible donations from 3% to 12% of annual profits. However, he described this as a relatively isolated piece of good news and went on to outline a number of remaining problems.
He questioned Wang Zhenyao’s estimate, made at the launch of the charity information centre earlier this year, that charitable donations in China reached CNY 10 billion (USD 1.2 billion) in 2006, amounting to just 0.5% of GDP (compared with donations in the USA worth more than 2% of GDP).
In fact, Xu argued, CNY 3.5 billion of total donations in China went to government agencies, and so could not be regarded as wholly charitable and even raised suspicions of “trading money for influence.” Other donated funds, he said came from state owned enterprises (and so did not qualify as private donations) or from international organisations and individuals. Thus, he concluded, “the actual domestic private donation to non-governmental charity organizations is CNY 3-4 billion, only about 0.2% of GDP.”
Xu went on to list five reasons for lacklustre growth of giving. First, he noted, “the government has taken too much responsibility” in all areas of social life, such that the private, charitable sector remains underdeveloped.
Secondly (and largely as a result of growing up in a society where “an omnipotent government serves as master of the people”), “the public has a weak charity awareness.”
Thirdly, private wealth is still new in China and relatively few individuals both feel financially secure and “know what is the honourable behaviour,” whilst for those who do have charitable inclinations it remains difficult to register a private foundation.
Fourthly, most charitable organisations are in “government-to-private transition with very fragile capacity for self survival and self-development,” and as a result tend to have “a not very good reputation.”
Finally, taxation policy remains generally “unfavourable.” Even the former provisions allowing tax-deductible donations of 3% of corporate profits were “not seriously implemented by local tax authorities” who are invariably keen to maximise local revenues, so it is doubtful whether the new and more generous tax relief arrangements will be effective. Moreover, Xu pointed out, only ten national-level organisations are currently eligible to receive tax-deductible donations. This, he said, depressed donations generally and is “not conducive to fair competition . . . In some ways it has [done] more harm than good” even for the organisations receiving preferential treatment.
Second generation foundations
Despite this downbeat assessment, Xu Yongguang is himself at the forefront of a new generation of fully private foundations that have managed to register under regulations issued in 2004. According to those regulations, these “foundations not entitled to engage in public fundraising” (不得面向公众募捐的基金会) must have an initial endowment of at least CNY 20 million (USD 2.5 million) to register at national level (CNY 2 million to register at provincial level) and must each year distribute at least 8 percent of their total assets in the preceding year.
Xu has been working with Nandu Group, a successful property developer in Zhejiang Province, to create the Nandu Charity Foundation (南都公益基金会), which Xu now heads. It aims principally to provide quality education for children of migrant workers and, according to Xu, will over the next 5-10 years make grants of CNY 150-200 million (USD 19-26 million) to create 100 non-state (民办,“people-run”) “New Citizens” boarding schools throughout the country.
President of the Nandu Group, Zhou Qingzhi (周庆治) and Xu are both natives of Zhejiang’s Wenzhou district where the booming economy is now almost entirely private and where there are many nouveau riche entrepreneurs.
Another newcomer on the philanthropic block is the Apple Education Foundation
established by Ms.Wang Qiuyang (王秋扬) and Mr. Zhang Baoquan (张宝全), co-presidents of Jindian (今典) Real Estate Development Group in Beijing.
Ms. Wang says the foundation’s origins lie in a self-drive tour of Tibet she made in 2003. Shortly afterwards, she and Mr. Zhang decided to donate CNY10 million to help build up schools in two counties of outlying Ali Prefecture.
The foundation was registered in May, 2005, and has pledged to donate CNY 5 million per year, with a continued focus on Ali. Part of the funds will go to building schools, providing scholarships to students from nomadic families and training teachers. A medical programme aims to offer training for “barefoot doctors” and midwives, as well as providing free medicines for all of 138 natural villages in seven counties the prefecture.
February 2007 saw the registration of a China Social Entrepreneurs Foundation (友成企业家扶贫基金会), which was created by a group of business people and is officially sponsored by the State Council’s Poverty Alleviation Office. The foundation has hired half a dozen professional staff, including Ms. Chen Yimei (陈一梅), formerly the lead Chinese administrator in the Beijing office of the Ford Foundation, and is in the process of deciding its grant making priorities. Among its founders and board members are successful entrepreneurs from the real estate and financial services sectors, including Ms. Liu Ting (刘亭), daughter of the Liu Shaoqi, a once eminent Communist leader who was imprisoned and died during the Cultural Revolution.
The 2004 regulations on foundations do thus appear to have facilitated the emergence of a new breed of private, grant-making organisations that are quite distinct from the largely governmental public fundraising foundations that previously dominated the sector.
Progress on registration of international foundations has, by contrast, been very slow, marked both by bureaucratic indecisiveness over how to apply the regulations and by heightened sensitivities, following “colour revolutions” in Eastern Europe and Central Asia, to international influence.
By the summer of this year only three international organisations had successfully completed the procedures to open representative offices under the 2004 regulations. These are the World Economic Forum (aka Davos), the Gates Foundation, and the Clinton Foundation—each notable for its substantial political and/or financial capital.
Trouble at the grassroots
Many international presenters at the Beijing symposium spoke of “NGOs” as being synonymous with the charitable or philanthropic sector. For example, a paper by Kenneth Dribble, Executive Director for Legal and Charity Services with the UK’s Charity Commission for England and Wales, explicitly set out to address comparative issues in “defining, registering, supporting, monitoring and regulating NGOs.”
The developing official discourse of “charity” in China appears, by contrast, to eschew identifying the sector with the many Chinese organisations established over the last decade by private Chinese citizens who see themselves as “grassroots” (草根) NGO practitioners.
It was a bad summer for China’s grassroots NGO community. Staff from numerous organisations told China Development Brief that they were experiencing increasingly intrusive monitoring and surveillance by security services in the run-up to October’s XVIIth Party Congress and the 2008 Beijing Olympics. Several organisations were ordered to close and/or to cease publication of their “in house” periodicals even before the move against China Development Brief in July.
Report by Nick Young, October 19, 2007, with research on new foundations by Tina Qian. This report is based on research and interviews conducted in June 2007.