A long awaited Law on Foundations will raise the minimum funding threshold for registration to CNY 5 million (from 200,000 at present) and allow up to 50% of capital to be invested in businesses and securities provided that risk is spread and funds are professionally managed, according to Dr. Wu Zhongze, head of the Ministry of Civil Affairs Bureau of Non Government Organisations, which has been closely involved in drafting the law.

Dr. Wu was addressing a November training seminar for NGO staff held at Tsinghua University's NGO Research Centre. He said the law will be finalised very soon.

Another provision he mentioned will prohibit foundations from spending more than 7% of donated funds on project management and overheads. More substantial endowments would, however, give Foundations a better operating margin than most enjoy at present.

China currently has 76 national level and 1700 or so provincial foundations. Most have only very small endowments, which were usually provided in the first place by government, and act as fundraising and/or project implementing agencies rather than grant giving bodies. They are required to cover overheads from the endowment interest, but have been experiencing extreme difficulty in doing so, given small endowment size and current low interest rates.

It is not immediately clear how many of the existing foundations would be able to raise the CNY 5 million necessary to register under the new rules. But many of the current bodies, such as the Marxism Leninism Foundation, are already seriously cash strapped and effectively moribund.

Dr. Wu added, however, that agencies which did not have sufficient cash to register as Foundations would have the option of registering as 'Funds' instead.