To judge by the enquiries China Development Brief receives, the number of international NGOs wishing to establish programmes in China is growing steadily. But how to get started? Here, we attempt to answer some of the most frequently asked questions.

What is the proper, legal procedure for registering as an international NGO in China?

There isn't one. There is a general presumption that international agencies of all kinds - whether businesses, official development assistance donors or NGOs - should work with and through officially recognised Chinese partners; but, in the case of NGOs, no single procedure has yet been defined. NGOs with established programmes have found various ways of working. For newcomers, how best to proceed will depend upon what your organisation hopes to do, whether you need a permanent representative office in China, and what your visa and staffing requirements will be.

What are the different options?

Easiest of all is simply, from a base outside of China, to fund projects implemented by Chinese agencies. All you need do is identify an appropriate partner, reach an agreement with them, and hand over the money. Provided your Chinese partner is a legally recognised entity, you are extremely unlikely to encounter any bureaucratic obstacles to this way of working. (Be sure, however, that reporting conditions are clearly agreed in advance: we know of at least one case where an international NGO funded an 'action research' project whose results it was never allowed to see -- although this was several years ago and general transparency has since improved significantly).

It is also possible, from a base outside China, to negotiate project agreements where you have more of a hands-on role: e.g., coming in occasionally not just to monitor progress but also to act as consultants and/or trainers.

Numerous international NGOs support work in China in this way, to their own satisfaction. This remains the preferred relationship for many Chinese government partners, who tend at the outset to feel that, given the resources, they can do the job largely by themselves. However, in at least some quarters there is growing interest not just in external funding but also in external expertise and methodologies. Being able successfully to offer these will mainly depend upon the quality of the relationships that you develop with Chinese partners.

What about opening a project management office?

Opening a project office at local level is relatively straightforward, given the good-will of a local partner agency: - either a government department (Health, Agriculture, Education etc), a 'mass organisation' such as the Women's Federation, a people's government at county or city level, or an academic institution. Within the terms of a signed memorandum of understanding, partners of this kind can usually facilitate your opening a local programme office (provided the scale of the project merits it) and arrange visas, residency permits etc for international staff and visiting consultants.

It is important, however, to observe one point of protocol. A project office should not present itself as a national, representative office, especially if it is located outside of Beijing. A project office in Gansu or Guizhou may, for all practical purposes, serve well enough as a base for exploring cooperation opportunities elsewhere; but describing it - say, on a business card - as a 'China Programme Office' may offend Chinese bureaucratic sensibilities, and even upset your local partners. Chinese administrative culture is quite strict about operations which are 'national' in scope being represented at central level.

What has to be done to open an officially recognised representative office?

Again, given that international NGOs are not marked on Chinese administrative maps, there is no single, clearly established procedure or template.

Some organisations have special agreements with national level partners -- as in the case, for example, of the Ford Foundation and Chinese Academy of Social Sciences; or some international volunteer organisations and the State Foreign Experts Bureau (waiguo zhuanjia ju).

Several operational international NGOs (e.g., Save the Children, Plan International) have opted to register as an 'enterprise' with the Bureau of Industry and Commerce (gongshang ju). Although this may not seem an appropriate route, it confers useful official status, the right to open bank accounts in the organisation's name, to write officially recognized receipts, and to officially hire Chinese national staff. To register in this way it will generally be necessary to enjoy the sponsorship of a Chinese partner, and it may also be helpful to have links with an intermediary, matchmaking organisation.

What is the role of intermediary organisations such as 'FESCO', 'CICETE', 'CANGOs' and 'YINGOS'? What exactly are they?

In the administrative hierarchy, all of these agencies fall under, or have grown out of, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). This has until now been the main Chinese gatekeeper and matchmaker for bilateral, government-to-government aid. It negotiates with foreign governments and some agencies in the UN system and links donors to Chinese project partners (line ministries; provincial governments).

By a loose analogy, MOFTEC and its provincial level counterparts often expect also to serve as gatekeepers for international NGO assistance, even though there is no formal requirement in law for international NGOs to use this channel.

At central level, the China International Centre for Economic and Technical Exchange (CICETE), under the jurisdiction of MOFTEC, co-designs and executes UNDP projects. One department of CICETE used to perform the same function with respect to international NGOs, and developed contacts with upwards of fifty international organisations. Some (such as Australian Catholic Relief) channelled funds to projects exclusively through CICETE, while others (such as Oxfam and Misereor) funded some CICETE projects but also maintained independent programmes.

Over the last few years, the CICETE NGO Division has evolved into the 'CANGOs' -- the China Association of NGOs. This now presents itself as an NGO in its own right, aiming to serve as an umbrella organisation for Chinese NGOs and link them to international counterparts. In practice, the Chinese institutional members of CANGOs (egg, local Women's Federation branches) seldom fit international ideas of what counts as an NGO -- which is not, of course, to say that they may not be doing worthwhile work. It remains to be seen whether CANGOs will remain primarily a broker of international projects, or whether it will provide a broader range of services to Chinese and international organisations. Watch this space.

Some provinces have established 'International NGO Societies' under the jurisdiction of the provincial Department of Foreign Trade and Economic Cooperation. ('YINGOS' in Yunnan, 'TINGOS' in Tibet, etc.) These 'societies' are quite clearly government agencies - but that in itself is no impediment to their being useful partners. They, like the original NGO Division of CICETE, offer project brokering and match-making services, but are generally willing to work with organisations that want to establish a presence in China rather than just funding work from outside. Some international NGOs that have working agreements with these bodies report good relationships with them, and say that they are helpful in facilitating work permits, contact with other government agencies and, in some cases, registration with the Bureau of Industry and Commerce.

Agreements between international NGOs and provincial INGO Societies appear to be negotiated on a case-by-case basis and may differ from province to province. The provincial agencies are almost certainly under pressure to recover their own costs and, in negotiating with new international NGO clients, may try to levy a service fee of some kind, perhaps a fixed percentage of project expenditure. Newcomers should consult with established NGOs to find out what, if any, charges they are paying. (Some pay nothing at all).

Provincial 'INGO Societies' may also state, or imply, that some kind of registration with them is a legal requirement. To the best of our knowledge this is not the case. Provincial governments would be entitled to draw up local rules requiring this; but we are not aware of any that has done so. Some international NGOs work in project partnerships with provincial level bodies without having any formal relationship with these NGO Societies.

Bureaucratic facilitation services may also be provided by the parastatal Foreign Enterprise Service Company (FESCO) and its provincial counterparts. As the name implies, this system was designed to provide services - such as recruitment, assistance with registration and other procedures -- for the international private sector; but FESCO will generally be happy to accept NGO clients. Like the provincial INGO Societies, FESCO can arrange registration with the Bureau of Industry and Commerce.

Is opening a representative office necessary for developing a meaningful programme in China?

Registration as an enterprise and/or links with the MOFTEC hierarchy through FESCO or INGO Societies can confer practical benefits and a useful degree of formal recognition, but these procedures are not absolutely essential to working effectively in China, particularly if your operations are fairly small scale.

If you can show that you are cooperating with a recognised Chinese agency, and if you are not doing anything that is particularly contentious or sensitive, it is unlikely that you will encounter any kind of trouble arising from not having official registration and status, apart from the practical difficulties of not being able to open a bank account in the name of the organisation.

Several international NGOs operate substantial programmes in China without any formal registration status, merely reaching working agreements with government partners on a project-by-project basis. The lack of a clearly defined procedure for registration itself justifies this approach.

Is the government doing anything to define or formalise legal registration and management procedures?

For several years the government has been promising to publish regulations defining a procedure. Officials from the Ministry of Civil Affairs' Bureau of NGOs, which is primarily responsible for drafting the regulations, have on various occasions over the last twelve months said that a draft has been completed and sent to the State Council for approval, and that publication is imminent; but, to date, delays have proven more the rule than the exception.

What is the reason for the delay?

Government appears committed to establishing a policy and regulatory framework for all non profit activity in China; but there is a huge amount of law-making to be done in many other fields and it is hard for the policy makers to keep pace with a rapidly changing situation.

Also, the government regards as delicate and contentious any topic which raises associational issues and/or foreign engagement with China. International NGO registration can be seen from both these aspects. Government fears on these subjects have been greatly sharpened by the stand-off over the last two years with the Falun Gong movement. This appears in many cases and at many levels to have paralysed departments responsible for dealing with formal organisations, both Chinese and international. There seems to be no clear consensus on how to proceed.

When the new rules are finally published, what are the main provisions likely to be?

Civil Affairs officials have declined to discuss the likely content of the rules. The department responsible has little knowledge or experience of working with international development NGOs and, as far as we know, has not consulted with any. It is doubtful whether the department has a clear idea of the nature and range of international NGOs working in China. This does not bode well: it cannot be easy to regulate a sector one does not know, and if an enabling environment results, it may be more by accident than design.

Perhaps the likeliest outcome, however, is that the regulations will formalise the current system of partnering with recognised Chinese agencies, in a way that broadly mirrors rules issued in 1998 for registration and management of Chinese 'social organisations.' These require organisations to find a government agency in a relevant sector willing to act as a sponsoring unit and to 'supervise' the group's activities. Only having found such a sponsor can a social organisation apply for final registration with the Civil Affairs authorities.

For Chinese organisations, one of the main problems with this system is that the sponsoring units acquire responsibilities without safeguards or returns, and so have little incentive to accept approaches from unknown, independent or potentially adventurous groups. International organisations would have less trouble finding willing sponsors; but it could become harder to work with a range of different institutional partners, as the official sponsor would gain more leverage in dictating the terms of agreements, and may expect to monopolise the available resources in directly partnered programmes. This would probably make multi-sectoral approaches harder - which is ironic, given that drawing a range of Chinese partners together is one of the most useful, bridging roles that international groups can play.

However, the protracted delay in drawing up the new regulations may prove a blessing, as the opportunity still exists for greater consultation between Civil Affairs officials and international NGOs. Newcomers hoping to establish programmes should not hesitate to talk to the Civil Affairs department responsible. If nothing else, this will help to broaden the Civil Affairs view of the sector.

Is it possible to partner directly with a Chinese NGO?

There is no problem in providing grant funding and technical support to legally established Chinese NGOs; indeed, some, such as the Nanjing based Amity Foundation, rely almost exclusively on support from a wide range of international partners. But relatively autonomous Chinese NGOs will not usually have the status necessary to help an international organisation establish a formal presence in China. On the other hand, some of the largest (and closest to government) of China's non-profit organisations, such as the Youth Development Foundation, Disabled Persons Federation or Chinese Charities Federation, have more status as local partners and do in fact have working relationships with many international organisations.

What is the tax status of international NGOs working in China?

Over the last few years, the tax authorities have applied themselves vigorously, and with growing success, to increasing revenues from import duties, personal and corporate tax. In the light of very low government revenues over the last two decades, this is in itself understandable; but the environment is not propitious for obtaining tax relief.

Although the 1999 Public Welfare Donations Law (see here for our translation of the full text) makes a general commitment to providing exemption or reduction of duties for donated goods of money, specific guidelines are lacking and in practice any reduction has to be negotiated on a case-by-case basis with local tax authorities. The bargaining power of the Chinese partner or recipient agency will be a critical element here; but in practice very few international NGOs have been able to obtain, egg, exemption of duties on imported equipment.

However, organisations registered as enterprises have generally been able to avoid paying tax on their total turnover.

National staff of international organisations are liable to pay personal income tax. Expatriates are also expected eventually to begin paying tax on their personal income -- but, once again, there appears to be no fixed ruling on this; it is largely a matter of negotiation with the local tax office.

As of 2001, all individuals and their employers (in urban work units) are also expected to pay into the national unemployment insurance scheme.

What are the main pitfalls to be aware of when opening a programme in China?

The single most important condition for doing useful work in China is to develop good, honest and mutually respectful relationships with Chinese partners. It is therefore essential to select the right partners in the first place and avoid future misunderstandings by being clear and consistent about how you operate and how you understand the nature of the relationship.

It is important to realise that whether you wish to fund work from outside, or to have a hands-on role inside China, there may be keen competition between Chinese agencies to partner with you. It is not simply that agencies will compete for the resources international NGOs may bring, although this is certainly one important factor. Foreign support often also confers status, and helps Chinese agencies to mobilise domestic funding. Moreover, some of the more sophisticated Chinese agencies recognise that although many international NGOs may have quite limited resources of their own, they can act as a conduit or magnet for more substantial international funding (through governments or larger foundations); and they may also draw other foreign groups to the area where they are working.

For all of these reasons, it is sensible to proceed cautiously when first selecting a partner; to avoid binding commitments which prevent you from developing future relationships with others; to avoid arrangements which require you, for example, to rent premises or accept seconded staff from your partner rather than advertising on the open market.

We know of several international agencies that got into bed too soon with a Chinese partner and found it difficult to get out again when things didn't work out.

How can these pitfalls be avoided?

Don't hurry. Take time to get to know the field, and to develop relationships with Chinese institutions. It is wrong to assume that you can identify a niche for your organisation in such a huge and complicated country on the basis of a one or two week working visit. If you are looking for long-term involvement, it makes sense to place an experienced person in China for at least six months to explore the terrain, meet prospective partners and others working in your sector, before beginning to develop a programme. (There is no practical difficulty in doing this; it can easily done on either a business or a tourist visa, and no-one in China would seriously object to this kind of exploratory phase without any kind of formal relationship with a Chinese institution.)

If you attend first to professional partnerships in your sector, and develop good relations with partners, they can help you to negotiate whatever permissions are necessary for you to operate on a more or less legal footing.

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Contacts

China Association for NGO Cooperation (CANGO)
Tel: +86 10 6201 1830/32
Fax: +86 10 6201 1328
info@cango.org ; www.cango.org

Foreign Enterprise Service Company (FESCO)
Tel: +86 10 65001371
webmaster@fesco.com.cn ; www.fesco.com.cn
Ministry of Civil Affairs NGO Management Bureau
Tel: +86 10 65135339