So are the conditions for philanthropy improving in China or not?

China, philanthropy, GONGOs, future, giving, charity, wealth

A new Chinese philanthropy, with lingering problems – image by Mariusz Kluzniak via Flickr

 

I am not an expert on Chinese philanthropy – I have never been to China, though I would love to go. As an outsider, I have found it very difficult to square the views of those who see China as being on the cusp on a philanthropic awakening, and those who see insurmountable barriers to its philanthropic development. As such, I thought I would simply show the positive and negative developments (that have been reported by English speaking sources at anyway) and let you make up your own mind. If I have missed anything glaring on either side, please add it in the comments.

 

The money

 

China has experienced possibly the most rapid and profound development process ever witnessed. Throw a dart at a stack of data sheets on China and it will likely skewer a chart showing a transformation that, had it been a projection for the future a generation ago, would have seemed fantastical. Take China’s GDP growth for example. In the year 2000 GDP stood at US$ 1.2 trillion. By 2014 it reachedUS$10,4 trillion.

 

The recent turmoil on the Shanghai Stock Exchange – currently rallying as this article is being written – may be indicative of a less bullish economy, but that is relative to a previous decade of break-neck growth. Whether the optimists are right that we will see a 7% growth in GDP and higher in 2016, or the sceptics are right that growth could be as low as 3-6%, the story is still one of enormous wealth creation.

 

China, money, wealth, philanthropy

It is necessary to include the above paragraphs on China’s economic outlook for one simple reason; it explains why people are so interested in speculating about the future of Chinese philanthropy. The enormous wealth that has, and will continue to be created in China could, if committed to good causes, have a significant impact on some of the most intractable problems facing China, and the world. So is the environment for philanthropy and civil society organisations (CSOs) improving in China or not?

 

The positives

 

The astonishing pace of China’s economic growth over the past decade or so has resulted in an equally startling return for those in a position to found businesses and invest. According to Forbes, China now has 213 billionaires. For some, including  Bill Gates, this cabal of fantastically wealthy individuals presents an opportunity to establish a philanthropic legacy that could not only benefit those left behind in China’s development, but also establish philanthropy in Chinese culture as something noble to aspire to.

 

There are some signs that this optimistic vision could become a reality. Jack Ma, the co-founder of Chinese e-commerce giant Alibaba, has apparently committed as much as US$3 billion to a philanthropic trust leading the Economist to label him China’s Carnegie.  But peer pressure alone does not a philanthropist make. For China’s wealthiest people to be persuaded to donate there must be an ecosystem of CSOs through which charitable contributions can be put to use, and an enabling legal environment that incentivises donors, regulates CSOs proportionately, and facilitates their independence.

 

China certainly seems to be rapidly developing a thriving CSO sector. It has been estimated that China has more than 4,000 domestic foundations as well as 600,000 registered domestic NGOs (up from 354,000 in 2012). To some extent, this is may be down to improvements in the environment for both donors and CSOs.

China is advancing at record breaking speed

China is advancing at record breaking speed

In 2009 the Ministry of Civil Affairs announced a Cooperative Agreement on Advancing Integrated Reforms in Civil Affairs with the municipal government of Shenzhen, a designated special economic zone within the southern state of Guangdong. Under this agreement, a number of progressive experiments have been undertaken into the regulation and administration of CSOs. One such innovation was to allow organisations to register with the state authorities without needing the prior sponsorship of a central government agency. These measures have since been extended to the whole province of Guangdong. Jiangsu and Hunan provinces have been allowed to issue local-level regulations governing foundations freeing them from the yoke of centralised restrictions. In 2012 the city of Guangzhou (the provincial capital of Guangdong) lifted restrictions on fundraising for CSOs and thus removed one of the key barriers to their independence and growth – the ban on public fundraising.

 

In addition to these measures to create an enabling environment for CSOs, measures have been undertaken to motivate donors, particularly corporate donors,  through more generous tax incentives. An increase in deductibility of charitable gifts from 3% to 13% for companies and a simpler process for claiming those incentives has meant that corporations provide 60% of donations in China.

 

The negatives

 

For a long time after the 1949 revolution, formal civil society was almost completely extinguished under the weight of The Communist Party of China’s desire to restructure society. The only organisations that existed were what are known, somewhat paradoxically as government operated non-governmental organisations (GONGOs) – many of which including The China Red Cross Society, China Youth Development Foundation and the China Foundation for Poverty Alleviation remain some of the most prominent organisations in the philanthropic space. Such government control in civil society may diminish the motivation to give in donors who seek to influence structural or societal change.

 

China, giving, charity, philanthropy

Chinese government reluctant to allow CSOs to play their own tune

Though many independent CSOs do operate in China, they typically do so under a generous reading of vague laws and the tacit agreement of the state rather than by achieving full registration with the Ministry of Civil Affairs (outside of the above mentioned experiments in certain provinces). This is particularly problematic for foreign organisations as to gain such a registration, foreign CSOs need to gain prior sponsorship, usually from a government body and very few manage to achieve this.

 

As stated above, the environment for donors has improved in some provinces. However, for individual donors, claiming tax incentives for the few organisations that should in theory qualify, can be very difficult. A lack of clear, simple and well-publicised tax exemption regulations and procedures for individual donors continue to suppress the uptake of incentives for individuals with tax authorities often failing to recognise the veracity of legitimate claims.

 

After the  2008 Sichuan earthquake, the  Chinese Red cross, one of the few Chinese GONGOs allowed to accept direct donations from the public, benefited from an outpouring of public generosity and received a share of the 12.4 billion US dollars in donations. But stories quickly began to emerge of excesses within the Chinese Red Cross and of donated money being clawed back into government coffers. In 2009, research from Tsinghua University revealed that 80 per cent of charitable donations following the Sichuan earthquake had been designated as extra government revenue. Coupled with allegations about the outlandish remuneration of a supposed Red Cross Society of China (RCSC) employee named Guo Meimei (which seem to have been false), these scandals continue to negatively affect public trust in CSOs and the willingness of people to donate.

 

The result has been a stagnation in the proportion of Chinese citizens making regular donations to CSOs. According to the World Giving Index 2014, the proportion of people in China that had made a donation to a CSO in the month prior to being surveyed as part of the Gallup World Poll in 2013 was just 13% compared to a global average of 29%. As the chart below shows, this compares rather unfavourably with other nations defined by the World Bank as “Upper Middle Income countries”.

CLICK TO ENLARGE: Data from World Giving Index 2014

If domestic donations are flagging, there seems little prospect of foreign donors picking up the slack. Since the 1990’s, Yunnan the capital of Kunming province has been used by foreign CSOs as a base in China as local authorities have been broadly welcoming. Worryingly, an increasingly hostile attitude to these typically unregistered organisations  by the authorities in Yunnan look more and more like the thin end of the wedge as the Chinese government have begun turning the screw on international CSOs.

 

Indeed, a draft “Law on the Management of Overseas NGOs” that is expected to be passed in the coming weeks  would see foreign CSOs regulated under the auspices Ministry of Public Security rather than the Ministry of Civil Affairs which regulates the rest of the sector. Registration with the Ministry of Public Security would be mandatory and would reinforce and strengthen the requirement to gain an official sponsor. International civil society advocates are rightly concerned and the global press has been quick to react (here and here) to the law, but the warning signs have been here for some time and they reach beyond foreign organisations to the heart of civil society.

 

If reports are to be believed, a leaked government briefing to officials in 2013 referred to as ‘Document Number Nine’ identified the promotion of civil society as a potential threat in the ‘ideological realm’. Reports of the transcript of the document contain some startling conclusions as to the perceived dangers of civil society. One paragraph reads; “Advocates of civil society want to squeeze the Party out of leadership of the masses at the local level, even setting the Party against the masses, to the point that their advocacy is becoming a serious form of political opposition.”

 

Conclusion

 

Confused? So am I. Essentially, it seems that policy makers recognise that philanthropy can and should play a part in China’s development and the experiments in Guangdong, Jiangsu and Hunan show that there is an appetite for reducing the administrative burden on CSOs, allowing fundraising and encouraging innovation. However, it appears that, like a worrying number of other nations, China is hoping to have its cake and eat it. A policy of nurturing the kind of activities that are seen as consistent with the governments agenda whilst closing the space for criticism and dissent is understandably attractive to officials seeking to insulate the state from what it might see as destabilising forces.

 

Narrowing the scope of philanthropy to align with government policy might seem like a shrewd move by policy makers in Beijing. However, fuelling public demand to engage in philanthropy whilst cordoning off certain activities could have unintended consequences. On one hand, as I pointed out in a New Statesman article I wrote on the wrong-headed approach of successive Egyptian governments to civil society law, silencing advocacy can lead to the build up of social pressure that if not allowed to vent through legitimate campaigns and protests, can explode in less politically constructive ways.

 

On the other hand, it may simply be that as trust n CSOs builds in China, and donors start to demand a more liberal approach to the management of the sector, that the conditions for philanthropy begin to incrementally improve. Taking a historical perspective, we might note that up until the death of Mao Zedong in 1976 there was essentially no civil society to speak of. A slow and steady liberalisation has since resulted in a flowering of CSOs, particularly in urban areas and even if backward steps are occasionally taken, the ultimate destination could still be reached.

 

 

Adam Pickering

 

 

 

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