Unleashing the Potential of Philanthropy in China

Copyright Š 2015 Information for United Nations Development Programme/51Give No.2 Liang Ma He Nan Lu, Beijing, China 100600 Internet: www.cn.undp.org Email: registry.cn@undp.org All rights reserved Disclaimers United Nations Development Programme: The findings, interpretations and conclusions expressed herein are entirely those of the author(s) and do not necessarily reflect the view of United Nations Development Programme. United Nations Development Programme cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of United Nations Development Programme any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries.

This publication has been translated into Chinese. If there is any inconsistency or ambiguity between the English version and the Chinese version, the English version shall prevail.

To cite this publication: Unleashing the Potential of Philanthropy In China. 2015. United Nations Development Programme

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Foreword

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Acknowledgements

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I. Introduction

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II. History and Culture of Philanthropy in China

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III. The Philanthropic Sector in China

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1. The Landscape 2. Governance IV. Charitable Giving in China

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V. Trends and Innovations in the Philanthropic Sector

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VI. Challenges to Future Growth

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VII. Conclusions & Recommendations

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Endnotes

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References

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FOREWORD 2015 was a crucial year for global development cooperation. The international community endorsed a new, bold development agenda and committed to achieve the Sustainable Development Goals (SDGs); The Third Conference on Financing for Development in Addis Ababa agreed on more diverse and sustainable resources to finance this new agenda; finally, the UN Climate Change agreement in Paris created momentum for governments and the private sector to invest in a green, low-carbon future.

All these agreements call for a drastic change in the way that development takes place.

It is clear that neither governments, nor the UN alone have the resources or capacities required to achieve this paradigm shift. Their successful implementation will rely on developing effective partnerships that bring together the UN, governments and civil society with the private sector and the world of philanthropy.

The active engagement of philanthropists, both globally and in each country, will be critical. In addition to offering new pools of funding, philanthropic organizations bring private sector expertise and new perspectives to development. This represents an enormous opportunity, since a broader range of philanthropists is emerging and engaging in international giving, while domestic giving within middle-income and developing countries is also increasing fast.

Countries like China, but also Brazil, India, Indonesia and South Africa, are becoming more involved in development assistance not only through government aid but also through private investment, remittances and homegrown philanthropy. As the world looks for additional sources of funding to finance its fight against poverty, inequality and climate change, a lot of hope is resting on the rise of philanthropy. A strong and healthy philanthropic sector in China, confident in looking outside its borders and with the right capacities to respond to the great demands, will benefit China, as well as the rest of the world.

This report believes that China today has the unprecedented opportunity to tap into its expanding non-profit and philanthropic sector. Home to record numbers of billionaires who have started to give back, with more and more corporations investing in corporate social responsibility (CSR) and with an expanding middle class increasingly aware of environmental and social challenges, China has vast resources to mobilize in support of philanthropy. In the last few years, technology and new media have created innovative ways to donate, which are making it even easier for the general public to participate in philanthropy. Finally, as Chinese businesses and state-owned companies continue to go global, China’s philanthropists are also starting to look beyond their borders.

At the same time, important institutional and social barriers to the development of philanthropy still exist. In many respects, China is still a place where philanthropists are finding it hard to build, promote, and sustain charitable organizations. This report 3

calls for targeted reforms to be undertaken in order to remove these barriers and unleash the enormous potential for philanthropy in China. The majority of these reforms are not costly, yet they would allow the philanthropic sector to play a much larger role in tackling poverty and inequality, and contribute to the SDGs, both within China as well as globally.

Einstein once said: “it is every person’s obligation to put back in to the world at least the equivalent of what he or she takes out of it”. Supporting the development of philanthropy in China will allow millions of people to actively contribute to a more equitable, prosperous, and stable world.

Agi Veres Country Director United Nations Development Programme China

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ACKNOWLEDGEMENTS This Report, Unleashing the Potential of Philanthropy in China, was commissioned by the United Nations Development Programme (UNDP) in China, and prepared by the research team at 51Give, a platform that provides online tools and processing services to enable the collection of charitable donations in China.

We are extremely grateful to Prof. Zhang Xiulan (Dean, School of Social Development and Public Policy, Beijing Normal University) and Wang Xinsong (Assistant Professor, School of Social Development and Public Policy, Beijing Normal University) for writing this report. We want to acknowledge Gina Holly and Valentina Pignotti among others for their insights and contributions to the research; Andrea Pastorelli, Policy Specialist in the Poverty, Equity and Governance team of UNDP China, for the overall supervision and guidance; Tak Sum Rhys Timothy Yim and Yao Chen for the Chinese translation, as well as Lucy Huang and Siqi Liao for the cover design of this report.

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INTRODUCTION PHILANTHROPY

INTRODUCTION

Philanthropy encourages compassion and strengthens community ties

The TheOxford OxfordDictionary Dictionarydefines definesphilanthropy philanthropyasas “The “Thedesire desiretotopromote promotethe thewelfare welfare ofof others, others, expressed expressedespecially especiallybybythe thegenerous generousdonation donationofof money money toto good good causes.” causes.” Philanthropy Philanthropy asas anan expression expressionofofhuman humangenerosity generosityexists existsininevery every culture, society,and andisisreflected reflectedininmost mostofofthe theworld’s world’s cultures culturesand andreligions. religions.Philanthropy Philanthropyisisliterally literallythe the “love “loveofofhumanity.” humanity.”ItItenhances enhanceswhat whatititisistotobebe human the process of givingofandgiving receiving humanthrough through the process and – receiving private giving for the betterment others. Itsof – private giving for the of betterment contributions can make upcanformake the failure others. Its contributions up for of the governments or the marketplace.

This can beThis a failure of governments or the marketplace. pivotal contribution can be a pivotalto sustainable contributiondevelopment. to sustainable development.

The UN recognizes that corporate and private philanthropy played that an corporate important and roleprivate in The UN recognizes supporting the achievement the Millennium philanthropy played an of important role in Development Goals (MDGs). Inof fact, the last 15 supporting the achievement thein Millennium years the growth global philanthropy Development Goalsin(MDGs).

In fact, in thehas last transformed thegrowth international development sector.

15 years the in global philanthropy has Itstransformed resources the have grown exponentially as a international development sector. proportion of have total grown Official Development Its resources exponentially as a Assistance. philanthropy not be proportionHowever, of total Official should Development viewed simply a “gap filler” for ODA1. Instead, Assistance (ODA).

However, philanthropy should and importantly, brings not most be viewed simply aphilanthropy “gap filler” for ODAa1. complementary beneficial set of new actors, Instead, and and most importantly, philanthropy approaches, and types of funding to development. brings a complementary and beneficial set of new And this approaches, comes at a crucial moment for globalto actors, and types of funding development with atthe enactment of development.cooperation And this comes a crucial moment the Sustainable Development Goals (SDGs). fornew global development cooperation with the Asenactment the world looks additional Development sources of of the newforSustainable funding to finance its world fight looks against povertyGoals (SDGs).

As the for additional including remaining in poverty sources 70 of million fundingpeople to finance its fight against inpoverty, China rising alone- inequality rising inequality and change, climate a and climate change, a lotisof hope on is the resting with the rise ofin lot of hope resting rise of philanthropy countries like China.

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philanthropy in countries likephilanthropic China. A strong and China.

A strong and healthy sector sector inoutside China,its confident inhealthy China,philanthropic confident in looking borders,in looking outside willrest benefit will benefit China,itsasborders, well as the of theChina, world.as well as the rest of the world.

In many ways China today has the unprecedented In many ways China has the unprecedented opportunity to tap intotoday its increasing economic opportunity and to tap into its increasing development its expanding non-profiteconomic sector. development and itsinexpanding While philanthropy China is non-profit currently sector. at a While stage, philanthropy in China at a nascent it has grown rapidlyisincurrently recent years. nascent it hasofgrown rapidly in recent have years.

The totalstage, amount charitable donations The totalbyamount of charitable donations have increased 66 per cent between 2009 and 2014, increased by 66 per cent between 2009 and have 2014, while the number of charitable organizations while the number organizations have multiplied almost of 5 charitable times between 2004 and 2 multiplied 5 times between 2004 and 2014 . Home almost to approximately 500 billionaires in 2 2014.and Home 400 billionaires 2015, withtoanapproximately expanding middle class, Chinain 2015, an expanding middleresources class, China has vastand andwith growing socio-economic to 3. Into vast and growing socio-economic resources behasmobilized in support of philanthropy 3 be mobilized support of and philanthropy.

In addition, the use in of the internet social media, addition, with the usesmall-scale of the internet and social media, together innovations have togethernewwith innovations and have created toolssmall-scale such as crowd-funding promoted newsocial fund-raising techniques suchareas online or even media donations, which crowd-funding social donations, which making it even and easier for media the general public to are making even easier for the general public to participate in itphilanthropy. participate in philanthropy.

However, important institutional and social However, institutional and social barriers to theimportant development of philanthropy still barriers development of philanthropy still exist, suchtoasthe a) the gap between the sector’s fast exist, such as outdated a) the gapregulations between the growth and the thatsector’s govern fast it, andofthe out-dated regulations thatpublic govern b)growth the lack transparency and therefore it, b)inthe lack of transparency therefore public trust charitable organisations,and c) and the lack of trust in charitable organisations, c) and the lack capacity for foundations and organisations to ofcapacity for foundations and report organisations carry out charitable projects. This calls forto carry out projects, etc. This to report calls reforms to charitable be undertaken in particular address for reforms be undertaken in context order to of remove these barriers,to especially in the the these barriers, thetocontext of the forthcoming 13th especially 5 Year Planindue be published in 2016

in 2016.

With the enormous potential for th forthcoming 5China, Year Plan due to isbeexpected publishedto philanthropy13in the sector inhave 2016.

With tothe enormous for the ability greatly influencepotential development, philanthropy in China, the sectorboth is expected tackle inequality and poverty, in Chinatoas have ability to greatly influence development, wellthe as globally. tackle inequality and poverty, both in China as well globally.

Thisasreport aims to present a basic overview of the state of development of philanthropy in China, This aims focus to present a basic overview of the withreport a special on the practical governance state development of philanthropy in China, and of policy-related reforms needed to unleash the with special focus the practical true apotential of thisonsector in China.governance It compiles and neededliterature to unleash the datapolicy-related collected viareforms an extensive review true potential official of this sector in China. by It compiles including publications Chinese data collectedand via international an extensive agencies literature review authorities together including official publications

by Chinesein with interviews of key experts and practitioners authorities international agencies together the sector. and The aim is to review the sector’s scale with of key some expertsimportant and practitioners in andinterviews scope, discuss innovations the aim is to review sector’s andsector. moreThe recent trends, and the analyse thescale main and scope, discuss important challenges that are some holding Chinese innovations philanthropy and moreeventually recent trends, and forward analyse the main back, putting actionable challenges that holding Chinese philanthropy suggestions forare reform. back, eventually putting forward actionable suggestions reform.

It should befornoted that this report does not discuss the role or status of international philanthropy in ItChina, should nor be noted this report doestrends not discuss does itthat discuss in depth related the or status of international in to role Chinese philanthropy towards philanthropy poorer countries China, nor does it discuss trends and communities outsideinofdepth China, nor related general to“Corporate Chinese philanthropy towards poorer countriesby Social Responsibility” activities and communities outside of China, general Chinese companies overseas.

Whilenor implications “Corporate Social activities by may be drawn forResponsibility” these issues from this report, Chinese companies While implications detail analysis on overseas. these issues is left for other may be drawn for these issues from this report, reports and in-depth research. detail analysis on these issues is left for other reports and in-depth research.

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HISTORY & CULTURE OF PHILANTHROPY IN CHINA

HISTORY & CULTURE OF PHILANTHROPY IN CHINA

“…philanthropy in ancient China was dominated by clanbased lineage organisations”

Philanthropy saw its emergence in ancient Chinese society. The Confucian tradition, with its doctrines on relationships and social roles, created conditions for the exchange of goods and services between people, strengthening guanxi –thea community ties and consolidating guanxi, Chinese of wordsocial describing the system of social system networks and influential networks andwhich influential relationships, facilitaterelationships business andwhich other facilitate Philanthropy business inand other dealings. dealings. ancient China was thus Philanthropy in ancientlineage Chinaorganisations, was thus dominated by clan-based dominatedservices by clan-based lineage offering like care for organisations, widows and offering distribution services like care and forconstruction widows and orphans, of grain of orphans,for distribution of grain and construction of schools boys in the clan. This type of ‘clanschools charity’ for boys was in thebased clan. This typeexpansive of ‘clanbased on an based charity’of was basedThrough on an itsexpansive understanding the family. doctrine understanding the family.

Through its doctrine of altruism ofand humanity, Confucianism of altruism and humanity, Confucianism however also brought within its fold those who however also brought its fold those who were found outside the within institutions of family and were found the institutions of family and clan.

There outside is evidence, for example, of local clan. There evidence,individuals for example, of local notables andis wealthy overseeing notables welfare and wealthy individuals village activities such overseeing as the village welfare activities such as and the establishment of clinics, refugee shelters, establishment soup kitchens. of clinics, refugee shelters, and soup kitchens.

Between the nineteenth and early twentieth Between missionaries the nineteenth and and early introduced twentieth century, arrived century, methods missionaries arrivedgiving, and paving introduced western of charitable the western charitable giving, paving the way for methods the new of charitable organisations found wayChina for thetoday. new charitable organisations in in With the Communistfound Party China today.

With the Communist Party and coming coming to power, wealth nationalized the to power in 1949, nationalized the environment for wealth philanthropy in and China environment for philanthropy in China completely changes, as any kind of recognition completely changed, of the need for charityas any kind of recognition of

ofwas the seen need as foracharity seen as a sign of statein sign ofwas state failure.

However, failure.

However, in thedue 1980s and 1990s, due to the 1980s and 1990s, to reform and opening reform and asopening up, as as up. as well decentralization and well increasing decentralization andphilanthropy increasing social demands, social demands, in China was philanthropy in China was given the space to given the space to develop, especially at the develop, especially at theopened local level. local level.

As China itself As up China to the opened up and to the world, concepts world, itself concepts international practicesandof international philanthropy to philanthropypractices startedof to influence started Chinese influence Chinese policymakers andpolicymakers social elites. and social elites.

With With the the increase increase inin socio-economic socio-economic status, status, individuals in China are now becoming individuals in China are more concernedmore with concerned with public welfare, and to more willing public welfare, and more willing spend time toand spend time and money onWhile publictheprojects. money on public projects.

Chinese While the Chinese economy enteredofa slower ‘new economy has entered a ‘newhas normal’ normal’ of slower growth, 2014 economic growth,economic in 2014 total in regular total regular (i.e. donations, (i.e. not donations donations, donations relatednot to related natural todisaster natural relief) disasterhave relief) reacheda ahistorical historic new reached new 4 4 high highofof$15.51 $15.51billion billion.. Recently, Recently,responding respondingtoto pressure pressure from from both both the the state state and and civil civil society, society, corporations have also begun to pay attention corporations have also begun to pay attentiontoto social socialresponsibility responsibilityby bysupporting supportingprojects projects that that address addresscommunity communityand andsocial socialneeds. needs.Overall, Overall,aa new newculture cultureofofphilanthropy philanthropyisisarising, arising,featuring featuring active activepublic publicparticipation participation inin aa wider wider range range ofof charitable charitableprojects. projects.

The Thenumber numberofofpeople peopleininChina Chinawho who decide decide toto donate donatetotocharity charityisisgrowing growingevery everyyear yeartogether together with with the the amount amount ofof money money donated donated by by corporations. corporations.IfIfthis thistrend trendcontinues continues China China will will soon most developed countries in the soon surpass surpass most overall absolute amount of resources raised for ch 8

developed the overall amount are of charity. Incountries addition,in new technologies resources raised for charity.

In addition, new creating a world where effective philanthropy is technologies are the creating world effective no longer only worka of big where foundations or philanthropy no longer the work big organizations,is but anyoneonly interested in of giving foundations or organizations, but anyone back. This invigorates people and enables them interested in giving back.

Thisainvigorates to think that they can make difference,people while and enables think thatAll they urging othersthem to dotothe same. of can thismake shoulda difference, urging others to do the same. be supportedwhile and encouraged.

All of this should be supported and encouraged.

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THE THEPHILANTHROPIC PHILANTHROPIC SECTOR IN CHINA SECTOR IN CHINASECTOR THE PHILANTHROPIC IN CHINA

“Education is the primary focus of work, for both private and public foundations”

I. The Landscape The charity orphilanthropic philanthropicsector sector China charity or in in China is is a agrowing growingpart partofof the the not-for-profit not-for-profit or or ‘third ‘third sector’, which in the is mostly the Chinese context context is mostly organized under organized under aa large large array array of of Social Social Organisations zǔzhī- -SOs).

SOs).

Organisations5 (社会组织, Shèhuì Shèhuì zǔzhī The organizations These organizationsare arerequired required to to be be registered registered under the under the local local Civil Civil Affairs Affairs Bureau of of the the Ministry of Civil Civil Affairs and and include: include, Social Social Associations (社会团体, (社会团体, Shèhuì Shèhuì tuántǐ), tuántǐ), Civil Civil Non-Enterprise Institutions ( 民 ( 民办办非 非企 企业 业,, Non-Enterprise Institutions Mínbàn fēi fēiqǐyè) qǐyè) Foundations (基金会, andand Foundations (基金会, Jījīn Jījīn huì).

Currently foundations play the huì). biggest role in the growing philanthropic sector in foundations China and receive majority of Currently play thethe biggest role in the the growing funds donated philanthropic by either sectorindividuals in China and or receive the majority the funds donated by corporations.

The of Chinese legal system either individuals or corporations.

Theand Chinese categorizes foundations into public nonlegal system categorizes foundations public public foundations (hereafter intoprivate and non-publicThe foundations (hereafter private foundations). largest difference lies in foundations).

The largest difference their their ability to raise funds.

While lies the in former ability to raisetofunds. foundations are allowed raise While funds public directly from the are allowed to raise funds directly from the public, the latter are prohibited from public public, privateand foundations prohibited from fund-raising, instead are must only rely on public fund-raising, and instead must only rely endowments from wealthy donors or on endowments from wealthy donors or corporations. corporations.

Most public foundations were established in Most1980s public foundations in the the and 1990s were withestablished some form of 1980s and 1990s with some form of government government support. The Chinese Children support.

TheFoundation Chinese Children and public Youth and Youth was the first Foundation was the first public foundation foundation established in 1981; other wellestablished in foundations 1981; other include well-known public known public the China foundations include the China Foundation for Poverty Alleviation,

foundations the China Alleviation, Foundation for Foundationinclude for Poverty the Poverty Alleviation, the Soong Ching Ling Soong Ching Ling Foundation and the China Foundation and the China Youth Development Youth Development Foundation.

It was only Foundation.

It was only in June 2004 in June 2015 with the passingwith of the the passing of the on Regulations on Administration of Regulations Administration of Foundations Foundations (RAF), that private, independent (RAF), that private, independent foundations foundations weretolegally recognized. then, were allowed exist. Since then, Since the number the number of private foundations has surged of private foundations has surged to 2,724toin 2,724 surpassing number of of public 2014,in 2014, surpassing the the number public foundations in 2010.

By the end of 2014, 65 per foundations in 2010. By the end of 2014, 65 cent of the 4,211 foundations registered in China per cent of the 4,211 foundations registered were private (Graph 1). (see Graph 1). in China were private Strict procedures andand requirements by Strictapproval approval procedures requirements the Ministry of Civil Affairs make registration of by the Ministry of Civil Affairs make a registration new public of foundation, to openly a new allowed public foundation, fundraise, difficult.

Even with these restrictions, allowed to openly fundraise, difficult. Only however, in organisations China receivehave a about 30foundations independent significant portion of all charitable donations successfully registered as public foundations within the country (46 per cent in 2013)6. The since 2004, including the One Foundation total yearly income of all foundations has founded by Jet Li, and the China Charities Aid steadily increased between 2010 and 2014, Foundation for Children. going from $5.92 billion to $8.31 billion USD (Graph 2). Over 80 per cent of the income Even with these restrictions, however, comes from donations, while the rest is from foundations in China receive a revenues. significant government subsidies and investment portion of all charitable donations within the 6. The total country (46 per cent 2013) Although nowadays therein are more private yearly income of foundations has steadily foundations than public, the overall share of increased between 2010 foundations and 2014,is going assets and income in private still from $5.92 to $8.31 billion USD 7. In 2013, slightly lowerbillion the total assets of (Graph public 2). Over 80 per cent of thewere income comes from and private foundations $7.61 billion (51.65 per cent) and $7.31 billion (48.35 per cent) respectively. Poverty Alleviation, 10

donations, while the from government cent) respectively.

Ofrest the is total income for all foundations 2014 ($8.31 billion), public subsidies andininvestment revenues. foundations received $5.28 billion, or 63.54 per cent of inthe total.foundations Finally, because public income private is still slightly 7 foundations are required spendofnopublic less than lower.

In 2013, the totaltoassets and 70 per cent of their total income from the private foundations were $7.61 billion (51.65 previous is also per cent)year, and their $7.31expenditure billion (48.35 perhigher cent) ($4.54 billion in 2013).

This is three times the respectively. This is because public expenditure of which are foundations areprivate able tofoundations, raise more resources. required to spend at least eight per cent the Of the total income for all foundations inof2014 8 remaining funds of the previous year . received ($8.31 billion), public foundations $5.28 billion, or 63.54 per cent of the total.

Accordingbecause to a recent

by China Finally, public survey foundations are Foundation Center, education is the most required to spend no less than 70 per cent of popular areaincome of workoffor both private year, and public their total the previous their foundations.

Other areas of focus include: expenditure is also higher ($4.54 billion in povertyThis reduction, public health, culture and the 2013). is three times the expenditure of arts, children, and disaster relief.

Private private foundations, which are required to foundations have tended direct resources spend at least eight pertocent of their the remaining to focus thatyear. are usually not taken up funds of on theprojects previous by their public counterparts. For example, one of the most prominent private foundations in China, the Narada Foundation, has made its mission to “foster civil society”.

Although areFoundation, more private China, the there Narada hasfoundations made its mission to “foster civil society”. than public, the overall share ofOverall, assets the and growth of private foundations has revitalized the philanthropic sector in Chinasurvey by increasing the According to a recent

by China total amount ofCenter, donations, bringingisin the new most and Foundation education professional human resources, and introducing popular area of work for both private and more missions and projects that are conducive to public foundations.

Other areas of focus the overall development of civil society. include: poverty reduction, public health, culture and the arts, children, and disaster relief. Private foundations have tended to direct their resources to focus on projects that are usually not taken up by their public counterparts. For example, one of the most prominent private foundations, the Narada Foundation, has made its mission to “foster civil society”. Overall, the growth of private foundations has revitalized the philanthropic sector in China by increasing the total amount of donations, bringing in new and professional human resources, and introducing more missions and projects that are conducive to the overall development of civil society.

Graph 1: Total Number of Foundations in China

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 0

500

1000

Number of Private Foundations

1500

2000

2500

3000

Number of Public Foundations

Sources: Yang, Tuan (ed.), 2015, Blue Book of Philanthropy: Annual Report on China’s PhilanthropyDevelopment (2015), Beijing: Social Sciences Academic Press (China)

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Graph 2: Total Income of Foundations (billions of USD), 2010-2013 9

8.31

8

7.15

6.98

2011

2012

7 6

5.25

5 4 3 2 1 0

2010

2013

Source: Liu, Zhongxiang (ed.), 2014, Annual Report on China’s Foundation Development (2013), Beijing: Social Sciences Academic Press (China); Yang,Tuan (ed.), 2015, Blue Book of Philanthropy: Annual Report on China’s Philanthropy Development (2015), Beijing: Social Sciences Academic Press(China).

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II. Governance Legal and policy context Although there there are aa number number of of separate separate regulations regulations that that govern govern different different parts parts of of the the philanthropic sector, pass a philanthropic sector, China China has has yet yet to to pass national law the National National People’s People’s single national law in the Congress (NPC) thethe thirdthird sector.

Most Congress (NPC)regulating regulating sector. existing regulations are lagging behind the rapid Most existing regulations are lagging behind development of the sector and sector this is and creating the rapid development of the this considerable challenges to its sustainable future is creating considerable challenges to its development.future For example, the regulations on sustainable development.

For example, social associations and civil non-enterprise the regulations on social associations and civil institutions, bothinstitutions, passed in theboth latepassed 1990s by the non-enterprise in the State Council, are mostly concerned with the late 1990s by the State Council, are mostly management of registration of social concerned with the management of organizations and did not of?]. attemptThe to regulate registration [instead Law the on broader sector.

Since then, the Law on Donation Donation for Public Welfare was passed by for Public Welfare passed by the NPC in 1999, the NPC in 1999, and the latest regulation in and field, the RAF, passedwas by passed the State in the the RAF, byCouncil the State 2004, were important steps forward in regulating Council in 2004. the sector. However, many practitioners and scholarspractitioners agree that and therescholars is a need forthat an Many agree overarching law that clarifies roles and there is a need for an overarching law that responsibilities, new incentives designs to give clarifies roles designs and responsibilities, to charity and tosets path new incentives givea toclear charity andfor setsthea development of the sector – who can do what,– clear path for the development of the sector under which circumstances and through what who can do what, under which circumstances means. and through what means.

Efforts to push forward legislation on Efforts to push forward legislation on philanthropy started as early as 2005 by the philanthropy started as early as 2005 by the Ministry of Civil Affairs (MCA) that submitted a Ministry of Civil Affairs (MCA) that submitted draft “Law on Promoting Philanthropy” to the aNPC. draftHowever, “Law on itPromoting to was only Philanthropy” in 2014 that the the NPC. However, was onlyain more 2014 that the legislative efforts itentered official legislative efforts entered a more official drafting stage. A draft law was made available drafting stage, it isconsultation widely expected by the NPC for and public in late that 2015,a draft be made available by the and itlaw is will widely expected that this willNPC be for public consultation in late 2015, with finalized in 2016. finalization in 2016.

It is notable that some of the most outstanding It is notable some of the most research institutes that dedicated to philanthropy and outstanding research institutes dedicated to the social sector in China, including the China philanthropy and the Institute, social sector inNormal China, Philanthropy Research Beijing including the China Philanthropy Research University’s School of Philanthropy, and Sun Institute, Beijing Normal University’s School Yat-Sen University, have actively participated in of Philanthropy, and Sun Yat-Sen University, the legislative discussions and provided their have actively participated in thebylegislative own draft proposals for consultation the NPC. discussions and provided their own draft Their participation was funded by foundations.

For example, the BNU draft was sponsored by the Heren Philanthropy Foundation, while the draft prepared collectively by Beijing University and Tsinghua University was funded by the Dunhe Foundation from Zhejiang province. 9

proposals by the NPC. Their For example,fortheconsultation BNU draft was sponsored by participation was funded by while important the Heren Philanthropy Foundation, the stakeholders in the by legislation process, draft prepared collectively Beijing University and namely Tsinghua foundations.

University Forwas example, funded the

by BNU the Dunhe from Zhejiang draft Foundation was sponsored by province the 9.Heren Philanthropy Foundation, while the draft Taken together, the by legislative proposals prepared collectively Beijing University provided by various institutes suggest and Tsinghua University was fundedthat by the the 9 following issues from in the governance Dunhe Foundation Zhejiang province. of philanthropy in China are most pressing. First, there be a clearer scope As needs seen tofrom the definition legislativeof the proposals ofprovided philanthropy.

While some propose that by various institutes, the following philanthropy should only beoflimited to socialin issues in the governance philanthropy assistance to the needy, others strongly argueto China are most pressing. First, there needs that definition of philanthropy shouldof be the a legal clearer definition of the scope include anything related to social development, philanthropy. While some propose that such as the arts and sciences.

Second,towhile philanthropy should only be limited social most proposals suggest that the MCA be the sole assistance to the needy, others strongly argue agency for administration of philanthropy, some that the legal definition of philanthropy have proposed a separation should include anything between related regulatory to social and administrative functions.

These development, such as the arts andproposals sciences. include the set-up of a National Philanthropy Second, while most proposals suggest that the Commission the roleforofadministration regulating theof MCA be the with sole agency sector, with Civil philanthropy, someAffairs have Authorities proposed as a administrators.

Third, given the limitation separation between regulatory faced and by private foundations on public fund-raising, administrative functions. These proposals and consequently on their charity work, all include the set-up of a National Philanthropy proposals call for relaxation of requirements for Commission with the role of regulating the obtaining public fund-raising status. This would sector, with Civil Affairs Authorities as unleash the potential of private foundations to administrators. Third, given the limitation bring more innovations and raise standards faced by private foundations on public fundwithin the sector. Finally, most experts have raising, and consequently on their charity proposed legislative reforms to encourage work, all proposals call for relaxation transparency and accountability of charityof requirements for obtaining public organisations, better investment behaviourfundof raising status.

This would unleash tax the foundations, and stronger, more effective potentialfor of private foundations to bring more incentives both donors and receivers. innovations and raise standards within the sector. Finally, mostexpressed experts have proposed However, some have concern about legislative reforms to tackle issues the latest stage of legislation, and have arguedof transparency accountability charity that it would be and sufficient to update theofexisting organisations, investment behaviour laws and regulations in order to follow theof foundations, and stronger, more effective tax sector’s development, instead of passing a whole incentives for both donors new law. Some believe that and sincereceivers. philanthropy in China is still in a transitional phase, additional However, expressed concern time shouldsome be have allotted for more trials about and the latest stage of legislation, and have argued developments within the sector before an that it would update the overarching piece be of sufficient legislation to is appropriate. existing laws andparts regulations in order to However, as many of the philanthropic followcurrently the sector’s development, instead sector function in a regulatory greyof passing a whole new law.

Some believe that area, they would benefit from more legal clarity and policy support. In addition, introducing one 13 set of reforms at one stage does not preclude another set of reforms being introduced later on.

since philanthropy China introducing is still inone a and policy support. Ininaddition, transitional phase, additional timenot should be set of reforms at one stage does preclude another set reformstrials beingand introduced later on. allotted forofmore developments within the sector before an overarching legislation Registration is appropriate. of Social Organisations However, as many parts of the philanthropic sector currently According a pilot study out by The function in atoregulatory greycarried area, they would Center for Global Prosperity, which measured benefit from more legal clarity and policy philanthropic freedom using three main support. categories of indicators (civil society regulation, domestic tax of regulation, and cross-border flows Registration Social Organisations regulation), China has some of the most serious barriers. Governed a ‘dual registration and According to a pilotby study carried out by The management system’, a social organization in Center for Global Prosperity, which measured China has to first find a using ‘sponsoring philanthropic freedom threeagency’, main which can be a government department or one of categories of indicators (civil society few authorized government-backed regulation, domestic tax regulation, and crossorganisations; only then China can ithas qualify border flows regulation), some for of registration with the Civil Affairs Bureaucracy. the most serious barriers. Governed by a ‘dual As the sponsoring agencies bear potential risks registration and management system’, a social from the operations of the organization, organization in China has to first findthey a tend to prefer to sponsor organisations that have ‘sponsoring agency’, which can be a close relations with the orgovernment.

For government department one of few independentsocial grassroots organisations, finding authorized organisations; only then cana sponsor agency is difficult and many choose to it qualify for registration with the Civil Affairs register as a business or to stay unregistered, Bureaucracy. As the sponsoring agencies bear even though this is illegal and carries the clear potential risks from the operations of the risk of being shut down. Often, especially organization, they tend to prefer to sponsor smaller organisations, prefer to avoid the added organisations that have close relations with government oversight and bureaucratic and taxthe government. For independent grassroots related costs that are currently associated with organisations, finding a sponsor agency is official registration as a non-profit. difficult and many choose to register as a business or to central stay unregistered, While the governmenteven hasthough been this is illegal and carries the clear risk of being contemplating national reforms of the shut down. procedures of SOs, some local registration governments conducted experiments of their While the central has been own. Shenzhen was government the first municipality to contemplating national reforms the remove the dual management system of in 2008, registration procedures someSOs local allowing social welfare of andSOs, charity to governments conducted experiments of their register without a sponsoring agency. In 2009, own.

Shenzhen was theintroduced first municipality to the Beijing Municipality the so called remove the dual management system in 2008, ‘hub association’ which temporarily replaced the allowing social welfare charity SOs to usual sponsoring units forand SOs. Eventually in register without a sponsoring agency.

In 2009, 2013, the National Development and Reform the Beijing Municipality introduced the so Commission (NDRC) issued a reform policy to called ‘hub association’ which temporarily allow direct registration of philanthropic replaced the usual for SOs. organisations.

The sponsoring reform wasunits successively Eventually in 2013, the National Development enhanced during the Third Plenum of the 18th and Reform Commission (NDRC) issued a Central Committee of the Communist Party of reform policy to allow direct registration of China (CPC) in 2014 and was included in its “Decisions on Some Major Issues Concerning Comprehensively Deepening the Reform.”

philanthropic organisations.

The Concerning reform was “Decisions on Some Major Issues successively enhanced the This Third Comprehensively Deepening during the Reform.”

Plenumallows of the four 18th Central Committee the reform categories of CSOsof to directly Communist register Party withofcivil China affairs (CPC) institutions: and was industrial commercial on associations, included inandits “Decisions Some Major technological organisations, Comprehensively philanthropic Issues Concerning organisations, andReform.” rural andThis urban community Deepening the reform allows service organisations.

Currently, MCA is four categories of CSOs to directly register revising relevant accordingly with civil affairsregulations institutions: industrialand and piloting direct registration with local civil affairs commercial associations, technological departments.

By March 2015, moreorganisations, than 30,000 organisations, philanthropic eligible CSOs had directly registered. and rural and urban community service organisations. Currently, MCA is revising Foundation Management Regulations relevant regulations accordingly and piloting direct registration with local civil affairs Different from their international departments.

By March 2015,counterparts, more than most foundations in China are ‘operational’, 30,000 eligible CSOs have directly registered. meaning that they conduct projects themselves rather than giving grants Regulations to other social Foundation Management organisations as implementing partners. This is due to a general of trust from the donors in Different fromlack their western counterparts, sub-granting programmes and aare lack‘operational’, of capacity most foundations in China inmeaning smaller social organizations and the that they conduct broader projects NGOs sector.

This dual mission of Chinese themselves rather than giving grants to other foundations, namely fund-raising social organisations.

This is due and to a project general implementation, requires more staff support and lack of trust from the donors in sub-granting overhead costs compared to simply grant-giving programmes and a lack of capacity in the NGO foundations. In China this is particularly difficult sector. This dual mission of Chinese because foundations are required to keep foundations, namely fund-raising and project administrative costs (including salaries and implementation, require more staff support payments) below 10 percent of annual compared to grant-giving foundations. As a expenditure. While this was originally designed result, most operational foundations find it to keep costs low, most operational foundations hard to meet thethese requirement by the to keep find it hard to meet requirements. administrative costs (including salaries and per public cent ofand theprivate yearly Inpayments) addition, asbelow stated10 above, donations received. foundations have very different regulations when it comes to fundraising. Only public foundations Public and designated private foundations and officially organisations,have like very the different regulations when it comes to fund China Red Cross Society or the China Charity raising. Only public officially Federation, have the foundations authority toand engage in designated organisations, like the China Red public fund-raising; private foundations and Cross Society or the China Charity Federation, other non-profit organisations, on the other hand, have the authority to engage in public fundare funded by gifts or donations through private raising; private foundations and other nonchannels. profit organisations, on the other hand, are funded byfor gifts or donations through private Incentives Charitable Giving: channels.

Over the last 15 years several laws and Incentiveshave for Charitable Giving regulations tried to define tax exemptions for donations, including the Individual Income Tax Law, the Enterprise Income Tax Law, and 14 the Law on Donation for Public Welfare.

Over the the lastEnterprise 15 yearsIncome several Tax Law, Taxlaws Law, and and regulations triedfor toPublic define tax the Law on have Donation Welfare. exemptions donations, the However, the for enforcement and including implementation Individual Income Law, and the continues Enterprise of these laws remainsTax difficult, to Income Tax Law, and theThe Law on Donation for discourage donations. biggest barrier Public the enforcement and remainsWelfare. the However, requirement that receiving implementation organisations need of to bethese eligiblelaws to receive remains tax10 deductible donations . Because to of the strict and difficult, and continues discourage complex procedures involved, until today only donations.

The biggest barrier remains the 157 organisations received organisations this status in requirement thathave receiving China.toThis means that the majority of charity need be eligible to receive tax-deductible organisations, even if officially not-for-profit donations. Until today only 157 organisations entities have to this pay status taxes for donations they have received all the over China. This receive.

These organisations are not able to issue means that the majority of charity tax-deductible even invoices for donations, and organisations, if officially not-for-profit donors are therefore unable to apply for tax entities, have to pay taxes for the donations deductions, them less motivated to they receive. making These organisations are not able donate. to issue tax-deductible invoices for donations, and donors are therefore unable to apply for Another barrier making lies in the registration status to of tax deductions, them less motivated most organisations.

In fact, most social donate. organisations in China are often still registered with the barrier Industry Commerce Bureau as Another liesand in the registration status ‘businesses’, which meansIn they continue have of most organisations. fact, most tosocial to pay taxes for all donations received, along organisations in China are often still with other business In light this, those registered with thetaxes.

Industry andofCommerce who can, ask their donors to give to partnering Bureau as ‘businesses’, which means they foundations, whichtoinpay turn charge 5 per cent continue to have taxes for3alltodonations overhead along for receiving andbusiness managing funds. received, with other taxes.

In Even worse, for those organisations not light of this, those who can, ask their donors registered either with the Civil Affairs Bureau or to give to partnering foundations, which in with the Industry and Commerce Bureau, receiving donations remains a very challenging affair.

turn charge to individual 5 per cent overhead impossible to use3 for donors.

Yet, thisfor receiving and managing funds.potential Even worse, could be considered the largest for for those organisations not registered growth in Chinese philanthropy and reforms in eitherwith thehelp Civilunleash Affairs Bureau or withof the this area could a new culture Industry and Commerce Bureau, receiving philanthropy in the future. donations remains a very challenging affair.

Finally, corporate-giving makes up the majority of total charitable donations, and has been the main engine in the development of charitable undertakings in China. However, the current tax regime, which allows the deduction of up to 12 per cent of corporations’ taxable income for donations to approved charitable organisations, has been held back by the same constraints explained above. When it comes to making a tax-exempt donation in China, supply and demand is an issue.

In summary, an extremely complicated and burdensome process required for receiving tax deductions has held back both corporate and personal giving in China. It can be argued that this is especially true in the personal income tax sphere, where incentives are practically impossible to use for individual donors. Yet, this remains the largest anewculture of philanthropy in the future.

Finally, corporate-giving makes up the majority of total charitable donations, and has been the main engine in the development of charitable undertakings in China. However, the current tax regime, which allows the deduction of up to 12 per cent of corporations’ taxable income for donations to approved charitable organisations, has been held back by the same bureaucratic and regulatory constraints explained above.

In summary, an extremely complicated and burdensome process required for receiving tax deductions has held back both corporate and personal giving in China. It can be argued that this is especially true in the personal income tax sphere, where incentives are practically impossible 15

Key Requirements for Chinese Foundations Minimum capital requirement

• $1.2 million for nationwide public foundations • $590,000 for regional public foundations • $295,000 for private foundations

Sponsoring requirement

• Must obtain approval from a government 'sponsor agency' • The 'sponsor agency' must be in charge of the public sector of the applicant's philanthropic activities

Public interest domain

Approval

Expenditure requirements

Other requirements

• MCA and 'sponsor agency' must confirm that the proposed foundation falls within the definition of 'public interest domain' (i.e. promotes public welfare in China) • Desired name, articles of association and list of personnel must be submitted to and approved by MCA and 'sponsor agency' • No less than 70% of previous year's income must be spent on public benefit activities in public fundraising foundations • No less than 9% of previous year's surplus must be spent on public benefit activities in private fundraising foundations

• Must have a registered office address in China • Administrative costs to be kept within 10% of capital gained

16

CHARITABLE GIVING IN CHINA CHARITABLE GIVING “Corporate giving accounted for the majority of all charitable giving in 2013�

IN CHINA According to to the the China China Charitable Charitable Giving Giving According 11, Report (2014) (2014) published publishedinin September September2015 2015, Report the total the total sum of of domestic domestic and and international international charitabledonations donations in 2014 amounted to charitable in 2014 amounted to 104.23 billion 104.23RMB billion (approximately RMB (approximately $16.40 billion) $16.40 and accounted foraccounted 0.16 per cent of the annual GDP. billion) and for 0.16 per cent of the Compared to 2013, overall donation witnessed a annual GDP. Compared to 2013, overall 5.3 per cent growtha despite donation witnessed 5.3 per the centeconomic growth slowdown andeconomic low incidence of major natural despite the slowdown and low disasters.

3 shows rise andGraph fall in3 incidence Graph of major naturalthe disasters. charitable giving in China since 2009.

The shows the rise and fall in charitable giving in volatility of the totalThe amount is related the China since 2009. volatility of thetototal incidence naturaltodisasters, as seenoffrom the amount isofrelated the incidence natural rise in donations in 2010 and 2013 when major disasters, as seen from the rise in donations in earthquakes and landslides hit earthquakes Qinghai, Sichuan 2010 and 2013 when major and and Gansu. landslides hit Qinghai, Sichuan and Gansu.

Corporate Corporate giving giving accounts accounts for for the the majority majority of of charitable giving, reaching almost 70 per cent in charitable giving, reaching almost 70 per cent 2013 (Graph 4).4).Both foreign in 2013 (Graph Both domestic domestic and and foreign private major private enterprises enterprises proved proved toto be be major contributors in 2013 (Chart 5).

In comparison, contributors in 2013 (Chart 1). In comparison, the the percentage percentageof of individual individual giving giving was was small. small.

For example, individual donations to For example, individual donationsthetoChina the Charity Federation in 2013 accounted for merely China Charity Federation in 2013 accounted less than one centone of per total cent donations it for merely lessperthan of total received, while the rest were received from donations it received, while the rest were corporations. As the data shows, the government received from corporations. As the data and major corporations remain the main players shows, the government and major within the philanthropic sector in China, while corporations remain the main players within the contribution from individual donations the philanthropic sector in China, while the remains very small. This remains the largest contribution from individual donations untapped resource for charity and philanthropy remains very small. This remains the largest in China, the power of the many private citizens who are slowly becoming more interested in giving away small sums of money. However, a lack of trust in most charities and the inexistence of practical financial incentives (e.g. in taxation) for the middle class to donate to charity have

untapped resource giving away small sums of for money.charity However,and a philanthropy in China, the and power the many lack of trust in most charities the of inexistence are slowly becoming ofprivate practicalcitizens financialwho incentives (e.g. in taxation) more small have sums for the interested middle classintogiving donateaway to charity ofmoney.

However, a lackgiving. of trust in most slowed the growth in personal charities and the inexistence of practical Because of incentives the preferential status financial (e.g. fundraising in taxation) for of the public foundations, approximately 59.18 cent middle class to donate to charity haveper slowed ofthecharitable ingiving.

2013 went to the growth in giving personal government or its affiliated charity organisations, including the China Charity Because of the preferential fundraising status Federation per cent),approximately Civil Affair Bureaus of public(34.27 foundations, 59.18 (13.79 per cent), and other government andto per cent of charitable giving in 2013 went public institutions (11.12 per cent).

As it the government or its affiliated charity receives the majority of donations, the state has organisations, including the China Charity dominated the development of the philanthropic Federation (34.27 per cent), Civil Affair sector and has a key role play in and shapingother its Bureaus (13.79 per to cent), future.

As incomes and expenditures grow, stategovernment and public institutions (11.12 per backed have opportunity to shape cent). institutions As it receives theanmajority of donations, the medium-term future of the sector.

They can the state has dominated the development continue to channelsector more to ofthe philanthropic and resources has a key role Government-backed institutions or Government to play in shaping its future. As incomes and Organized Non-Governmental Organizations expenditures grow, state-backed institutions (GONGOs), thereby reinforcing theirmediumstatus have an opportunity to shape the within the sector; or they can distribute moreto term future of the sector. They can start resources to more autonomous social channel more resources to Governmentorganisations and incentivize the growth of a Organized Non-Governmental Organizations new ecosystem of smaller organisations. Either (GONGOs), thereby reinforcing their status way, the state remains the dominant player within the sector; or they can distribute more within the philanthropic sector in China and resources to more autonomous social continues to affect change in the dynamics of the organisations and incentivize the growth of a sector. The question remains whether in the new ecosystem of smaller organisations. future it will choose to unleash new potential or Either way, the state remains the dominant continue to affect change to best suit its own player within the philanthropic sector in needs.

17

Graph 3: Annual Amount of Charitable Giving (unit: billion, USD)

18

16.74

16.51 15.26

16 13.52

14 12

14.22

10.08

10 8 6 4 2 0

2009

2010

2011

2012

2013

2014

Source: Peng Jianmei (ed.), 2014, China Charitable Giving Report (2013), China Charity InformationCenter, Beijing: Enterprise Management Publishing House

Graph 4: Percentage of Annual Corporate Giving (%)

80 70 60

69.67

65.8 58.5

57.48

58.04

2011

2012

50 40 30 20 10 0 2009

2010

2013

Source: Peng Jianmei (ed.), 2014, China Charitable Giving Report (2013), China Charity InformationCenter, Beijing: Enterprise Management Publishing House

18

Graph 5: Percentage of Corporate Giving by Types of Enterprises (%) 70 60 50 40 30 20 10 0

2009

2010

2011

2012

2013

State-Owned Enterprises Chinese Private Enterprises Non Mainland Enterprises (Foreign, Tawan, Macau and Hong Kong)

Source: Peng Jianmei (ed.), 2014, China Charitable Giving Report (2013), China Charity InformationCenter, Beijing: Enterprise Management Publishing House

19

TRENDS & INNOVATIONS IN THE PHILANTHROPIC TRENDS & INNOVATIONS INSECTOR THE PHILANTHROPIC SECTOR

Philanthropy isis still early stage stage of Philanthropy still at at an an early development in From an an international international development in China. From perspective, while was about about half half perspective, whileChina’s China’s GDP GDP was that of the the US US inin2013, 2013, the the total total amount amount of of that charitable giving USUS was 21 21 times of that charitable givingininthethe was times of 12 11 According in China . According to tothe that in China. theWorld World Giving Giving Index, the the percentage percentage of giving Index, of China’s China’s giving th population ranked 115 th in in 2013.

20131312. population ranked only only 115 However, China’s China’s philanthropy philanthropy sector sector is is However, growing fast, fast, with with per per capita capita charitable charitable giving giving growing 14 increasing 20 per cent annually until 2013 . In 13 increasing 20 per cent annually until 2013. fact, as more social actors have have joinedjoined this sector In fact, as more social actors this and the use of new technologies for charitable sector and the use of new technologies for giving is increasing, it is reasonable to expect charitable giving is increasing, it is reasonable thatexpect the recent growth trends willtrends be sustained. to that the recent growth will be This chapter will discuss some major trends and sustained. This chapter will discuss some innovations that and have innovations emerged in recent major trends that years, have along with their implications for the future emerged in recent years, along with their development offor philanthropy China. implications the futurein development of philanthropy in China.

Increased Popularity of Philanthropy

first contribution by aa politician areas.

Although numbermade of publicly China’s and was considered a sign of the broader politicians are known to support charity acceptance of giving across sectors work, Premier Zhu’saway was wealth the first contribution ofbysociety. a politician made publicly and was considered a sign of the broader acceptance of China’s newlywealth rich have also sectors started toofgive back giving away across society. and are more willing to support a wider range of development issues innovative China’s newly richthrough have also started means. to give According to recent estimates, the levels of back and are more willing to support a wider personal wealth inissues China arethrough rising range and of corporate development faster than ever before.

At the end of 2015 more innovative means. According to recent than 500 billionaires in China, estimates. the levels resided of personal and surpassing even the number residing in the USA. corporate wealth in China are rising faster The netbefore. worth of persons in thantotal ever Atthe the400 endrichest of 2014 around China was valued atresided around in $570 billion USD, a 400 billionaires China, surpassing 35 per cent increase from the previous even the number residing in the USA.year.

The Many wealthy individuals are persons starting toin total of netthese worth of the 400 richest give back, setting private foundations or China wasby valued at up around $570 billion USD, by the work of previous other social a 35supporting per cent increase from the year. organizations. At the end of last year there were Many of these wealthy individuals are starting over 4,211 foundations in China, a 60 per cent to give back, by setting up private foundations increase from just five years ago. The majority or by supporting the work of other social of these are corporate or family foundations organizations. At the end of last year there associated to a company. The income of these were over 4,211 foundations in China, a 60 foundations has also grown exponentially, to per cent increase from just five years ago. The account for more than $8 billion USD at the end of thesetoare or family ofmajority 2013. According the corporate Hurun Philanthropist foundations associated to a company.

The List 2015, in 2014-2015 China’s top 100 income of thesetogether foundations has also grown philanthropists contributed the exponentially, to account for more than $8 equivalent of $3.18 billion to support charitable billionincluding USD at the end of (44%), 2013. According causes education social goodto the Hurun Philanthropist List 2015, in relief 2014(26%), poverty alleviation (9%), disaster

Increased Popularity of Philanthropy The popularity of philanthropy in China is apparent from the way citizens from all walks of The popularity of philanthropy in China is life have joined together to participate or donate apparent from the way citizens from all walks for different causes. In 2013, former Premier of havedonated joined $3.22 together to participate or Zhulife Rongji million from royalties donate for different causes.

In 2013, former he earned from one of his books to found the Premier Zhu Rongji donated $3.22 tomillion Shishi Zhuxue Foundation, dedicated basic from royalties he earned from one of education in impoverished areas. Althoughhisa books found the Shishi Zhuxue numberto of China’s politicians areFoundation, known to dedicated to basic education in impoverished support charity work, Premier Zhu’s was the society.

(5%) and others (17%).

20

2015 China’s top(17%).

100 philanthropists together (5%) and others contributed the equivalent of $3.18 billion to The contributions the superrich been support charitable of causes including have education growing rapidly over the last few years.

As per (44%), social good (26%), poverty alleviation the Hurun Philanthropy Listand 2014, 58 out of the (9%), disaster relief (5%) others (17%).

100 richest people in China were among the mostcontributions generous philanthropists in China, The of the superrich havewhose been per capita giving in 2013 amounted to over growing rapidly over the last few years.$200 As million (an increase of 264List per2014, cent58since per the Hurun Philanthropy out 2012) . It isrichest important that among the of the15100 men to in note China were among top most 100 philanthropists in China, in in2015 18 the generous philanthropists China, were women, a 50% increase from just three whose per capita giving in 2013 amounted to years$200 before. over million (an increase of 264 per cent since 2012)14. Most interestingly, some of Over the last few have years,started some toofestablish China’s China’s billionaires billionaires trusts have funded startedby share to establish philanthropy options philanthropic trusts funded by share options granted by their corporations. Jack Ma, granted by their corporations.

Jack Ma, China’s China’s richest man, publicly donated two per richestofindividual, two per cent Alibaba’spublicly equity donated (equivalent to cent $3 of Alibaba’s equity (equivalent to $3 billion) to billion) to establish a charity fund in 2014. establish a charity fund in 2014.

Some hope that Some hope that this will push other large this will push other companies to do the large same companies soon. 15 to do the same soon16.

Outside of the corporate sector, celebrities, Outside of the corporate sector, celebrities, journalists, and other professionals have also journalists, and other professionals have also displayed great commitment and success in displayed great commitment and success in mobilizing and taking action to address social mobilizing and taking action to address social issues. Wang Keqin, an investigative issues. Wang Keqin, an investigative journalist, journalist, raised public awareness for black raised public awareness for black lung disease lung disease through his reports and by through his reports and by founding the Love founding the Love Save Pneumoconiosis Fund, Save Pneumoconiosis Fund, which has raised $3 which has raised $3 million since 2011, and million since 2011, and has contributed medical has contributed medical infrastructure for infrastructure for treatment of patients across treatment of patients across China.

China. Family foundations in particular have started to play an increasingly important role in New technologies and innovations the sector, as they can take more risks of capital –investing in longer term ideas that may not New suchimpact as thebut internet and result technologies, in an immediate may foster social media, have been strong driving more structural changes over years andforces often behind philanthropic development around the decades. world, with China being no exception. It is now more and more common practice for New technologies and innovations foundations and other social organisations in China to use social media such as New technologies, such as theplatforms internet and social Weibo and been WeChat increase public media, have strong to driving forces behind awareness about particular social causes, philanthropic development around the world, calling for being donations and voluntary with China no exception.

It is nowaction, more and publishing project updates.

More and more common practice for foundations and recently, donation portals have other socialonline organisations in China to use social reduced the indirect costs of giving, and have media platforms such as Weibo and WeChat to increase public awareness about particular social causes, calling for donations and voluntary recently, online donation portals have reduced the indirect costs of giving, and have thus encouraged public enthusiasm toward

thus encouraged publicabout enthusiasm increase public awareness particular toward social causes, calling For for an donations anddonor, voluntary philanthropy. individual there action, and publishing project updates.

More a are two ways to donate online: 1) through recently, online donation portals or have public foundation’s website, 2) reduced through the indirect platforms; costs of giving, and have third-party both benefit fromthus the encouraged public enthusiasm toward idea of crowd-funding. philanthropy. For an individual donor, there are two ways to donate online: 1) through a public Crowd-funding foundation’s website, or 2) through third-party platforms; Both can benefit from the idea was of Crowd-funding for philanthropic causes 16 crowd-funding. initiated in 2007 by 51Give.org. The idea was to bridge the gap between projects and Crowd-funding donors by publicising donation calls, accepting donations, and tracking charity Crowd-funding philanthropic causes in private China activities for for donors online. Because 17 was initiated in and 2007 social by 51Give.org . The idea foundations organisations are was to bridge the gap between projects and prohibited from public fund-raising, many donors publicising donation accepting such by organisations partnercalls, with public donations, and tracking charity activities for foundations by setting up special funds (专项 donors online. Because private foundations and 基金, Zhuānxiàng jījīn), which are publicised social organisations are prohibited from public on crowd-funding and receive funds fund-raising, many websites such organisations partner frompublic the foundations public through secureup payment with by setting special systems. By building a reputed and secure funds (专项基金, Zhuānxiàng jījīn), which are system for fund-raisers, crowd-funding publicised on crowd-funding websites and services have solved the problem of receive funds from the public through secure asymmetry in information networks, and have payment systems. By building a reputed and reduced transaction costs of fund-raising, secure system for fund-raisers, crowd-funding while increasing project transparency. services have solved the problem of asymmetry in information networks, and have reduced Major new costs social media players and while online transaction of fund-raising, payment services have joined the crowdincreasing transparency of investments and fundingofsector, andprojects. have made it easier for impacts charitable individuals to donate regularly. For instance, Sina new Weibo’s Major socialMicro-Philanthropy media players andplatform online raised more than $16 million within 72 hours payment services have joined the crowd-funding for 32and projects which focused the Lushan sector, have made it easier for on individuals to 17 The service also Earthquake relief in 2013. donate regularly. For instance, Sina Weibo’s allows any individual to raised submitmore callsthan for Micro-Philanthropy platform donation for charity causes, which, once $16 million within 72 hours for 32 projects verified

by Sina’s and acceptedrelief by a which focused on theteam Lushan Earthquake 18 to host project inpublic 2013 foundation . The servicewilling also allows any the individual for fund-raising, will be broadcast through the to submit calls for donation for charity causes, user’s Weibo the public which, once account. verified This by provides Sina’s team and with more choice, and makes funding available accepted by a public foundation willing to host to project many causes that are otherwise ignored. the for fund-raising, will be broadcast While the individual donations canThis be provides small in through user’s Weibo account. amount, some donorsfunding have the public with more corporate choice, and makes promisedtotomany donate cash that or goods based on available causes are otherwise the number re-tweets,donations which accelerates the ignored.

Whileofindividual can be small of online mobilization. inspeed amount, some corporate donors have promised to donate cash or goods based on the 21 number of re-tweets, which accelerates the speed of online mobilization.

promised to donate cash or goods based on the The internet service portal Tencent has number of re-tweets, which accelerates the speed promoted the idea of habitual ‘monthly giving’ of online mobilization. (月捐, Yuè juān), which mobilises users to sign Thefor internet service donation portal Tencent promoted up a recurring of 10has RMB ($1.5) every the idea month of habitual for a particular ‘monthly giving’ project(月捐, hostedYuè by 18 public foundations. anda juān), which mobilisesBetween users toMay sign2009 up for recurring donation of 10service RMB ($1.5) September 2013, this raised every $9.8 month for a particular project hostedTaobao, by public million from 16 million people. a 19 foundations . Between May the 2009Alibaba and popular eBay-like service under Septemberhas 2013, allowed this servicefoundations raised $9.8 million Group, and from 16 million people.funds Taobao, popularvirtual eBayindividuals to raise by aselling like service under the and Alibaba Group, has philanthropic ‘products’, has encouraged allowedto foundations individuals to raise sellers donate a set and percentage of individual 19 funds by selling virtual philanthropic ‘products’, sales to a philanthropic cause. Additionally, and hasbanking encouraged to donate a set online and sellers third-party electronic percentage of individual sales to a philanthropic payment platforms such as Alipay, Tenpay, cause20. Additionally, online bankinghave and thirdYeepay, 99bill, Baifubao, Unionpay been party electronic payment platforms such as making online donation possible through their Alipay, Tenpay, Yeepay, 99bill, Baifubao, web services and cell-phone applications. With Unionpay have been making online(and donation 648 million web-users in China still possible through their web services and cellgrowing), these online donation platforms phone applications.

With 648 web-users have the potential to million transform the in China (and still growing), these philanthropic sector in an unprecedentedonline way. donation platforms have report the potential to According to a research on online transform the philanthropic sector in an donations in China, 560 million donations unprecedented According to a channels research have been madeway. through these media report on online donations in China, 560 million since September 2013, raising a total amount donations were 20 made through these media of $87 million. channels since in 2013, raising a total amount of $87 million21.

Online fund-raising is often complemented by offline activities such as walk-a-thons and Online fund-raising is often complemented by academic seminars, which participants tend to offline activities such as walk-a-thons and find more engaging. These events then serve academic seminars, which participants tend to as promotional material on the internet to find more engaging. These events then serve as further the drive for donation and promotional material on the internet to further participation. the drive for donation and participation.

These These new new technologies technologies are are enabling enabling foundations, social organisations and even foundations, social organisations and even small small CSOs to deliver their philanthropic CSOs to deliver their philanthropic messages to messages to a than larger thanofever a larger audience everaudience before. Some this before.

Some of this potential has been potential has been recognized by the government recognized by thenewgovernment has and has influenced policies. For and example, influenced policy decisions.

For example, six six months after the “Free Lunch” programme months the “Free for for poorafter children was Lunch” created programme by a journalist poor children was created by a journalist using Weibo and mobilised around $4 million using andindividual mobilised donors, around $4 from Weibo 900,000 themillion State from 900,000 individual donors, the State Council issued a plan to improve the nutrition Council a plan to improve theinnutrition standardsissued of rural students enrolled primary and middle schools by allocating annual funds to cover these costs in 860 counties.

standards of rural students enrolled and middle schools by allocating annual funds toin primary schools by allocating cover these and costs middle in 860 counties. annual funds to cover these costs in 860 Strategic counties.Philanthropy The combination of business investment, Strategic Philanthropy innovative finance and philanthropy has become increasingly popular inofChina with both Chinese The combination business investment, and foreign business joining the drive innovative finance groups and philanthropy has towards what is known as “social impact become increasingly popular in China with investment”. investing refersgroups to both ChineseImpact and foreign business investments made into companies, organizations, joining the drive towards social impact foundations even financial products below and investment.and Three cases are highlighted funds that intend to generate a measurable, as instances of the growing influence of social beneficial social or environmental impact impact investment. alongside a financial return. Over the last few years has become of socially The it Alibaba Groupa form initiated several responsible investing serving as a guide philanthropic projects to support small for and various investment strategies in corporations and medium enterprises and start-up financial markets.byThree cases are entrepreneurs providing easyhighlighted access to below as instances of the growing influence of a loans and training services. The LGT Group, social impact investment private banking andin China. asset management company, set up a venture philanthropy fund The Alibaba severalor (LGTVP) in 2007 Group to invest initiated in organisations philanthropic projects to support small and projects that work towards sustainable medium enterprises and start-up entrepreneurs development and advancing the livelihoods who want to deliver services or goods to the ofdisadvantaged groups. In 2013, LGTVP set poor by providing easy access to loans and up an investment project on the Shangritraining services. The LGT Group, a private laFarm in Yunnan, to facilitate fair trade banking and asset management company, set up oflocal coffee and honey farmers. LGTVP a venture philanthropy fund (LGTVP) in 2007 to provided funds and technical support to help invest in organisations or projects that work farmerssustainable increase development production, and which in turn towards advancing helped increaseof their incomes. the livelihoods disadvantaged groups. In 2013, LGTVP set up an investment project on The China Social Foundation the Shangri-la Farm inEntrepreneur Yunnan, to facilitate fair (YouChange) has consistently supported social trade of local coffee and honey farmers. LGTVP organisations their provided funds and and projects technicalduring support to initial help stages by acting like a venture capital firm. farmers increase production, which in turn Different from commercial helped increase their incomes. investments, the venture capital invested in philanthropic projects not meant to generate material The ChinawasSocial Entrepreneur Foundation returns for the investors, but rather to (YouChange) has consistently supported achieve social sustainability for both – fiscal conditions and organisations and projects during their initial social impact of invested organisations stages by acting like a venture capital firm.or projects. from Through its Eagle Plan, Start-up the Café Different commercial investments, and innovative projects, YouChange helped the venture capital invested in philanthropic projects growth of a number of social enterprises and was not meant to generate material returns for leaders.

In 2013, along with the Climate Group the investors, but rather to achieve sustainability and Green China Lab, it established the Social for both – fiscal conditions and social impact of Impact Fund (SIF) to support projects that invested organisations or projects. Through its Eagle Plan, Start-up Café and innovative 22 projects, YouChange helped the growth of a number of social enterprises and leaders. In 2013, along with the Climate Group and Green China Lab, it established the Social Impact Fund

may Eaglehave Plan, the Start-up potential Café of creating and innovative value for projects, YouChange helped With the growth of a sustainable development. expected number of social enterprises In donations estimated at and $80 leaders. million, 2013, along with the Climate Group and Green YouChange and its partners have started to China Lab, it established the Social Impact identify prospective projects focusing onFund the (SIF) to support projects that may have environment, food safety, health and aging. the potential of creating value for sustainable development. donations estimated In summary, With the expected development of strategic at $80 million,has YouChange its partners that have philanthropy created and an ecosystem started to identify prospective projects focusing connects businesses with charity groups. Not on the foodaccess safety,fundamental health and only canenvironment, charity groups aging. support in monetary and technical terms, but their projects are also run more efficiently In summary, the development of strategic under the supervision of professional philanthropy has created an ecosystem that investors. Corporate donors also have better connectsover businesses withofcharity groups. Not control the returns their investments, only can charity groups access fundamental albeit in the form of social impacts, and thus support in monetary and technical terms, but are more willing to continue their contribution their projects are also run more efficiently under to the social sector. the supervision of professional investors.

Corporate have better control over Since 2000donors Impactalso Investing utilizing private the returns their investments, albeit grown in the equity andof bond funding has form of social impacts, and thus are more willing exponentially. The creative combining of to continue their contribution to the social sector. commercial requirements with social impact represents a significant new investment Since 2000 Impact Investing utilizing private practice. Impact investing is poised for equity and bond funding has grown significant growth in 2015, with $8 billion in exponentially. The creative combining of planned new investment in Asia and the commercial requirements with social impact Pacific alone. The market for social impact represents a significant new investment practice. investing in private equity significant is likely togrowth follow in a Impact investing witnessed similar morenewinstitutions 2015, withtrajectory $8 billion inasplanned investment embrace both financial return social in Asia and the Pacific alone.

Theand market for outcomes in order to access this new influx of social impact investing in private equity is likely capital.

China is viewed as the next frontier of to follow a similar trajectory as more institutions this type of investment growth this embrace both financial and return and insocial sector is likely to influence Chinese outcomes in order to access this new influx of philanthropy capital. Chinainisunprecedented viewed as the ways. next frontier of this type of investment and growth in this sector Going could Global influence Chinese philanthropy in unprecedented ways.

As Chinese businesses and state-owned companies Going Globalhave gone global, China’s philanthropists are also starting to look beyond their borders.

Over and the last decade, As Chinese businesses state-owned some firms investing overseas have begun to companies have gone global, China’s participate in Corporate Social Responsibility philanthropists are also starting to look beyond (CSR) projects their borders.

Over that the lastwork decade,with some local firms communities.

However, lack of local investing overseas have begun to participate in knowledge, experience in (CSR) implementing Corporate Social Responsibility projects development projects and capacity, have kept that work with local communities. However, initial lacks of local knowledge and capacity have kept these initiatives small; a recent report

by UNDP, CAITEC and SASAC discusses the history and challenges surrounding these initiatives.

More recently, several public

theselack initiatives Moreand recently, initial of local small. knowledge capacityseveral have kept these initiatives in small; a have recentalso report by public foundations China started UNDP, CAITEC and SASAC sometimes discusses theby to work internationally, history and with challenges surrounding these partnering corporations or state-owned initiatives.

More several public enterprises in their recently, CSR efforts.

In 2011, the foundations in China have also started to work China Foundation for Poverty Alleviation, internationally, sometimes by partnering within which has other healthcare projects corporations or state-owned enterprises in their Myanmar and Cambodia, built the SudanCSR efforts.

In 2011, the China Foundation for China Abu Ushar Friendship Hospital in Sudan, Poverty Alleviation, which has other healthcare financed by the China National Petroleum projects in Myanmar and Cambodia, builtAfrica, the Corporation.

The project Hope for Sudan-China Abu Ushar Friendship Hospital in initiated by the China Youth Development Sudan, financed the isChina National Foundation in by 2011, building and Petroleum Corporation.

The project Hope for rehabilitating primary schools in UN-identified Africa, initiated Countries by the (LDCs) China including Youth Least Developed Development Foundation 2011, is building Tanzania, Kenya, Burundiinand Rwanda. and rehabilitating primary schools in UNidentified Least Developedmore Countries Most importantly, and (LDCs) more including Tanzania, Kenya, Burundi and a philanthropists have started to develop Rwanda. global vision vis-à-vis issues that affect wellbeing in other party of the world. In 2008, Dr. InFeng addition, and moreof philanthropists have Lun,more Chairman Beijing Vantone started to develop a global vision vis-à -vis issues Industrial Corporation, started this trend by that affect well-being in other party of the world. founding the World Future Foundation, In 2008, Dr. Feng Lun, Chairman of Beijing dedicated to building green communities and Vantone Industrial Corporation, started this funding R&D to mitigate climate change. trend by founding the World Future Foundation, Others have followed his leadership. In 2013 dedicated to building green communities and the Cihang Foundation, established by the funding R&D to mitigate climate change. Others Hainan Airlines Group started to contribute to have followed his leadership. In 2013 the Cihang the World Food Program and to UNICEF Foundation, established by the Hainan Airlines through a donation of 20 per of its shares.

Group started to contribute to cent the World Food In 2014 Jack Ma and other Chinese Program and to UNICEF through a donation of philanthropists established the China Global 20 per cent of its shares. In 2014 Jack Ma and Conservation Fund to support conservation other Chinese philanthropists established the projects around the world focusing China Global Conservation Fund to supporton sustainable projects development. conservation around the world focusing on sustainable development.

In 2014, in a somewhat controversial move, realinestate tycoon controversial couple of SOHO, Inthe 2014, a somewhat move,Zhang the Xin and Pan Shiyi, donated $15 million and real estate tycoon couple of SOHO, Zhang Xin $10Pan million to donated Harvard $15 and million Yale respectively and Shiyi, and $10 to establish the SOHO China Scholarships, million to Harvard and Yale respectively to providingthe scholarships Chinese establish SOHO China for Scholarships, undergraduates to study abroad. many providing scholarships for While Chinese criticised them for donating to foreign undergraduates to study abroad. While many institutions instead of the education sector criticised them for donating to foreignin China, the move institutions instead of thereflected education the sector new in international vision of Chinese China, the move reflected the new international philanthropists, their willingness look vision of Chineseandphilanthropists, and totheir willingness to look beyond China to cultivate the next generation of leaders.

23 As philanthropy in China continues to grow, it is expected that these kinds of donations and the

beyond China to next generation ofcultivate leaders. the next generation of leaders.

As philanthropy in China continues to grow, it is expected that these kinds continues of donations and the As philanthropy in China to grow, it overall weight of these Chinese donors internationally is expected that kinds of donations and will increase.

This represents an enormous the overall weight of Chinese donors opportunity for will development, since represents a broader internationally increase. This range of philanthropists and an enormous opportunity isfor emerging development, becoming engagedrange in international giving, while since a broader of philanthropists is domestic giving within developing countries is emerging and becoming engaged in also increasing.giving, Countries likedomestic China, but also international while giving Brazil, India and South Africa, have become within developing countries is also increasing. involved inlike foreign not only through Countries China,assistance but also Brazil, India and government aid but also through private South Africa, have become involved in foreign investment, notphilanthropy, remittances. assistance only throughand government aid While their official development assistance but also through private investment, reached an estimated $3.7 billion in 2012, philanthropy, and remittances.

While their remittances from these countries to developing official development assistance reached an countries amounted to more than $14 billion in estimated $3.7 billion in 2012, remittances the same Philanthropic contributions to from theseperiod. countries to developing countries international causes in the developing world amounted to more than $14 billion in the same already amounted to around contributions $400 million, a 30 period.

Philanthropic to per cent increase from a year before. international causes in the developing world already amounted to around $400 million, a 30 per cent increase from a year before.

24

CHALLENGES TO FUTURE GRWOTH

In many ways China today has the unprecedented opportunity to tap into its increasing economic development and its expanding non-profit sector. While philanthropy in China is currently at a nascent stage, it has grown rapidly in recent years. Home to record numbers of superrich ready to give back, with more and more corporations investing in CSR and with an expanding middle class, China has vast and growing socio-economic resources to mobilize in support of philanthropy. In addition, the use of the internet and social media, together with small-scale innovations have created new fund-raising techniques such as crowd-funding and social media donations, which are making it even easier for the general public to participate in philanthropy.

However, important institutional and social barriers to the development of philanthropy still exist, such as the gap between the sector’s fast growth and the outdated regulations that govern it; lack of transparency and therefore public trust in charitable organisations; and the lack of capacity for foundations and organisations to carry out charitable organisations; and the lack of capacity for foundations and organisations to carry out charitable projects. This report calls for reforms to be undertaken by the government in order to remove these barriers. With the enormous potential for philanthropy in China, the sector is expected to have the ability to greatly influence development, tackle inequality and poverty, both within China as well as internationally.

greatly influence development, tackle inequality and poverty, both within China as well as internationally.

1. Lack of clear incentives to give Despite the fast growth of China’s philanthropic sector, its size and impact are still small compared to other countries. In 2014 the percentage of China’s donation to GDP was 0.17, and the jobs created by the philanthropic sector accounted for only 0.2 per cent of the labour market. In comparison, philanthropy in the US contributed to 12 per cent of its GDP and 10 per cent of its labour market22.

Part of this is related to the fact that China lacks clear, workable and effective financial incentives for the sector to grow further. The current fiscal space is not working well for neither small independent donors nor large corporations, nor recipients. While tax exemption and deduction policies exist, these remain too complex and unreliable to be taken up more broadly. On the donating side, this stifles the potential of personal donations from millions of Chinese citizens as well as large corporations to give more. While better income or corporate tax deductions would make a difference, the biggest barrier remains the eligibility requirements that organisations need to fulfil to be eligible for taxdeductible donations 23. However, the process of registering for tax deductibility is complicated 25 and burdensome, and receiving tax deductions remains inaccessible to most organisations. In addition, as most social organisations in China

registering for tax deductibility is complicated and burdensome, and receiving tax deductions remains inaccessible to most organisations. In addition, as most social organisations in China are registered with the Industry and Commerce Bureau as ‘businesses’, they continue to have to pay taxes for all donations received, along with other business taxes.

Finally, the inequality between public and private foundations is also negatively affecting the development of the sector. The inability of independent foundations to raise resources from the public limits their ability to grow, but most importantly to innovate and influence the public discourse around philanthropy in China. The dominance of the state in philanthropy is reducing opportunities for new players to come in and flourish. While the state should continue to direct the sector, allowing others to grow and innovate would benefit everyone.

2. Lack of transparency and public trust in the sector Lack of transparency is a serious challenge facing the philanthropic sector in China, which has been hitherto dominated by state-affiliated charity organisations plagued by bureaucracy and inefficiency. Out-dated laws and regulations do not permit newly founded and more autonomous organisations to play a full role in philanthropy, still requiring most organisations to be affiliated with a semi-government entity.

This stifles competition and innovation while enabling a small number of organisations to play an unsupervised and unrestricted role in the sector. According to a recent study by the Centre for Public Participation and Supports at Peking University, the average transparency score of the 93 surveyed Chinese philanthropic organisations was 35.49 (out of 100). Two-thirds of the organisations recorded scores between 20 and 5024.

Many years of continued lack of transparency and accountability have created a public trust crisis. Recently, as the sector’s reputation was again tarnished by new revelations of misconduct (most famously the Red Cross Society scandal of 2011) 25, the state and public foundations worked together to push forward clearer accountability and transparency rules.

foundations worked together to push forward clearer accountability and transparency rules.

Both central and local governments have since made requirements of social organisations to disclose their fiscal reports annually; many have started publishing their fiscal expenditures on their websites or in annual reports. However, these attempts remain small scale, ad-hoc and insufficient without broader governance reforms that can clarify the operational and financial status of most philanthropic organisations.

In the meantime, some organisations have developed independent indices to measure the transparency of social organisations and have published independent rankings. The China Charity Transparency Index (CTI) Report has been released annually by the China Charity Information Centre (CCIC), a social organisation supervised by the Ministry of Civil Affairs. In addition, the China Foundation Transparency Index (FTI) and the China Grassroots Transparency Index (GTI) were later developed by the China Foundation Centre and the Union of Self-Disciplinary Organisations (USDO) respectively. With collective efforts from the state and civil society, accountability and transparency of philanthropic organisations is expected to improve, which should in turn build public trust in the sector and encourage more public giving.

3. Capacity building of social organisations and foundations The transition of foundations in China from direct programme management to more grantgiving has been an issue of concern. The fact that most foundations in China run their own programmes has cut off an important part of new funding for smaller grassroots organisations, which have not been given the opportunity to grow and develop their operational capacity.

This, in turn, has further reduced the level of trust by other potential donors towards CSOs across China, which created a vicious circle leading to less and less funding for CSOs. In the last five years most international development actors have left China, from bilateral donor agencies to international funding mechanisms like the Global Fund to fight AIDS, TB and Malaria. These international sources of funding, 26 which over the years had invested heavily on CSOs in China, have not been replaced by domestic sources. Both private and public funding of CSOs in China remains small. This

specialized workers who are skilled in areas such as fund-raising, accounting, information and communications technology (ICT) development and programme management. Most entry-level employees have insufficient training, and organisations have to spend considerable resources to train newly employed staff without the assurance that the latter, on acquiring skills and experience, will remain in employment.

Malaria. These international sources of funding, which over the years had invested heavily on CSOs in China, have not been replaced by domestic sources. Both private and public funding of CSOs in China remains small. This has created an urgent funding gap for most community-based or smaller grassroots organisations. Domestic philanthropic resources should reach smaller community-based organisations, as they are equipped with the local knowledge and are often able to reach areas and populations that large foundations cannot.

This is connected to the second challenge of attracting and retaining skilled staff. The average wage for employees in charity organisations is comparatively low. According to the 2014 Guide on the Labour Market and Wages for the Philanthropic Sector in China, an entry-level employee earns an annual salary of between $5,000 and $10,000 in a public foundation and between $8,000 and $30,000 in a private foundation. According to a report prepared by the Narada Foundation in 2010, 90 per cent of workers in other social organisations bring home a monthly salary of less than $800. While payment for entry-level employees in the philanthropic sector is only slightly lower than that in other sectors, the mid- to high-level employees are paid significantly less if compared to the corporate sector. This discourages most young people and students from entering the sector and over the years it discouraged the proliferation of educational and training institutions focusing on the non-profit sector. While this is the case internationally, some countries have started to adopt specific fiscal, taxation or social-support policies to incentive the attraction and retention of talent in the non-profit sector.

Moreover, many donors still tend to restrict the use of their contributions, which often limits the foundations’ ability to support social organisations. As a result, capacity building for social organisations remains a critical need for an efficient division of labour and for a more productive use of corporate and public philanthropic resources.

Specific capacity needs assessments and capacity building support is needed for foundations as giving entities. This could be focused on how to enhance giving, making it more strategic, increasing development impact and ensuring longer-term sustainability. This could be done by increasing support and strengthening of philanthropic associations that support the overall philanthropic sector in China.

However, more collaboration among philanthropic organizations and philanthropists themselves, with peer to peer learning and more coordination and information sharing, would also support combining resources and ideas towards common goals and larger impact.

Thirdly, as foundations are required by national regulations to keep administrative costs within 10 per cent of their income, they tend to employ fewer staff with lower wages, which creates unfair and over-burdened workloads. This results in a high mobility of the workforce, mostly within the sector since finding employment in the corporate sector is more challenging. Also, since most foundations and social organisations are small in size, the prospect of upward mobility is slim for midlevel employees, once again causing them to switch jobs.

Finally, there is a lack of coordination and partnerships among different stakeholders – with most actors still working alone. However, there are enormous economies of scale that could be utilized if a better environment for collaboration and partnerships was built between GONGOS, family foundations, the private sector and academia.

4. Human Resources and talent management The fast growth in the philanthropic sector in China has created a number of human resource challenges. Firstly, the sector is in great need of specialized workers who are skilled in areas such as fund-raising,

27

Outdated laws and regulations confuse practitioners and the public

Private independent foundations held back by outdated restrictions

Lack of clear and practical financial incentives for public donations

Challenges for Philanthropists Continued lack of transparency = lack of trust from the public

Innovators kept in grey area: crowd funding and social media

Low pay and no career prospects push away talent

28

CONCLUSIONS & RECOMMENDATIONS CONCLUSIONS & “Lack of transparency is a serious challenge facing the RECOMMENDATIONS philanthropic sector in China” In many ways for China today has the While the potential growth for philanthropy unprecedented opportunity to tap its is clear, it is also becoming evident thatinto without increasing economic development its some targeted reforms and governance and changes expanding non-profit sector.

While the sector may lose its steam in the years ahead. philanthropy in China is currently at a nascent This report calls for practical, evidence-based stage, it has grown rapidly in recent years. reforms aimed at creating a more enabling Home to record numbers of insuperrich environment for philanthropy China, inready order to give back, with more andreduction more to support China’s domestic poverty corporations investing in CSR and with an goals, as well as tackling rising inequality.

There expanding middle class, China has vast and is urgent need for a new, overarching growing to governance socio-economic structure of the resources sector, which mobilize in support of responsibilities philanthropy. In includes clear roles and of addition, the use of the internet and social different actors. These new rules should focus on media, together innovations, with small-scale incentivizing innovations supporting have created tonew corporations givefund-raising back whiletechniques focusing such as crowd-funding media especially on unleashing and the social potential of donations, which which are making it evenargues easier can for personal giving, this paper the general public to participate grow considerably in the medium term. Most in of philanthropy. these reforms are simple, have no cost to the state, and often consist of clearing specific institutionalimportant barriers institutional which were and originally However, social introduced reasons butof now are limiting barriers tofor thegood development philanthropy innovators and as stifling creativity within a “new still exist, such the gap between the sector’s normal” economic outlook. fast growth and the out-dated regulations that govern it; lack of transparency and therefore The following are not meant public trust inrecommendations charitable organisations; and to belack exhaustive, but were as the main the of capacity for chosen foundations and pillars of a newtovision for the of organisations carry outgovernance charitable philanthropy in China. organisations; and the lack of capacity for foundations and organisations to carry out 1. Reform the This eligibility forfor public charitable projects. report calls fundraising The inability of private or independent foundations or social organisations to raise money directly from the public has hurt the development of the overall sector. Independent actors should be empowered to grow and innovate within the sector, as this will benefit everyone and increase the impact of

reforms to be undertaken by thehas government money directly from the public hurt the in order to remove these barriers.

With the development of the overall sector. Independent enormous potential for philanthropy in China, actors should be empowered to grow and the sector is expected to have the ability innovate within the sector, as this will benefitto greatly and influence development, everyone increase the impact tackle of inequality and poverty, both within China as philanthropy in China. Approval procedures well asbe internationally. should reformed to allow more social organisations and foundations to register as I. Governance public foundations Challenges while private foundations should be allowed to finally raise funds from the Lack of give public.

A clear more incentives competitive to fund-raising market will lead to innovations that will explore and better utilizethe the potential of individual Despite fast growth of giving, China’s inspiring a race to the topitsinsize terms of impact delivering philanthropic sector, and are results.

The sector will benefit from the still small compared to other countries. In development of more professional 2014 the percentage of China’s fund-raising donation to services that is currently missing in China.

GDP was 0.17, and the jobs created by the philanthropic sector accounted for only 0.2 While thisofwould allowmarket. availability of more per cent the labour In comparison, resources to support a wide range of philanthropy in the US contributed to social 12 per causes, most importantly it would help change cent of its GDP and 10 per cent of its labour 21 and perception of philanthropy and the narrative market. charity with the broader public.

Part of this is related to the fact that China 2.lacks Release the workable potential ofand individual clear, effectivegiving financial incentives for the sector to grow further. The Corporate givingspace still accounts for too high of for a current fiscal is not working well proportion of the total philanthropic sector in neither small independent donors nor large China.

Although nor new methods of online corporations, recipients.

While and tax social media giving have boosted individual exemption and deduction policies exist, these donations last five and years,unreliable the scale istostillbe remain in toothecomplex small, and provides the largest untapped taken up more broadly. On the donating side, potential for growth in the sector.

The this stifles the potential of personal donations government should simplifycitizens and strengthen from millions of Chinese as well as procedures for individuals (as well as large corporations to give more. While better corporations) to claim tax deduction for their charitable giving. At the same time, regulations 29 concerning qualifications for social organisations to receive tax-deductible donations also need to be streamlined and simplified,

corporations) to claim tax deduction for their charitable At thetax same time, regulations income orgiving. corporate deductions would concerning qualifications for social make a difference, the biggest barrier remains organisations receive tax-deductible donations the eligibility to requirements that organisations also need to be streamlined and simplified, need to fulfil to be eligible for tax-deductible allowing moreHowever, organisationsthe to benefit from this donations. process of status. Doing so would not only enable recipient registering for tax deductibility is complicated organisations to earn more donations for charity, and burdensome, and receiving tax but would also enable them to issue invoices to deductions remains inaccessible to most donors who could legitimately claim tax organisations. In addition, as most social deductions, creating a virtuous circle for growth. organisations in China are registered with the Industry and Commerce Bureau as 3. Simplify and strengthen the regulation of ‘businesses’, they continue to have to pay the sector taxes for all donations received, along with other business taxes. philanthropic sector that A more autonomous incentivises competition and innovation will also Finally, inequality public and be able the to solve some ofbetween the transparency and private foundations is also accountability challenges identifiednegatively in this affecting the development of thecould sector.

The report. However, the government enhance inability of independent foundations to raise its regulatory role in order to protect a growing resources frombeing the public limits by theirirregular ability sector from damaged to grow, but most importantly to innovate practices. New international standards and in influence the public discourse around reporting and disclosing income and information philanthropy in China. dominance of the could be adopted and The standardised nationally. state in efforts philanthropy reducing Independent to enhance is transparency in opportunities for new players to come in and the sector should be supported and promoted.

A flourish.

While the state should continue to zero tolerance towards corruption and direct the sector, allowing others to and mismanagement, especially in growpublic innovate would everyone. institutions, foundations andbenefit semi-government should lead to internal reforms, rather than Lack of transparency and public trust and in systemic paralysis. Finally, regulatory the sector administrative functions should not be assigned to the same bureau or authority. Rather, the Lack of transparency challenge different functions isofa serious regulation and administration are better sector undertaken by different facing the philanthropic in China, which entities. has been hitherto dominated by stateaffiliated charity organisations plagued by 4. Build capacity of social organisations bureaucracy and inefficiency.

Out-dated laws and regulations do not permit newly founded The more philanthropy sector organisations in China is currently and autonomous to playtop a heavy. are too manystill large organisations full roleThere in philanthropy, requiring most and foundations on huge amounts of organisations to sitting be affiliated with a semicapital, with very few This resources reaching smaller government entity. stifles competition organisations at the bottom of the pyramid.

At and innovation while enabling a small number theorganisations same time,tograssroots and community of play an unsupervised and organisations need urgent capacity building, unrestricted role in the sector. According to a both in study terms by of internal management and recent the Centre for Public project implementation.

These organisations Participation and Supports at Peking offer an enormous implementation opportunity, University, the average transparency score of which could support philanthropists in achieving the 93 surveyed Chinese philanthropic the social impact of (out theirof 100). investments. organisations was 35.49 TwoInnovative ways like online trainings and MOOCs can reach thousands of organizations and provide a new platform for networking and information sharing. It should be made easier for social organisations to qualify to receive tax-

Innovative ways like online trainings and MOOCs can reach thousands of organizations thirds of the organisations recorded scores and provide a new platform for networking and between 20 and 50.23 information sharing. It should be made easier for social organisations to qualify to receive taxMany years of continued lack of transparency deductible donations. More grants should also be and accountability have created a public trust made available by foundations to grassroots crisis. Recently, the sector’s reputation was organisations, andas foundations should move again tarnished by new revelations away from project implementation and focus on ofmisconductgrant-making (most famously Red Cross fund-raising, andthemonitoring Society scandal of 2011) , the state and public activities. Gradually, a more efficient division of foundations worked together to push forward labour between foundations and grassroots clearer accountability and transparency rules. organisations could benefit the sustainable Both of central andwhile localsupporting governments have growth the sector the growth since made requirements of social of civil society in China. organisations to disclose their fiscal reports have legal started publishing their 5.annually; Enhance many the overall environment fiscal expenditures on their websites or in annual reports. However, attempts As the recommendations abovethese suggest, the remain ad-hoc and insufficient sector is insmall urgentscale, need of an overarching law to without governance reforms thatthe can define thebroader scope of philanthropy, clarify clarify the operational and financial relations between various actors, establish status new ofmost philanthropic organisations. principles and codes of conduct, better regulate and punish wrongdoers and incentivise giving.

In theis meantime, somefor organisations have There an opportunity the new China developed indices to measure Charity Law, independent currently under discussion in the the transparency of social organisations and National People’s Congress (as of December havetopublished The 2015) address all independent of these issues rankings. while leaving space Chinafor Charity the sectorTransparency to grow, allowing Index for future (CTI) innovations. the law by could Report hasMost beenimportantly, released annually the focus on strengthening transparency and China Charity Information Centre (CCIC), a accountability for charity organisations, protect social organisation supervised by the Ministry the interests of both donors and recipients, and of Civil Affairs. In addition, the China include new, workable incentives charitable Foundation Transparency Indexfor (FTI) and the giving by private individuals as well as China Grassroots Transparency Index (GTI) corporations.

Moreover, by what urgently needed were later developed theisChina Foundation isCentre legal recognition of innovations such as and the Union of Self-Disciplinary philanthropic and venture philanthropy Organisationstrusts (USDO) respectively.

With tools, as well as regulations to protect and collective efforts from the state and incentivise theaccountability growth in crowd-funding and civilsociety, and transparency social media fund-raising. ofphilanthropic organisations is expected to improve, which should in turn build public 6.trust Invest in in theHuman sector Resources and encourage more public giving.

There is a need to create a new culture that values careers and of professional development Capacity building social organisations within the non-profit sector. Regulations that do not permit foundations or social organisations to The transition of foundations in China from invest internal capacity should be directin their programme management to lifted. more For example, the requirement for foundations to grant-giving has been an issue of concern. The keep administrative costs within 10 per cent of fact that most foundations in China run their their annual income has seriously limited the own programmes has cut off an important Specific fiscal or tax policies could be considered in order to incentivise talent to join 30 and stay within the sector. International best practices should be adopted to render the nonprofit sector more attractive to young graduates

capacity of foundations to grow their staff. part of new for policies smaller grassroots Specific fiscalfunding or tax could be organisations, which not been given the considered in order to have incentivise talent to join opportunity to the grow andInternational develop their and stay within sector. best operational capacity.

This, intoturn, hasthe further practices should be adopted render nonreduced the more level attractive of trust by other graduates potential profit sector to young donors towards CSOs across China, which and mid-career personnel.

This could include a created a vicious circlebroader leadingsupport to less to and less mix of tax incentives, social benefits (like mortgages or last low-cost housing) or funding for CSOs. In the five years most enhanced social securityactors mechanisms. international development have left Universities specialised higher-education China, fromand bilateral donor agencies to training institutes should be engaged in international funding mechanisms like the providing more courses and professional training Global Fund to fight AIDS, TB and Malaria. focusing on the philanthropic therefore These international sources ofsector, funding, which sparing social organisations the added over the years had invested heavily on CSOs in responsibility to been train replaced their staff. more China, have not

by As domestic universities in private China have newly funding established sources.

Both and public of philanthropy for training prospective CSOs in Chinaacademies remains small.

This has created charity workers, their should be an urgent funding gapcoordination for most communityencouraged to develop and based or smaller grassroots qualified organisations. standardised teaching materials and training Domestic philanthropic resources should methods. In the meantime, training of a new reach smaller community-based generation of academics andequipped professorswith is also organisations, as they are the necessary, given that philanthropy research and local knowledge and are often able to reach teaching relatively that new large in China.

More areas andispopulations foundations fellowships and research grants could also be cannot. made available by donors, foundations and the governmentmany to helpdonors develop thistend newtodiscipline Moreover, still restrict among sector in China.which often the usetheofeducation their contributions,

acquiring skills and experience, will remain in employment.

This is connected to the second challenge of attracting and retaining skilled staff. The average wage for employees in charity organisations is comparatively low. According to the 2014 Guide on the Labour Market and Wages for the Philanthropic Sector in China, an entry-level employee earns an annual salary of between $5,000 and $10,000 in a public foundation and between $8,000 and $30,000 in a private foundation. According to a report prepared by the Narada Foundation in 2010, 90 per cent of workers in other social organisations bring home a monthly salary of less than $800. While payment for entry-level employees in the philanthropic sector is only slightly lower than that in other sectors, the mid- to high-level employees are paid significantly less if compared to the corporate sector. This discourages most young people and students from entering the sector and over the years it discouraged the proliferation of educational and training institutions focusing on the non-profit sector.

Thirdly, as foundations are required by national regulations to keep administrative costs within 10 per cent of their income, they tend to employ fewer staff with lower wages, which creates unfair and over-burdened workloads. This results in a high mobility of the workforce, mostly within the sector since finding employment in the corporate sector is more challenging.

Also, since most foundations and social organisations are small in size, the prospect of upward mobility is slim for mid-level employees, once again causing them to switch jobs.

limits the foundations’ ability to support social organisations. As a result, capacity building for social organisations remains a critical need for an efficient division of labour and for a more productive use of corporate and public philanthropic resources.

Human Resources The fast growth in the philanthropic sector in China has created a number of human resource challenges. Firstly, the sector is in great need of specialized workers who are skilled in areas such as fund-raising, accounting, information and communications technology (ICT) development and programme management. Most entry-level employees have insufficient training, and organisations have to spend considerable resources to train newly employed staff without the assurance that the latter, on

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How to unleash Philanthropy in China Pass a new overarching charity law that clarifies roles and responsibilities

Empower independent and private foundations to innovate

Strengthen transparency and accountability

Philanthropy Sector Reform

Create a fiscal space that growth by employment of best talent

Regulate to support innovators using the internet and social media

Create workable and practical financial incentives for public donations

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ENDNOTES 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

Yang, Tuan. Blue Book of Philanthropy: Annual Report on China’s Philanthropy Development 2015, Social Sciences Academic Press, Beijing, China, 2015 The China Foundation Center [http://foundationcenter.org.cn].

Flannery, Russell. China now has a Record 400 Billionaires and Billionaire Families (2015) Retrieved from [http://www.forbes.com/sites/russellflannery/2015/04/20/chinanow-has-a-record-400-billionaires-and-billionaire-families-greater-china-500] on 9 October 2015.

World Giving Index 2014: A Global View of Giving Trends, Charities Aid Foundation, November 2014 In addition to Social Organization, the Chinese authorities sometimes use the term minjianzuzhi ( 民 间 组 织 ), which literally means ‘popular’ or ‘citizen-initiated’ organisations.

Yang, Tuan Blue Book of Philanthropy: Annual Report on China’s Philanthropy Development 2015 Social Sciences Academic Press, Beijing, China, 2015 Ibid All USD amounts in this report are converted from RMB at the currency rate of 1 RMB = 0.16 USD “Five Drafts of Philanthropy Law from the Society”, China Youth Daily, 7 January 2015 According to the “Announcement Regarding Qualifications of Tax Exemption for Nonprofit Organisations” issued by the Ministry of Finance and State Administration of Taxation in 2009, and the “Announcement Regarding Tax Deduction on Donations for Public Welfare” issued by the Ministry of Finance, State Administration of Taxation, and Ministry of Civil Affairs in 2008 “Chinese Charitable donation exceeded 100 billion CNY in total in 2014”, Xinhua News, 19 Sep 2015 Retrieved from [http://news.xinhuanet.com/local/201509/19/c_1116614227.htm] on 9 October 2015.

Peng, Jianmei. China Charitable Giving Report, China Charity Information Center, Beijing, China, 2014, p.25 World Giving Index 2013: A Global View of Giving Trends, Charity Aid Foundation, Retrieved from [https://www.cafonline.org/publications/2013-publications/world-givingindex-2013.aspx] on 9 October 2015.

Peng, Jianmei. China Charitable Giving Report, China Charity Information Center, Beijing, China, 2014, p.25 China’s Most Generous 2014, Hurun Report, Retrieved from [http://www.hurun.net/CN/HuList.aspx?nid=29] on 9 October 2015.

The fund was established through a philanthropy trust, and was not calculated in the total amount of charitable giving in 2014 For more information of the organization, please refer to [http://www.51Give.org] For more information, please refer to [http://gongyi.weibo.com/] For more information, please refer to [http://gongyi.qq.com/] For more information, please refer to [http://gongyi.taobao.com] Research Report on Online Donation in China (2013), the Alibaba Group and Recende, Retrieved from [http://www.recende.com/Item/Show.asp?m=1&d=1207] on 9 October 2015.

Ma, Weihua. Business Management of Charity Organizations (2014) Retrieved from [http://opinion.caixin.com/2014-05-29/100683938.html], 9 October 2015.

Lotus Consulting et al. Catching the Rising Tide: Chinese Donor Strategies and Implications, 2014 33

Li, Yutong. “Average Transparency Score is 35.49 for Charity Organizations�, The Beijing News, 31 March 2015.

25. In 2011, the China Red Cross Society was involved in a scandal in which a popular microblog user, identifying herself as a staff member of the China Red Cross, showed off an extravagant lifestyle online. Although her affiliation with the organization turned out to be fake, China Red Cross was swamped by online criticisms of its possible misappropriation of donations and lack of transparency.

24.

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