A Closer Look at the Charity Law and China’s Charity Day
By Yifu Dong, Research Assistant, Ash Center for Democratic Governance and Innovation
As China’s civil society expanded in the early 2000s and philanthropy flourished in the years after the 2008 Sichuan earthquake, non-governmental charities operated in an evolving policy gray zone until 2016, when China introduced a Charity Law and later a Foreign NGO Management Law. Such legislation promises tax benefits to charity organizations and streamlines the registration process, but one year after it came into effect on September 1, 2016, progress has been limited.
In the past, China had put in place a “dual administration” system for regulating social organizations, which mandated that any such organization must first find a government department or government-affiliated organization to serve as its “professional supervisory unit” before it could register with the Ministry of Civil Affairs. However, the professional supervisory units were not obligated to register social organizations and would only assume additional risks for doing so. Moreover, regulations required that even small local organizations each have at least 50 members and a minimum of 30,000 yuan in funds, making formal registration impossible for small grassroots NGOs, most of which had no choice but to register as for-profit businesses.
The new Charity Law allows charity organizations to directly register with the national and local civil affairs offices. Now, a year after the law came into effect, however, direct registration still faces obstacles, as an organization must be recognized as a social group, a social service organization or a foundation before it could directly register. Registration is further complicated by the fact that the Charity Law has a broader definition of charitable activities than the documents issued by the State Council and the General Office of the CPC Central Committee, so charity organizations working in certain fields may not receive support from the relevant government departments.
Another feature of the Charity Law is the availability of the public fundraising status for all charity organizations that have been registered for two years. In the past, only state-run foundations could fundraise publicly, and now the status will be available to all registered charities. However, two years has yet to pass since the Charity Law went into effect, and barriers to direct registration could still prevent charities from obtaining the coveted public fundraising status.
Now, a year after the law came into effect, however, direct registration still faces obstacles…
The Charity Law also emphasizes transparency, a response to a series of scandals in Chinese philanthropy in recent years, most notably a scandal in 2011 that involved an employee who allegedly worked for a Chinese Red Cross affiliate flaunting wealth on social media. To ensure transparency, the new law allows individuals to report wrongdoings by charities and stipulates that charities disclose all the basic information related to their operations. This quest for transparency has materialized in an official online platform that collects and publicizes information on Chinese charities. A year after the Charity Law came into effect, the transparency index of Chinese charity foundations stood at only 48.42 points out of 100, according to a Tsinghua University study cited in a report by the Xinhua News Agency.
Also notable are the supplementary provisions in the Charity Law that recognize the legitimacy of informal organizations that engage in charity at the grassroots level. Based on figures in the “2015 Report on the Development of Chinese Philanthropy,” there are about 6 million unregistered social groups and 20 million online social groups in China, and about 6 million of these informal groups engage in philanthropy. Although the Charity Law provides no provisions that further legitimize these groups, at least it permits them to continue playing their roles in society.
As for tax policies, the Charity Law only mentions that charities are eligible for tax exemptions and benefits but does not outline any procedure on how charities can enjoy them. Under China’s intricate tax system, foundations used to be subject to the corporate tax rate of 25%. In 2009, for example, when the entrepreneur Cao Dewang made a donation in 3.5 billion yuan worth of equity to the Heren Foundation, he had to pay more than 500 million yuan in taxes. Now, according to Wang Ming, director of the NGO Research Institute at Tsinghua University, less than a third of charitable organizations can enjoy tax benefits and less than 1% of the 600,000 registered charitable organizations are eligible for pretax deduction. A year after the Charity Law came into effect, tax benefits have largely not yet been put in practice.
Instead of limiting philanthropy to acts of wealthy, powerful individuals or organizations helping the poor, the government encourages any activity that helps disadvantaged social groups, such as the elderly, the disabled, and the poor.
In addition to passing the Charity Law, Beijing is also actively promoting an alternative model for philanthropy, based more on a state-led, mass propaganda and mobilization campaign that aims to enhance social welfare and strengthen social cohesion.
In recent years, despite various limits on civil society, state-orchestrated philanthropy has certainly increased. A good example is this year’s “China Charity Day” on September 5 — pomp and circumstance on the national level, mobilization and propaganda at the grassroots, ample good faith and warm feelings, and just a little bit of space for independent initiative in the form of Internet charity.
In this philanthropy campaign, the Chinese authorities define charity even more broadly than the Charity Law. Instead of limiting philanthropy to acts of wealthy, powerful individuals or organizations helping the poor, the government encourages any activity that helps disadvantaged social groups, such as the elderly, the disabled, and the poor. This mobilization tactic resembles another political campaign in which Mao Zedong called upon the people to learn from Lei Feng, a young soldier and propaganda icon who was loyal to Mao and active in doing good deeds for his community, but modern-day philanthropy campaigns in China involves a far less political undertone. In Haikou, for example, many people volunteered to serve the elderly and orphans as part of their Charity Day activities. Such activities are quite common and effective in increasing participation and raising awareness.
Many schools in China regarded Charity Day as an opportunity to cultivate collectivism, which is a theme in Chinese education as well as in the state-orchestrated philanthropy campaign. For instance, in Yilong county, Sichuan Province, every teacher and student in an elementary school made small donations on Charity Day, which the school then donated to an education fund.
Beijing is also actively promoting an alternative model for philanthropy, based more on a state-led, mass propaganda and mobilization campaign that aims to enhance social welfare and strengthen social cohesion.
Across the country, official charity associations organized various kinds of activities on philanthropy. In Beijing, the World Art Museum put on an exhibit explaining the role of philanthropy in poverty relief, education, and caring for the elderly and the disabled. There was even an interactive experience section in which the audience could learn about disabilities such as ALS, intellectual disability, and hearing loss, thus raising awareness and fostering sympathy for the disabled.
In Shenzhen, a few municipal charity associations offered lectures on charity work and organized an exhibit detailing the process and the components of charity work, including explanations on how charity organizations work and where donations go, in an attempt to increase transparency.
In Chongqing, the official municipal charitable association hosted a Charity Day event in which 72 organizations and institutions pledged a whopping 580 million yuan to charity work, although few details are known besides the total figure.
The main attraction on the national level was the “Charity Night” gala on China Central Television (CCTV), which aired nationwide on September 5. The gala served as an award ceremony for ten outstanding groups and individuals that advanced charitable causes in China. Among the ten honorees this year, there was one group made up of a rather vague collection of Chinese individuals contributing to the “One Belt, One Road” initiative — the only overtly political choice. Among the other nine award recipients, only one — the singer and actor Huang Xiaoming — is a well-known celebrity, while the rest are private individuals recognized for their good deeds in poverty alleviation, rural education, and empowerment of the disabled.
Similarly, not all independent initiatives in philanthropy are viewed with suspicion by the state, and there are signs that the use of the Internet in charity is encouraged by the authorities. In Guangzhou, for example, netizens can now simply scan a QR code and see detailed records of Guangzhou’s official charity association. Also in Guangdong Province, a charity project that aims to empower ethnic Monguor women by helping them sell traditional Monguor embroidery on the Internet was officially launched on Charity Day.
Since the Charity Law went into effect in 2016, mobilization and propaganda efforts in raising public awareness have appeared to be more effective than the law itself. Overall, the motivation behind this state-led charity drive is to compete for influence with NGOs and to make up for the deficiencies in social welfare. Even though the state is playing a dominant role, non-governmental charities and individual initiatives, as our data shows, will still wield considerable influence in the foreseeable future.
