China's 1,000-plus charitable organizations now act as an
intermediate step between the government and the individual. They
help the people who are not yet covered by the public welfare
benefits the government offers.
On March 19 this year, the State Council, China's cabinet,
promulgated the Regulation on Foundations Administration, which
will come into effect on June 1. The regulation marks a new phase
of the development of Chinese charity foundations.
Government keeps its hand in
Charity organizations play an increasingly important role in
China, and much of their success should be attributed to assistance
from various levels of government.
In contrast with the situation in most other countries, where
charity organizations are supported by privately raised funds,
China's rely heavily on public funding. Since making contributions
to charity has not yet become a common or widespread practice in
the private sector, the government-backed mechanism that exists now
is essential for fundraising: Few would trust an organization set
up by total strangers or some unknown company. Who would give them
money?
Many donors feel that government affiliation lends credibility
to an organization.
Retired and even incumbent senior officials occupy key posts in
most Chinese charity organizations.
For example, Chen Tiedi, president of the Shanghai Charity
Foundation, was once the head of the Shanghai Municipal People's
Congress, the top local legislature; and several of the 20-plus
vice presidents are incumbent Party or government officials whose
influence is crucial for the foundation.
Ruan Guangming, the secretary-general of the Shanghai Education
Development Foundation, said that top municipal leaders convened
the first meeting of his foundation. Representatives from various
departments of the Shanghai municipal government were present and
were lobbied to donate 17 million yuan (US$2.1 million), the first
sum of money the foundation obtained.
South China's Guangdong Province once organized a parade to
appeal for donations for education. Led by top local leaders, the
event mobilized an estimated one million citizens and all the major
local media. Any enterprise willing to donate 400,000 yuan
(US$48,385) was allotted a float in the parade. At intervals in the
parade, local leaders showed off their talents in calligraphy and
painting. A company could acquire a calligraphic rendering of its
name, executed by the hand of a top local leader, by making a
donation of 300,000 yuan. Many companies were happy to come up with
the cash, as it was a very low price to pay for the amount of
advertising and goodwill that accompanied the purchase.
Sociologist Lu Hanlong says that charity should supplement
private and government functions, but in China it is more an
extension of the government. The system seems to be effective and
efficient, but it can also dampen people's enthusiasm: no one wants
to feel forced to make a donation.
Because some charities are hotbeds of irregularities and
scandals, the government tries to regulate them very strictly.
Employees' salaries, administrative expenses and investment fund
management are all tightly controlled.
Charity organizations are generally required to invest funds in
bank deposits to avoid risk. Spending on administration and
lobbying is restricted, and many complain that it is too
restricted. They cannot afford to organize essential promotional
activities or hire qualified personnel, to the detriment of the
charities and ultimately of the people they are supposed to
help.
However, in many countries charities are permitted to spend 10
to 40 percent of the money they raise on administration and
promotion, far more than the current Chinese quota. The ceiling is
set low in China for fear that high expenses will irk the public
and damage the government's image.
The newly promulgated Regulation on Administration of
Foundations requires charities to limit spending on administrative
activities and employees' salaries to 10 percent of total annual
expenditure.
"Since foundations bear official stamps," says Ruan Guangming,
"the first thing the government thinks of is to protect its own
image."
The new regulation clarifies the government's role by saying
that civil servants should not hold important positions in
charitable organizations, but that the organizations should still
be subject to the leadership of certain government departments.
The nouveau riche: stingy or savvy?
The group that should be most concerned about its image
vis-à-vis charities is the mainland's entrepreneurs.
A survey reveals that fewer than 100,000, or 1 percent, of
mainland China's 10 million registered enterprises have records of
charitable donations.
To date, charities have relied heavily on the generosity of
middle-income individuals on the mainland and big donors from Hong
Kong, Macao, Taiwan and foreign countries.
Major organizations, such as the China Foundation for Poverty
Alleviation and the China Charity Federation, report that on
average, half of their funds come from small individual donations,
one-third from non-mainland donors and the rest from mainland
enterprises, with the overwhelming majority of those
state-owned.
In Shanghai, one of China's largest cities, the Shanghai
Education Development Foundation, the Soong Ching Ling Foundation
and the Shanghai Charity Foundation derive 50, 70 and 30 percent of
their donations, respectively, from non-mainland sources.
However, it would be unfair to conclude that entrepreneurs on
the mainland are utterly aloof. Some 90 percent of private
businesspeople have given donations at least once. Sixty percent of
the funds donated to the Shanghai Charity Foundation come from
domestic private entrepreneurs. Although many are willing to give,
the amounts they are willing to donate are miniscule.
"Apart from miserliness, private entrepreneurs face a couple of
problems that prevent them from giving donations. They are
reluctant to mention them in the public," said Ma Zhongqi, deputy
secretary general of the Shanghai Charity Foundation.
First, China's newly rich are afraid that public donations will
bring trouble because of inadequacies that still exist in the
Chinese law on the protection of private property. The
constitutional revision to protect private property passed in March
by the National People's Congress, China's top legislature, should
add new impetus to the growth of charitable donations in China.
Second, some private entrepreneurs hide their wealth for fear of
causing envy or hatred, or possibly even endangering their safety
or their families'.
Many an entrepreneur feels that if he gives money to one
organization, others will learn about his generosity and camp on
his doorstep asking for more donations. Because almost all the
charities are led by heavyweights whom he cannot afford to offend,
he must give to them all. Thus, many businesspeople are afraid to
make donations or make their donations public.
Moreover, says Deng Shengguo, deputy director of the NGO
Research Institute at the prestigious Tsinghua University, as in
most other third-world countries, many successful Chinese
entrepreneurs have just finished their primary accumulation of
capital. Uppermost in their minds now is how to increase their
wealth and further develop their enterprises. They don't have much
energy to care about charity.
Deputy Secretary-General Shen Haiping of the Soong Ching Ling
Foundation says that although most people don't do good works for
the sake of fame or other benefits, more people would be inclined
toward generosity if they felt they would be repaid with reputation
and advantages.
On April 30, 2003, to encourage donations for the battle against
SARS, the State Taxation Administration announced that it would
grant 100 percent deductibility for all cash and materials that
companies donated for the control of the disease. Donations from
enterprises - few of them privately owned - soared soon afterward.
Normally, the law permits them only to deduct a maximum of 3
percent of their annual turnovers.
Reports hint that China will make the bold SARS emergency tax
deduction policy permanent this year. If passed, it would make the
Chinese taxation system the most liberal in the world in terms of
encouraging donations.
Another connection between willingness to donate and taxes
involves the inheritance tax - or rather, the lack of one. Because
China does not levy one, most people prefer to leave the wealth to
their families rather than donate it or parts of it to charity.
Long way to go
In China, the wealthy tend to make donations in times of crisis
and disaster, such as during a flood or following an earthquake. In
other countries, people tend to have longer-range donation plans,
giving on a regular basis over a long period.
Li Yining, a prominent economist, points out that donations by
the rich will help narrow China's widening wealth gap, which is
already among the biggest in the world and threatens social
stability.
Rupert Hoogewerf, a Shanghai-based British accountant who draws
up annual lists of the 100 richest people on the mainland,
reportedly plans to publish a list of China's top 100
philanthropist businesspeople in late April or early May. Some
entrepreneurs are already indicating disdain for such a list.
Despite the apparent lack of generosity on the part of Chinese
entrepreneurs, less-wealthy citizens seem less inclined to stint.
In Shanghai, for example, more than 400 families - most of them
average income earners - have adopted disabled orphans.
(China.org.cn by Chen Chao, April 27, 2004)