Charity law signals growing role for NGOs in China

China has passed its first law on charitable and philanthropic activities in March. What does it mean for nongovernmental organizations in the Asian country? Photo by: Karl Baron / CC BY

Civil society is tentatively welcoming China’s first law governing charitable and philanthropic activity, passed in March and likely to go into effect in September. The new rules will shape and define the sector, whose contribution to development is now acknowledged by the government, one analyst told Devex.

“This is the first law that came out that really regulates the charitable or philanthropic sector … so it’s very important,” said Shawn Shieh, deputy director of development and operations at Hong Kong-based China Labor Bulletin. “It sends a signal that the government recognizes that this is an important issue and that they have acted on that by making the law.”

The new policy (English translation by China Law Translate) recognizes that charitable and philanthropic activities are crucial to help “promote social progress” and achieve the country’s development goals and objectives. That acknowledgment alone is being welcomed by advocates who have been pushing for a similar policy since 2008.

The law includes provisions on tax incentives for charitable contributions, ease of registration  and operations, and greater transparency toward charitable operations and finances.

“It will be easier for organizations to register,” Shieh said. “There’ll be better tax incentives for charitable organizations and [for] people who donate to these groups,” he said. “The idea here is to make charitable organizations more transparent and report what they do with the money and make that public.”

This focus on transparency and accountability is to “address the reputation of corruption currently associated with Chinese charities,” according to a paper by Louis Thivierge, senior editor at Beijing’s Tsinghua China Law Review.

The legislation emphasizes accountability, particularly for donors. Article 41, for example, states that if individuals or groups have publicly promised to “donate through radio, television, press, internet, or other such media” charitable organizations or recipients can file a lawsuit if they renege on their promise.

“Once one makes a promise of donation, it cannot be retracted,” Thivierge explained.

Other landmark provisions of the law include the right to congregate and form networks or “industry organizations” (Article 19), which can promote the industry’s credibility and boost internal communication.

Vague points

Despite the positive points of the law, civil society representatives and experts remain cautious about some more ambiguous areas of the law. Among the uncertainties are how the sector is defined, what constitutes public fundraising, and how smaller NGOs will be treated under the rules.

“There are questions about how broadly you will define the sector [and their activities],” Shieh explained.

There are also questions about how the rules will be implemented and enforced. “We still have to look at the weight of the implementing regulations like the scope and structure of them,” he said.

The effectiveness of tax incentives, for example, depends on how the rules are put into practice. According to Shieh, “We still have to see what the concrete tax regulations are going to be or how easy it is going to be to claim those exemptions. In the past, they have had laws and regulations that say there are tax incentives but then actually getting those tax incentives is a whole other matter.”

There are also provisions allowing the government to “investigate and revoke registrations” of groups engaged in “activities that endanger national security”. In his paper, Thivierge explained that this provision may offer authorities “greater latitude in taking action against” organizations and “leaves room for abuse when it comes to implementation.”

READ MORE: In China, NGOs tread lightly over new law

International NGOs

The Charity Law stands in contrast to draft legislation governing international NGOs working in China. Beijing released a second draft of that proposed law almost a year ago that “emphasizes more control” and generally “makes things much more difficult,” Shieh said.

While in principle, there shouldn’t be any overlap between the two policies once they take effect, Shieh explained that it may not be easy to distinguish in reality. For instance, some groups can fall under the jurisdictions of both laws, even as the institutions that govern and regulate these groups will be different. Overseas NGOs will have to coordinate with the public security police, while those under the charity law will have to be under the auspices of the civil affairs ministry.

“It seems that the people drafting those two laws should be talking to each other. It looks like there’s no discussion between them,” Shieh said. “That certainly could be a problem in the future.”

Charity in China

Philanthropy is still a budding industry in China, despite it boasting the second highest number of billionaires after the United States. The East Asian nation ranked at the bottom — 144 out of 145 countries — of the World Giving Index released by the Charities Aid Foundation last year.

“[Traditionally], giving is something that you’re kind of forced to do or something that others pressure on you,” Shieh said, explaining what he sees as cultural reasons for the low number of donors.

Some hope that this new law will help change that culture and allow for greater private philanthropy.

“This idea of voluntary charity is something that is kind of new to many Chinese,” he concluded. “But that’s changing and this law will have an important change on people’s attitudes.”

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About the author

  • Lean Alfred Santos

    Lean Alfred Santos is a former Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. He previously covered Philippine and international business and economic news, sports and politics.

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