The National Peoples’ Congress passed the Charity Law on the last day of its 2016 session, with 92.49 per cent of delegates voting in favor of the law. It passed on the same day as the Fifth Five Year Plan, which seeks to significantly reduce poverty by 2020. Officials have declared that charitable organizations are essential to achieving the goal and hope to encourage more giving with the charity law.  The Charity Law goes into effect in September of this year.

The final text of the law can be found at here>

While not yet translated into English, the official version looks very much like earlier versions and thus can be effectively analyzed.

This blog looks at the rationales behind having the charity law, which has been over ten years in the making, and what it is expected to achieve once it goes into effect.  The law was sought not only by charities, but also by the government and by wealthy donors.

1. From the standpoint of both charities and government, the situation under the ‘three regulations,’ which required charities to seek permission from an oversight agency in order to register with the Ministry of Civil of Affairs (MCA), had become too burdensome. In addition, there were many unregistered charities working throughout the country that MCA sought to ‘bring into the tent.’
2. Charities disliked the need for supervision of oversight agencies and avoided it by registering as businesses or not at all. Even after Minister of Civil Affairs Li Liguo said that the ‘Guangdong model’ of direct registration (without an oversight agency) should be followed, the situation became chaotic with different provinces setting different standards for registration.
3. Wealthy donors disliked the fact that
   1. they could not easily rely on ordinary charities to carry out the intended purposes of their donations because of the level of training for such entities and their staff members;
   2. there were inadequate vehicles for donations to charities on the mainland (for example, Jack Ma, founder of Alibaba, set up his billon dollar charitable trust in Singapore because he could not be assured of tax advantages in the PRC); and
   3. transparency and accountability for charities were not assured by existing law.
4. Smaller donors were also disgruntled about the lack of transparency in the charity sector, which had caused the level of giving to dwindle. Chinese have not trusted charities to put their money to good use. A series of scandals served to confirm those fears; the government-affiliated Red Cross Society of China (RCSC), for instance, has been accused of misusing donations intended to help victims of the 2008 Sichuan earthquake. Another scandal erupted in 2011, when a young woman claiming to work from the RCSC posted pictures of herself enjoying a luxurious lifestyle online (Guo Meimei – Karla W. Simon Civil Society in C, 14). Yet another scandal that year the Henan branch of the Soong Ching Ling Foundation accused of funneling donations to property developers rather than the needy.

As a result of these last two points, in the World Giving Index published by the Charities Aid Foundation in 2015, China ranked as 144 of 145 ranked countries. But other reasons cited in an SCMP article published on 9 March 2016 also played a role, for more on this see Mandy Zuo, Needy clauses: Would China’s proposed charity law be a gift to the disadvantaged?. For example, Zhang Gaorong, assistant director of China Philanthropy Research Institute, said that in the past donation drives were usually organized by employers. This approach had been phased out ‘but we have yet to build enough other channels that people trust,’ he said.

Controversial provisions still remained in the law toward the end of the legislative session, despite vigorous debate.  These included an upper limit of 15 per cent on administrative expenses – this was reduced to 10 per cent, in the final text, and most charities agreed it would be fairer to donors and beneficiaries. On the other hand, the provision stating that organizations endangering public security and social stability could lose their licenses and the managers could be subject to criminal penalties remained. What this means is unclear, and it must be taken into account against the broader backdrop of the current clampdown on civil society and the pendency of the Foreign NGO Management Law, which I discussed in a previous post.

Karla W Simon (西 门 雅) is chairperson of ICCSL.