Karla Simon

Although I’m an American, I will be blogging on developments in China regarding civil society and philanthropy. I am in the process of finishing a book on civil society in China, which is due to be published in 2012. Thus, keeping my finger on the pulse of all changes in Chinese civil society is pretty much my full-time occupation.

As we all know, China is making significant progress on a number of fronts, including increasing philanthropic giving and creating more space for civil society. Following the visit to China of Warren Buffett and Bill Gates in autumn 2010, the spotlight has been trained on a variety of issues affecting philanthropy. At first attention revolved around who among China’s dollar billion and millionaires would give to charity. Although many do in fact make significant donations, many do not, in part because doing so would expose their wealth and catch the eye of the tax collector.

More recently philanthropy has been in the news in China because its ‘netizens’ hit upon another burning issue: not just how much giving there is but what charities are doing with donated funds. The blogs went a little crazy after a 20-year-old woman nicknamed Guo Meimei flaunted her wealth on her own micro-blog while at the same time claiming to be involved in some fashion with the Red Cross Society of China (RCS), a state-run charity. It turns out that the source of Ms Guo’s fancy automobiles, handbags, etc was her married boyfriend, a businessman and highly placed member of the RCS Board, who was asked to resign after he admitted the facts about their relationship. Although there does not appear to have been any misuse of RCS funds for her benefit, an audit is underway. But the fiasco received a lot of public attention and brought two issues to the fore – one is the public’s distrust of official charity organizations; the second is the need for a more transparent and accountable charity sector in general.

Requiring better regulation of donations to charitable organizations and the organizations themselves had already received the attention of the highest authorities in China. Included in the latest ‘Five Year Plan’ (2011-2015), for example, is the importance of strengthening charity organizations. And the follow-up to this general plan for China’s advancement has been swift – in early July, the Ministry of Civil Affairs (MCA), regulator for the sector, announced its own ‘Five Year Plan’ to develop charity in China. Following on the heels of an ill-fated attempt to write comprehensive legislation for the charity sector, the plan signals a willingness to draw on local and provincial experiments with regulating charity fundraising before attempting to write national level legislation.

Greater transparency and accountability are clearly necessary, even if scandals like the one involving RCS are relatively infrequent. The amount of money donated to charity has increased markedly since 2006, when it for the first time topped 10 billion RMB (US $1 = approx RMB 6.5) – in 2010 the figure was 70 billion RMB. Moreover, the Ministry wants to develop a better ‘culture of philanthropy’, which ties into the first issue raised – making the charity sector more trustworthy for the average Chinese person and for the very wealthy.

One thing that would help in this quest is the creation of a more enabling legal environment for associations, foundations and private non-profit institutions. While the government has promised amendments to existing regulations for some time, the old set of regulations from 1998/2004 remains in effect. That means that, except for foundations, regulated under the 2004 rules, there are scant requirements for transparency and accountability. The adoption of principles requiring better rules for corporate governance and more public transparency in the Five Year Plan 2011-15 is welcome. In addition, the dual management system, which depends on an organization finding a sponsor before it registers, makes registration cumbersome, and not infrequently impossible. It is hoped the new regulations will address this issue – at least rumours are flying that they will.

According to official statistics, the number of social organizations registered with the civil affairs ministry increased from 310,000 in 2005 to 440,000 at the end of 2010. The number of foundations increased from 975 to 2168, and many social organizations made charity their principal service objective. Although these numbers show a significant increase in the numbers of registered organizations, it seems very likely that there would be many more if the regulations were to be amended to make registration somewhat easier. In fact, the Minister of Civil Affairs, Li Liguo, recently gave a talk suggesting that the MCA itself should become a ‘one-stop shop’ for registrations. Whether and to what extent lower-level MCA bureaucrats will do this in less adventuresome communities than Shenzhen remains to be seen. It would be preferable to have clear written policies saying this must be done.

And more is needed, as anyone familiar with the philanthropic sector in China knows. The China Foundation Center was established specifically to set up a web portal as well as an organization devoted to making higher standards for charities an accepted practice within the sector. Self-regulation is a tried and true methodology for creating good practices, and it seems that at least the foundations in China have embraced this idea whole-heartedly. Indeed, principles for self-regulation were adopted at a 2009 meeting of ‘private’ foundations.  The new Five Year plan states that government will encourage such initiatives.

One critical issue is the extent to which charities and CSOs are able to hire personnel who are adequately trained in the methods of good charity management. Unlike countries such as the UK and the US, there are not many management training programs for charity personnel in China. While some organizations have sought to ‘incubate’ new charities, this needs to be scaled up if it is to be successful. Thus, the decision of the MCA to emphasize this issue in the new Five Year Plan should have a good impact.

In the next blog post I will discuss issues regarding resources of charities, which the Five Year Plan suggests need to be developed.

Karla Simon (西 门 雅)  is professor of law and director of faculty development at the Catholic University of America and has worked in China for over 16 years