In 2012, philanthropy was discussed more heatedly in China than ever. While some were pessimistic and little has been done by the government, there are many ‘leapfrog’ opportunities for the country’s philanthropy. Here are a few trends I have observed.

International exchanges are becoming more frequent. An example is the International Forum on Social Impact Investment & Community Development, during the 21st Century Social Innovation Week in December, organized by 21st Century Business Herald. More international organizations have an interest in learning and sharing, and even recruiting Chinese members to their global networks. Stanford Center on Philanthropy and Civil Society, for example, has established the Stanford Center at Peking University to accelerate social progress by connecting academics, leaders and practitioners from China and the US.

At the 2012 China Philanthropy Forum, Tony Blair talked about how flourishing philanthropy is an essential part of a flourishing society, while Bill Gates spoke about how philanthropy can be much broader than just giving away money, including your voice, your leadership and your time commitment.

As these conversations spread, they will inspire more Chinese people to think about giving money and giving it effectively. At the moment, many rich Chinese send their money out of the country, resulting in a huge loss of wealth. The government may need to develop a strategy to provide incentives for the wealthy to invest in social purposes while allowing them to get tangible returns.

Increasing social innovation and impact investment
The Chinese are taking to the idea of impact investment, and some Chinese venture funds have already been established to allow philanthropic capital to be invested in social enterprises. More and more, professionals from private equity firms and social venture capital funds attend philanthropy forums. However, there are not enough investment-ready projects.

Meanwhile, there are some very good locally led innovations. He Daofeng’s China Foundation for Poverty Alleviation has been supporting innovations and providing microfinance for the rural poor for the past 17 years. A more enabling policy environment is needed for philanthropic capital to support small farmers and rural cooperatives to implement local innovations.

Chinese foundations overseas
To date, the number of Chinese foundations operating overseas has been very small, but this is beginning to change. The main topic of the first meeting of the China foundation bi-monthly salons organized by the Ministry of Civil Affairs[1] was the internationalization of Chinese foundations. In addition, the fifth ministerial level Forum of China Africa Cooperation decided that foundations and NGOs would for the first time be encouraged to work on projects focusing on livelihoods in Africa. Chinese foundations and NGOs need to prepare for the change. There are opportunities for international development organizations such as Business for Social Responsibility, Mercy Corps and Save the Children to work as trusted partners, engaging local communities and delivering impact.

More philanthropic capital going to policy research
In September 2012, Cao Dewang announced that his family foundation, the Heren Foundation, will spend 40 per cent of its funding (about RMB 40 million a year) to support policy research and talent training. Earlier in the year, Lu Dezhi, founder of Huamin Charity Foundation, pledged that he would donate RMB 10 billion over five years to support social development and charitable sector development. He has already founded the Spirit of Capital Research Center at China Philanthropy Research Institute of Beijing Normal University. Investment in think-tanks and philanthropy research institutions may help create mature theoretical guidance and a more favorable climate for strategic philanthropy in China.

Adapting the pro bono model
China’s first urban generation is creating a mass of young (and old) volunteers, people who want to be involved in social issues. One form of this is the pro bono approach, recently introduced into China. To succeed here, it must be adapted effectively.[2] However, if there is buy-in from business leaders and related government agencies, more professionals in China may contribute their skills to catalyse social change. The potential impact is huge.

Greater transparency
The China Foundation Center, founded just three years ago, has already expanded to cover 90 per cent of foundations in China and brought huge improvements in transparency, with its Foundation Transparency Index launched this year to address lack of accountability and transparency in the sector. Moreover, One Foundation has developed ten simple transparency self-reporting criteria for NGOs, covering about 70 NGOs across the country. Additionally, I More has created a mobile and social media application to collect data from various field projects and post them through micro-blogs and mobile media, to help track income and expenditure of charitable funds. The Red Cross Society of China has been the first to establish a Social Supervision Committee of external experts and influential opinion leaders to monitor its transparency and internal management issues. With the technology now available, China can potentially apply transparency tools to online social media platforms to facilitate the flow of information and capital to organizations and areas of need, which may lead to a major leap forward in the development of the sector.

More financial and policy support needed by local NGOs
Most private foundations have small revenues of RMB 1.66 million (US$267,000) on average, so the key challenge is to work out how they can play a catalytic role to leverage bigger social impact. One way would be greater support to NGOs, yet research shows that only 8.9 per cent of private foundations from mainland China support NGOs, most operating their own programmes instead. The Free Lunch for Children initiative offers free lunch and nutrition advice to students in poor areas, encouraging small and affordable donations – RMB 3 per day per donor. It is a case of an effective initiative, using Weibo (the Chinese Twitter), but it also demonstrates the role of NGOs. As Lu Mai, executive director of the China Development Research Foundation, said, ‘it is hard to imagine Free Lunch for Children succeeding in reaching out to children from 120,000 schools across the country without NGOs.’

If there was systematic research on the role of NGOs, supported by hard data, there might be more enabling policies and financial resources to support their development. Late last year, Vice Premier Li Keqiang admitted community-based organizations’ huge contribution to HIV/AIDS prevention and caring in China, saying that government should help such organizations solve the problems and challenges that they’re facing, which may be a promising sign for NGOs.

More local governments trying to attract philanthropic resources
The First China Charity Fair was organized by partners from the public, private and NGO sectors, the Shenzhen municipal government, Guangdong provincial government, the Ministry of Civil Affairs, and All-China Federation of Industry and Commerce among them. During the fair, 544 foundations, NGOs, companies, provincial and city governments, scientific institutions and media outlets showcased their philanthropy work and seven new reports on social innovation and philanthropy development were released. Local governments in both south and north are working to attract social investors to seed social innovations. However, national policies and legislation remain as barriers to further local innovations.

While we see the various innovations driven by local government, there is a need for a fundamental shift in attitudes by central government to unleash the positive energy of society. It really matters what vision leaders and policymakers have for the role of philanthropy and of society broadly. When Joseph Nye of Harvard University talked about the soft power of a nation state, he suggested that real soft power comes from the innovations and dynamics of society, which is well echoed by various innovations and trends mentioned above. We need solid research and hard data to provide evidence for policymakers in China to make the changes that are needed.

Broader collaboration for a more promising sector
Private foundations in China have social and political capital, in addition to material resources, that they can use to address some of the sector-wide challenges and development issues. They can achieve bigger impact through partnership with public foundations and NGOs, and with government and private sectors, to help shape a transparent and efficient infrastructure for the sector. Some sector leaders have been pushing for a joint China foundation development forum in 2014 bringing together private foundations and public foundations to broaden the discussion and sharing, which is very promising for the philanthropy sector.

1 The bi-monthly salons are an informal way for the government to engage leading foundations in China through the arm of MOCA – the China Social Organization Promotion Association.
2 For discussion of this, see http://ciyuan.bsr.org/data/resources/Lessons_of_Localization1.pdf

Bin Pei is Senior Program Officer for Policy and Advocacy, Bill & Melinda Gates Foundation China office. Email Bin.Pei@gatesfoundation.org