Charity law, trust in NGOs crucial

PUBLISHED : Thursday, 02 August, 2012, 12:00am
UPDATED : Wednesday, 15 August, 2012, 10:49pm


Transparency requirements for charities issued at the weekend are a much needed step in the right direction given the scandals that have plagued philanthropic organisations in recent years, but the rules fall short of what needs to be done

What is truly needed is the long-awaited charity law, which has been on the drawing board since 2005. Mainland authorities must also make fundamental changes to how they view NGOs.

The mainland has seen philanthropy grow since the 2008 Sichuan earthquake. But donations fell 20 per cent, to about 80 billion yuan (HK$98 billion) last year, largely owing to the 'Guo Meimei' incident, which deepened public scepticism on the use of donation money in relief work.

Guo, 20, was criticised widely on the internet last summer after she claimed to be the 'commercial general manager' of the Red Cross Society of China, the mainland's biggest charity.

She bragged about her expensive handbags and cars on her micro-blog, prompting people to question how the charity's money was being used. Guo was later found to be working for a separate entity, which had a contract with the Red Cross.

More scandals followed. The Henan arm of the China Song Ching Ling Foundation, the mainland's third biggest charity, was found to have collected 3 billion yuan in assets in three years through extending loans to businesses. The Sino-African Hope Project came under scrutiny for appointing a 24-year-old to oversee a 2 billion yuan effort to build schools in Africa.


The requirements issued last weekend require charities to be more transparent. They must publish reports about their income and expenses every three months during a fund-raising drive, and at the end of each drive. Charities must not endorse directly any business or commercial product, and can only make non-profit investments through banks or other financial institutions.

What the requirements failed to address, however, was that all the foundations roiled by scandals were government-organised or government-backed NGOs. Nearly all mainland foundations with public fund-raising status are affiliated with the government. Movie star Jet Li's One Foundation in 2010 became the first private group permitted to raise funds after reaching an unprecedented deal with authorities in Shenzhen.

Not all NGOs are charities, but the government's attitudes towards the two are similar. While authorities are increasingly embracing the role that charities and NGOs can play in society, they clearly prefer government-affiliated charities.

For example, donors can only claim tax deductions for donations to a handful of charities, all government-run or affiliated. The tight registration rules for NGOs, and new rules on foreign funding introduced in 2010, mean any grass-roots NGOs without close ties to the government would find it difficult to operate on the mainland.

No doubt most charities are well-intentioned, but the sheer size of the money involved puts them at risk of inviting corruption. There were 2,500 charitable foundations by the end of 2011, twice that of 2005, with assets exceeding 60 billion yuan.

One year after the Sichuan earthquake, the China Youth Daily reported 80 per cent of the 76 billion yuan donations received were in the hands of local governments for centralised relief work. But exact details on how this money was spent remain a major concern.

A level playing field is the best way to weed out suspicious practices. The government should encourage the growth of NGOs, rather than the concentration of resources in the hands of a few government-linked ones.

Aside from this weekend's announcement there have been other positive steps. From July 1, NGOs in Guangdong were, at least in theory, permitted to register directly with the Civil Affairs Department, avoiding the previous hurdle of finding an extra department to endorse them.

In the past, every NGO had to appeal to an appropriate government department to support its work. An NGO focused on education, for example, would need prior approval from the Department of Education before it could register with Civil Affairs. But the difficulty in getting that endorsement meant most of the mainland's millions of NGOs had to register either as a company or operate illegally, a costly and perilous undertaking.

The root of the problem is the government's ambivalence towards the role of NGOs. They have traditionally been seen as trouble makers rather than agents of positive change. This outmoded thinking presents an obstacle to passing the charity law.

As one NGO industry observer said, foreign NGOs and NGOs with a focus on political reform or rights advocacy will continue to face challenges and distrust in China. However, hopefully the rest should be allowed greater freedom to operate. Their contributions to China are critical. A stronger civil society is crucial to China at this stage of development, and this could only be achieved if they are not turned into an arm of the government.

The purpose of the charity law is to expand services to the country's citizens in need and to encourage good deeds; the goal should not be hampered by concern for government control or the safeguarding of departmental interests. Authorities must now see this law as priority. And while enforcing transparency in non-governmental charities are important, authorities should also make sure its government departments are doing the same.