President Xi Jinping's restrictions on the operations of foreign organisations in China are continuing, as Beijing prepares new regulations prohibiting foreign non-governmental organisations from activities that violate "Chinese society's moral customs". Rights activists fear the new measures will seriously curb their activities and drive many NGOs out of the country. The new draft regulations are the latest in a series of restrictions aimed at the operations of foreign companies, including restrictions requiring US technology companies to submit their products for security testing and to disclose their software source code. The Guangxi Academy of Social Sciences estimates that there are more than 6,000 foreign NGOs in China, of which 40 per cent are American, while Tsinghua University believes there may be 10,000 foreign NGOs. Foreign NGOs in China are involved in a range of activities, assisting China in achieving a cleaner environment, better governance and poverty reduction, which can often imply that the Communist state is not up to the task. Other NGOs are involved in training journalists or as advocates for gay rights - which are controversial activities in China. Many of the foreign NGOs, as well as the more than 500,000 Chinese NGOs, register as commercial enterprises or operate without proper authorisation, given registration constraints, a lack of regulations, or requirements that all charitable donations first pass through fiscal authorities. The new draft regulations on NGOs, which include forbidding fundraising in China and the setting up of branches in China, are being implemented for reasons of national security, according to a parliamentary spokeswoman. Foreign NGOs will also need to be sponsored by a government agency and will be subject to monitoring by a "business unit", the police and other authorities, such as the Ministry of Public Security and provincial public security departments. One director of a foreign NGO in China, who wished to remain anonymous, said: "The rumour we've heard is the purpose of the law is to get rid of us." Since Xi took office in March 2013, several foreign NGOs have been interviewed by state security agents regarding their funding sources. The latest crackdown has resulted in two foreign NGO workers being expelled from China, ostensibly due to working on the wrong visa. Beijing has become particularly sensitive to the growing number of foreigners who go to China on an easily-obtained tourist visa and then do some work. Xi's efforts at restricting the activities of NGOs is strikingly similar to the approach taken by Moscow in March 2013, when several NGOs came under scrutiny. According to Human Rights Watch, "at least 55 groups received warnings not to violate the law and at least 20 groups received official notices requiring them to register as 'foreign agents'." In June, Moscow's Ministry of Justice was granted authority to single-handedly register any NGO as a "foreign agent", and has since registered 42 NGOs as "foreign agents" without their consent. Much like Moscow, what Beijing risks doing with the latest regulations is driving many NGOs out and making it difficult for those that remain to operate effectively. While scrutiny of these organisations' activities is certainly necessary and justifiable, too strict an implementation of the new regulations is likely to slow the operations of many of the NGOs that are having a favourable impact on the quality of life in China. Beijing must reassure the NGOs that it is not seeking to drive them out and must tread carefully in setting guidelines for their operations - or risk the same backlash it currently faces from foreign companies which find it increasingly difficult to operate there, or from its own rich citizens who are fleeing with their families to other countries for a better quality of life. A 2014 report by Hurun Research Institute found 64 per cent of the "high-net-worth individuals" polled were either emigrating or planning to do so. Rich Chinese are increasingly buying real estate abroad and sending their children to schools overseas in record numbers. Much like their commercial counterparts, international NGOs operate in many countries and have access to limited capital. How they wish to deploy that capital and their resources is often determined by local operating conditions in a given country, as well as how effective that capital can be deployed to effect real change. Should international NGOs decide China is just not worth their time and effort, given the constraints on their operations, and should the Chinese government fail to fill the void with effective programmes of its own, the Chinese who could benefit most from these programmes will suffer. Gary Sands is a senior analyst at Wikistrat, a crowdsourced consultancy, and a director at Highway West Capital Advisors, a venture capital, project finance and political risk advisory
