Can charitable giving go far in China?

About one month ago, Chen Fashu, chairman of the New Huadu Industrial Group based in south China's Fujian Province, found himself in the middle of a controversy after declaring that he was going to set up the country's largest private philanthropic fund.

Chen, ranked 15th on the 2009 list of wealthiest people in Hurun China, promised to endow the New Huadu Philanthropic Fund with 8.3 billion yuan (about 1.2 billion U.S. dollars) worth of equity, some 45 percent of his personal wealth.

However, the goodwill move was greeted with more skepticism than appreciation. Charitable donations in the form of equity have no precedence in China. Many critics question the motives of the fund, arguing that it could be intended as a means of tax evasion.

"Corporate philanthropy is very fragile. If enterprises are really willing to take charities as their social responsibility, we should treasure that," says Howard Liu Hung To, director of China unit of Oxfam, Hong Kong.

Liu cited an old saying, of "displaying a sheep's head while selling dog meat" as a way of pointing out the skepticism. "Credibility is the key to charity funds," he notes.

Xu Yongguang, who masterminded Project Hope, the charity program enlisting nationwide resources in supporting basic education in rural China, insisted: "We should first give the Funda 'Hurray!' Whatever the motives, it is after all more money for a good cause." What's more, he added: "Tax avoidance is not something to be ashamed of if it's legitimate."

　　20 years of Project Hope

Charitable giving is not a novelty in China. Tracing back some 2,300 years, Mencius, the Chinese philosopher, advocated that a man should do good for his society when he is better off and able to do so.

However, the tradition has wandered off in the last few decades as people were engrossed in pursuing personal wealth in the newly introduced market economy. The wandering didn't last long. The increasing income disparity became a wake-up call to many of the newly wealthy beneficiaries of China's reform and open economic policies.

Against this backdrop, Xu Yongguang's Project Hope came to the fore. Since 1989, the initiative under China Youth Development Foundation has raised over 5.7 billion yuan (838 million dollars), building over 15,000 Hope primary schools and assisting more than three million children in their schooling.

"In pure economic terms, the 5.7 billion yuan money raised could only build 7-kilometer-long subway in Shanghai. But the schools sponsored by Project Hope have accounted for 4 percent of the country's rural primary schools," said Xu. He notes that the social contribution of Project Hope is more spiritual than material.

"It's far beyond the things that visible to the naked eye."

When the deadly earthquake struck southwest China's Sichuan Province last May, killing over 70,000, many school buildings were reduced rubble, taking thousands of young lives. But there wasn't a single death in one of the 500 or so Hope Primary Schools in the quake-stricken areas.

"I'm gratified that the schools have stood up to the tough test of the quake and therefore haven't let the donors down," said the 60-year-old Xu, who had to resort to court to fight allegations about Project Hope.

Project Hope has inspired others in China's philanthropic sphere: the Spring Buds Project which helps out girls dropping out of school; and the Mothers' Cistern Project that assists women from northwest China's drought-plagued Loess Plateau to collect rain water for drinking, to name two.

Since 2004 when the "Regulation on the Administration of Foundations" was issued, many private funds have joined the ranks of charity foundations. By 2006, 349 private foundations stood along with some 900 public foundations.

To date, there are 414,000 registered charity organizations in China, engaging in services ranging across the spectrum from health, AIDS, and disability to culture, education, and environment. If grassroots non-governmental organizations (NGOs) are taken into account, the number could easily top one million.

In the last decade, charitable giving in China has been growing steadily, but nothing matches the donations in 2008, when the whole country came together after the devastating May earthquake.

Statistics from the Ministry of Civil Affairs show that quake donations totaled 107 billion yuan (15.73 billion dollars) in 2008,about 3.5 times of the previous year. For the first time, private donations have exceeded corporate ones, reaching 45.8 billion yuan, more than half the total, with an average person contributing 34.6yuan (5 dollars).

"China is moving toward a modern society in terms of charitable giving," said Yang Tuan, deputy director of the Social Policy Research Center at the Chinese Academy of Social Sciences.

She believes that charity is a powerful force that brings people together in the present-day China. "In a society undergoing transition, charity is an ideology accepted by the majority."

Players crying "foul"

Nonetheless, 15 months since the devastating earthquake in Sichuan, research led by the NGO Research Center at Tsinghua University found that of the 76.7 billion yuan (11.28 billion dollars) in money and goods raised by the public, over 80 percent were injected into the government finance basket as "extra tax revenue" and used for quake relief.

A break-down showed that 58.1 percent of the money raised had gone to government departments, 36 percent to the officially-designated Red Cross Society of China and China Charity Federation, leaving a mere 5.9 percent for public foundations.

Wang Zhenyao, director of the Social Welfare and Charity Promotion Department, the Ministry of Civil Affairs, referred this as "an embarrassment."

"Some NGOs do not have the credibility or a clear feedback that the public requires for charity. Therefore donors do not trust them with their money and the money or goods raised have instead gone to the government," he explained.

Liu Hung To from Oxfam HK who has been working at charity agencies for 11 years, strongly opposes this role mix-up.

"The government should perform the role of referee, not athlete.

No government should raise money from its citizens. It is the government's obligation to encourage private and corporate donations for charity through favorable tax policies while buying with public expenditure services from NGOs in areas it cannot possibly attend to," said Liu.

It has been a matter of pure Chinese characteristics that all foundations, public or otherwise, should be attached to a government department. NGOs, which fall into the category of social organizations, need to have 100,000 yuan (14,705 dollars) in capital and at least two full-time staff as well as an office, to be registered in China.

As most grassroots NGOs are not able to find any government organizations to affiliate with, they end up registering as enterprises at local administrations of industry and commerce, with no tax relief or breaks.

This lack of legitimacy for charities has resulted in a resource dilemma. Big foundations, rich in funds, collaborate with government departments, which in turn provide matching funds. So the government departments don't feel the need or the desire to work with grassroots NGOs.

"It is no wonder grassroots NGOs don't grow," says Xu Yongguang, calling it a "vicious circle".

Statistics from the Ministry of Civil Affairs and Tsinghua University show that in 2007, non-profit organizations in China only share a 0.3 percent of added value from the tertiary sector. Likewise, its employment rate was a pitiful 0.3 percent of the whole service sector, only one-thirtieth of the world's average.

Xu urged the government to release public services from its hold and start nurturing the tertiary sector so that NGOs could employ more people while contributing to society.

Transparency and accountability

As more and more people are involved in charitable giving, there are constant calls for transparency and accountability on the part of non-profit organizations. A survey by the NGO Research Center of Tsinghua University and Sinomonitor showed that only 4.7percent of donors are clear about the end use of their money whereas some 70 percent have no idea.

"Public foundations reveal very little about the whereabouts of the money or its effect and efficiency. Sometimes even experts don't understand the reports they release," said Deng Guosheng, deputy director of the NGO Research Center.

The Law on Corporate Income Tax passed in 2007 has raised the permissible level of tax-deductible donations from 3 percent to 12percent of annual profits. But currently only donations to 22 designated non-profit organizations are eligible for full tax exemption.

"Beneficiaries of such tax reduction policies are actually taking advantage of public resources and therefore are public agencies. They are obliged to report to the public and be placed under public supervision," said Liu Hung To, of Oxfam HK.

He added that it's not enough for enterprises to rely on sheer morality to guide their motives. "It takes sunshine laws."

Xu Yongguang, now secretary general with the private Narada Foundation, believes that such foundations are a breakthrough for the registration difficulty confronted by NGOs. They could serve to connect the broken industry chain by provide funding for grassroots NGOs.

But he also cautioned the good Samaritans to become "rational donors", knowing that charity agencies have costs to shoulder and that they as donors have the rights to know.

"A well-informed public will be the driving force for the transition of public foundations from rubber stamps to real movers and shakers in the society," he said.

The good news is that shortly after the Sichuan earthquake last year, China Foundation for Poverty Alleviation, Amity Foundation and China Youth Development Foundation launched a self-discipline move, opening their accounts to public scrutiny.

Private foundations followed suit this July by issuing a declaration, pledging a professional management of their funds.

Despite the growing passion for charity, it is worth noting that charitable donations in China is still about 0.35 percent of its gross domestic product (GDP), far less from the 2-plus percent in the United States.

As Liu Hung To said: "Charity is a mission, a capacity, an ideal and a culture. While NGOs should have an instinct for transparency, it is also up to the authorities' judgment on NGOs' role in social harmony. Charity in China still has a long way to go."

Source:Xinhua