Philanthropy in China Poised to Take Next Evolutionary Turn with New Regulations

Last month Jack Ma, CEO of Alibaba, and the Alibaba Foundation hosted a first-of-its-kind conference in Hangzhou, China. The nascent topic that was covered was not the latest mobile technology, on which we now know China leads Silicon Valley, but rather philanthropy
 
 
The concept of philanthropy is still relatively new in China compared to its existence in the United States and the western world. It remains a world locked away primarily for wealthy individuals the likes of Jack Ma. 
 
2016 also marks 50 years since the Cultural Revolution. The impact of this period in China's history on the current psyche of its people cannot be underestimated. The Cultural Revolution stemmed any possibilities of rising magnates like a Rockefeller or Carnegie who would have had a large surplus of income to invest in philanthropy. But perhaps more deeply ingrained is the citizens’ mindset that the government is the ultimate caretaker. To challenge otherwise was often seen as a criticism of the government’s shortcomings. 
 
However, China has been changing rapidly in recent years and so too shifts towards philanthropy and charity can be observed. Beyond cementing its role as an integral player in the global economy, China has seen a record number of its students studying at US colleges. These students are not only themselves exposed to American culture and thought—including the desire popularly espoused by millennials to do something meaningful—but they also carry these influences over to their family members back in China or sometimes to peers and colleagues if they choose to return to China for work post-graduation. Furthermore, the proliferation of technology and information sharing over via the internet (yes, censorship and all) has made Western ideas and ideals all the more accessible. 
 
Six years ago, Warren Buffet and Bill Gates, picking up on the fertile makings for the growth of philanthropy in China, hosted a banquet for Chinese billionaires to promote philanthropy and the Giving Pledge. 50 individuals showed up (many of those invited chose not to attend and it's unknown how many were simply drawn by the opportunity to dine with Buffet and Gates, rather than by the topic) – however, none signed on to the Giving Pledge. By contrast, this year some 1,000 attendees showed up to the Xin Philanthropy Conference in Hangzhou. The host himself, Jack Ma, has demonstrated something of a shift. Once quoted in an interview as brushing off the power of donating money through the Giving Pledge, Ma since set aside 2% of Alibaba's pre-IPO equity for a philanthropic trust (valued at about $3 billion) and has become even more passionate about the issues of environment and healthcare following the loss of his father-in-law to cancer. 
 
The engagement of more Chinese CEOs in philanthropy could drive development of corporate philanthropy and responsibility in China. Certainly, international companies with a presence in China are likely already paying attention to things like supply chain and labor rights, but giving and philanthropy have faced hurdles – not purely in terms of winning over employees’ minds, but because the necessary infrastructure and framework needed for charities and philanthropy to thrive have not existed until now. 
 
Recent legislation seeks to provide that structure and draw the lines in the sand. In March, China passed the Charity Law, which provides a framework for the registration and administration of domestic charities, attempting to minimize suspicion and murkiness (page 17) that may have previously surrounded this field. In April, the Foreign NGO Law followed, consolidating the supervision of foreign nonprofits under the Ministry of Public Security and requiring the sponsorship of a Professional Supervisory Unit (PSU) as part of the registration process. At first blush, the requirements under the Foreign NGO Law may seem onerous, but most experts feel cautiously optimistic that the law represents a step forward in trying to lay out some ground rules for foreign charity activity in China. Many details are still unknown as we await the full governing regulations around the law. Most recently this month, China has issued guidelines to strengthen the supervision of both domestic and foreign NGOs through an established management system by 2020, with some stated benefits to these organizations such as government support and favorable fiscal and taxation policies. 
 
The Charity Law will become effective on September 1, 2016 while the Foreign NGO Law will become effective on January 1, 2017. For companies already working with charity partners in China, we recommend staying in close contact with them during this transitional period. For those companies still aspiring to build out CSR programming in China, stay tuned with open eyes and ears – the environment may just soon ripen. 
 
For more information on how Silicon Valley Community Foundation can help your company navigate the complexities of international grantmaking or other corporate responsibility questions, please contact us at Donate@siliconvalleycf.org