Giving Thoughts

The Conference Board China Center “Quick Take”: China’s New Charity Law

By Anke Schrader, Senior Researcher, and Minji Xie, Research Analyst, The Conference Board China Center

China’s first comprehensive charity law was passed last month by the National People’s Congress. It intends to provide a comprehensive set of rules to govern and promote China’s rapidly evolving charitable sector. To date, the sector has been governed by a set of conflicting and vague regulations. The Charity Law will go into effect on September 1, 2016, and will supersede all previous laws regulating the charitable sector.

So far, the response of the nonprofit community to the law has been mixed. Supporters see it as an important step in the right direction that will make it easier for organizations to register and raise funds, and for both natural and legal persons to give. They point out that the new law will:

• Ease and unify the registration process for nonprofits;
• Promote public reporting and disclosure obligations of both local governments and nonprofits;
• Ease approval for public and non-public fundraising;
• Clarify and improve taxation exemption and deduction measures; and
• Make it easier to establish charitable trusts.

Conversely, critics argue that the law’s main aim is to co-opt civil society to support the Government’s public welfare challenges, specifically funding the impoverished, but that it intentionally contains broader civil society engagement and development. “Charitable Activities,” as defined by the new law, clearly identifies improving material needs as the main objective (reducing poverty, improving education, reducing environmental pollution). The Law is altogether disregarding promoting values, rights, morality, and codetermination. As such, corporate giving programs that aim to support such issues will undoubtedly face the same challenges as in the past.

Potential impacts of the law on MNC business

There are a number of areas which, if the new law is implemented correctly, should yield an improved operating environment for MNCs working with local nonprofits on community engagement and other CSR programs:

• A broader yet more simplified scope of charitable organizations and easier registration procedures should lead to a larger pool of qualified partner and recipient organizations.
• Clearer rules on tax deductions and donation receipts should make it easier for companies to give—if the rules are consistently implemented by local tax authorities.
• Stronger reporting obligations for local governments and nonprofits should facilitate more transparency and better financial management practices of nonprofits.

Ultimately, the potential positive outcomes outlined above will largely depend on local government implementation and enforcement. Precedent says that quick, professional and consistent implementation and enforcement should not be expected.

Probably the most contested aspect of the new law is whether more government supervision is good or bad news for China’s civil society sector. The new law stipulates significant information disclosure obligations for both local governments and nonprofit organizations. In theory, this should help companies conduct better screenings and due diligence on suitable partner and recipient organizations. In the long run, stricter rules on financial management and disclosure should also serve to make it easier to monitor ongoing projects, and request status updates and information on outcomes and impacts of charitable investments. On the flip side, the law makes it very clear that the government’s role in steering domestic charitable activities will remain unchallenged, and the language of the law suggests that this steering will likely become more heavy-handed.(Note: An unofficial translation, provided by the China Development Brief, can be found here.)

Key Takeaways

• Last month, China’s first comprehensive charity law was passed by the National People’s Congress
• Critics argue that the law aims to co-opt civil society to support the government’s public welfare interests, and that it constrains broader civil engagement and thus will restrict China’s civil society development. On the other hand, the law will make it easier for nonprofits to register and raise funds, and for both natural and legal persons to give, and thus improve the charitable giving environment.
• If implemented well—a big IF—the new law should yield an improved operating environment for MNCs working with local nonprofits on community engagement and other CSR programs.
• Specifically for MNCs, the law portends to provide a larger pool of qualified partner and recipient organizations, clearer donation and tax procedures, and more transparency and better financial management practices of nonprofits.

Members of The Conference Board China Center can download a PDF-version of this “Quick Take” here.

About the authors:

Anke Schrader leads China Center research on Corporate Citizenship, Sustainability and Human Capital. Her current research interests include corporate sustainability practices, measurement, and reporting, corporate citizenship and philanthropy engagement, civil society development, demographic changes in China and their implications for business and economic growth, China labor force evolution and development, and the evolving skill sets of China’s workforce.

Minji Xie is a research analyst at The Conference Board China Center for Economics and Business, based in Beijing. Her research focuses on corporate citizenship and philanthropy engagement and civil society development, as well as corporate sustainability practices in China. Before joining The Conference Board, she worked for the Global Institute for Tomorrow, based in Hong Kong. Xie graduated from London School of Economics and Political Science with a master’s degree in NGOs and development.