Giving Thoughts

Aug
14
2014

China’s Entrepreneurs Only Now Thinking About Wealth Distribution

By Anke Schrader, Researcher, The Conference Board China Center

In a recent interview with CNNMoney (read the full article here), I discussed with journalist Sophia Yan the difficulties that would-be donors in China have to address before the philanthropy sector here can really start growing. Other philanthropy-focused reports, most notably Joan Spero’s Charity and Philanthropy in Brazil, Russia, India and China, have highlighted the emerging wealth in developing markets such as China, and the accompanying sophistication of the donor class and social sector. But there is still a long way to go.

What does the data tell us?

Based on publicly available data, philanthropy is still in its infancy in China. In 2012, charitable giving in China totaled roughly $13 billion, compared to $316 billion in the U.S., so it’s growing from a very small base. Put differently: U.S. per capita GDP is roughly five times that of China’s per capita GDP (measured in purchasing power parity), but per capita giving in the U.S. is over 100 times that of China.

True, we have seen surges in giving during times of natural disasters such as droughts, floods, and earthquakes (especially in 2008, 2010, and 2013), but otherwise the growth of philanthropic giving has pretty much stagnated over the past years. The majority of giving in China still comes from the corporate sector (around 60 percent in 2012). This is in stark contrast to the U.S., where the majority of philanthropic giving comes from individual donors.

Why are giving levels, especially individual giving, so low?

Until the past decade or so, China has not had the private wealth to support a robust nonprofit sector. As I say in the CNNMoney article, entrepreneurs are just starting to shift their thinking from what I would say is a pure consideration of wealth accumulation to wealth distribution. According to Dien Yuen, managing director of Kordant Philanthropy Advisors, who also featured in the article, the disparity in favor of corporations is also “partly because there aren’t strong tax incentives [for individuals] to give to charity.”

Another, maybe more significant, reason for the humble levels of private philanthropic giving is the political context of civil society engagement in China, which is vastly different from the West. The nonprofit sector in China is governed by its own unique set of rules, largely born out of China’s autocratic, “socialist market” political system. This manifests in hugely different structures, practices and regulatory norms compared to the West.

Most nonprofits in China are run by or affiliated with the government; in fact, many Chinese consider nonprofits to be an extension of the state. Generally, the government is reluctant to relinquish control of the sector, resulting in a system that not only hampers the development of independent grassroots organizations, but also favors the creation of large, often inefficient, organizations whose structures and dealings are largely nontransparent. It also underscores the public’s view that providing for people’s wellbeing is first and foremost the responsibility of the government.

I believe, however, that the government is increasingly realizing that nonprofit organizations can be valuable partners in shouldering some of the enormous burden of providing social services to citizens. And in some instances we have seen the authorities, especially at the local level, easing regulatory requirements and allowing increased civil society engagement.

In these situations, the government tends to be more comfortable supporting nonprofit organizations that focus on its own public welfare objectives (e.g., satisfying material needs such as housing, education, transportation, or social security) than those that focus on immaterial needs (e.g., values, rights, morality, or codetermination). This is likely because the latter organizations can be more easily perceived as a challenge to the legitimacy of the government.

What role do philanthropists play?

In 2004, the government passed regulations that specified the right of private citizens and corporations to set up foundations, resulting in an increase in the number of foundations from 285 in 2011 to over 400 in 2013, many established by wealthy Chinese entrepreneurs. However, it would be premature to speak of a widespread culture of giving among the elite in China, much less the middle class. Many of China’s super-rich, especially those who have benefitted from preferential access to government resources to grow their fortunes, prefer to hide from public scrutiny.

It is also difficult to accurately measure the extent of contributions from Chinese philanthropists, but several rankings that aim to shed light on it are published online. These include rankings from:

  • The China Charity Donation Information Center;
  • The China Philanthropy Research Institute of Beijing Normal University;
  • China Philanthropy Times Magazine;
  • Forbes China; and
  • Hurun Report.

None of these lists, however, distinguishes between donations from personal wealth, or the entrepreneur’s corporate funds. Such a lack of systematic data makes it very difficult to identify robust giving trends among philanthropists in China, despite the increased media attention on the subject.

Helping corporations be more effective donors

Corporations clearly have a large role to play in encouraging a healthy philanthropic sector in China. The Conference Board is helping companies navigate these waters through our research and peer networking groups. For example, in May, representatives from member companies of our Global Social Investing Council held their first meeting in China. They spent a few days together learning from each other, local nonprofits and civil society experts about how to become more effective donors in China.

Meetings like this will no doubt become more frequent and more popular as the philanthropic and nonprofit sectors continue to grow. Over the coming months, we will also be working on research papers that further explore the nature of philanthropy in China. Watch this space.

About the author:

Anke Schrader

Anke Schrader
Researcher
The Conference Board China Center

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.

 

 



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