Chris Russell (Additional reporting by Milo Zhang) Authors

The State of Philanthropy in China

May 18, 2015


Philanthropy in China doesn’t exactly have a good track record. What are the chances that the country will turn it around?

On 28th April 2014 the People’s Daily, China’s top official newspaper, played host to a guest editorial by Bill Gates, one of the world’s leading philanthropists through the Bill and Melinda Gates Foundation.

Gates urged his fellow elites to give more of their wealth to charitable causes. “Only when we help poor people break away from destitution and illness can we achieve sustainable development,” he wrote. And this was just one of his interventions in the Middle Kingdom.

Yet just days before, Jack Ma and his Alibaba co-founder Joe Tsai announced plans to establish a charitable foundation focused on pollution, the environment and health, and funded by 2% of Alibaba’s equity, which with the company’s astonishing IPO, would put the charity’s funds in the billions of dollars.

Both Ma and Gates, who along with some of China’s leading givers met for dinner in Beijing in June 2014 to discuss philanthropy, stand at the heart of the debate around China.

Ma represents what those at the top are capable of while Gates serves as a frequent reminder of China’s poor reputation internationally when it comes to charitable giving.

Miserly Millionaires

According to the Boston Consulting Group, the Hurun Report and a report jointly published by UBS and the Singaporean research firm Wealth-X, China is home to the second-highest number of billionaires, behind only the US.

Despite that, its ranking for charitable giving is much poorer. The Charities Aid Foundation’s 2014 World Giving Index found China languishing at 128th—the US and Myanmar topped the list. Nonetheless that was a slight improvement on its ranking the previous year of 133rd, although the country’s miserliness is brought into sharp relief by Hong Kong’s position at 17 that same year, and Taiwan’s at 47 in 2014.

Compounding China’s status as an ungenerous country are the actions of the country’s elite, of which there are now so many. In 2013, China’s top 100 philanthropists donated $898 million, according to the Hurun Report. In the same year, the US’ most generous givers racked up $7.7 billion in donations, according to the Chronicle of Philanthropy, while Forbes research showed that Mark Zuckerberg and his wife Priscilla Chan managed to dwarf the contributions of China’s elite through $991 million-worth of gifts.

The following year, China’s record had improved significantly, totaling $3.3 billion, although here the numbers are skewed by the outsized contributions of Ma and Tsai’s charitable foundation (the Alibaba chairman topped the Hurun Report’s 2014 philanthropy list by some distance).

Beyond the numbers, the reputation of China’s elite as being tightfisted when it comes to philanthropy was solidified in 2010 after media reports that many had turned down invitations to a dinner in Beijing hosted by Gates and Warren Buffet that was intended to raise awareness about philanthropy. Gates later said that two-thirds of invitees attended the event.

Rupert Hoogewerf, founder of the Hurun Report, says that for the wealthy, charity is “low down on the priorities”. “They feel that… the best way they can give back to society is to grow a strong, healthy business.”

One of the areas in which Chinese people can’t be accused of shirking their responsibilities is disaster relief. Earthquakes in the southwest of China, notably in 2008 in Sichuan and 2014 in Yunnan, and particularly the former, have led to huge outpourings of donations. The China Youth Daily reported that by the end of April 2009, RMB 76.7 billion (then $11.2 billion) had been donated to the Sichuan earthquake relief efforts. In the case of the Yunnan earthquake, the Red Cross Society of China had received a total RMB 72.5 million ($11.7 million) five days after the earthquake.

Whither generosity? China ranks 128th in the World Giving Index

These disasters lead to headline-grabbing spikes in donations, but by their nature are episodic. According to Scott Kennedy, Deputy Director of the Freeman Chair in China Studies at the Center for Strategic and International Studies, “philanthropy is dominated [by] two or three areas”—by far the biggest recipient is education, with the environment and healthcare the next two largest.”

With Jack Ma’s recent pronouncements, the spotlight is being shone on these areas to an even greater extent, and more is being done to encourage charitable giving at the top level, and in June 2014 Gates agreed to help Beijing Normal University launch a philanthropic education program, the aim of which is to raise RMB 100 million ($16.1 million) each year. But problems remain.

Trust and Transparency

One of the principal reasons for the lack of charitable giving in China is the low esteem in which charities are held. The image of the Red Cross Society of China was severely damaged in 2011 after a woman named Guo Meimei, who claimed to be a manager at the charity, repeatedly posted pictures of her luxurious lifestyle to social media, leading many to question whether funds were being misused. The Red Cross denied the connection, and later so did Guo, but the damage was done. In some cases, the public’s lack of trust might be well placed: a 2013 report on transparency at Chinese charities by the state-affiliated China Charity and Donation Center said that less than a third of registered charities in the country met transparency and disclosure standards.

“I think charity is a good thing, but I don’t really trust the charity groups,” says Yang Yalong, a 21-year-old college student. Liu Ping, a 50-year-old customs official, agrees: “I don’t believe charity groups at all. I mean, I will donate my money but I will definitely question them. The problem, from my view, is the system of charity in China; they are facing some serious trust issues.”

Related to these trust issues is the fact it can be hard to run in a way that assures people donations will be going where they are meant to be, or to even establish a charity in the first place. By law, charities are required to have significant start-up funds, and in practice many aren’t exempt from tax. “There are no clear rules about how funds are used, their taxability, about conflict of interest… that vacuum of regulation is also now hampering things,” says Kennedy.

“As long as we promote a better system of laws and regulations, [and] we have a better standard for running NPOs [non-profit organizations], I believe one day NPOs can have a more transparent running mechanism, [and] people will have stronger confidence in NPOs,” says Megan Li, Operations Director of the environmental charity Roots and Shoots Shanghai.

China is currently drafting a new charity law, says Kennedy, and has gone through several readings and revisions, and depending on its final content could have a real beneficial impact on the charity sector. “If it were to be issued… that would be a huge positive step forward.”

Underpinning these regulatory difficulties is the fact that, relatively speaking, China’s NPO sector is still in its infancy. Previously, NPOs were firmly a part of the state due to central planning and a lack of private entities, and even today the state maintains a large role in society. “Philanthropy essentially ceased to exist in the Mao era, [at least] in the way we think about philanthropy,” says Kennedy. “You have a very strong, powerful state that dominates the public sphere and itself has been responsible for addressing social needs.” As a result, that lack of a civil society means there is not as much space for charities as there is in other countries.

The system also doesn’t help incentivize philanthropy, says Hoogewerf. He points to the absence of US-style inheritance taxes, from which gifts to charity are usually exempt, as a further reason why the wealthy don’t donate as much as they could.

The desire of many of China’s wealthy to keep a low profile, so as not to draw attention to their riches and the scrutiny it would inevitably bring, also works against significant philanthropic gestures. And when big gestures are made, they are often dismissed as publicity stunts rather than true philanthropy, as has been the case with Chen Guangbiao, an entrepreneur who made his money in the recycling business. “I don’t know much about wealthy people’s charity acts, but I do believe they want to promote themselves more than they really want to help people,” says Liu, citing the example of Chen.

Jack Ma and Joe Tsai’s recent charitable initiatives might well set a welcome example then, but at the moment there is no one else with quite the same visibility. “Somebody has to do something,” said Ma in an interview with The Wall Street Journal. “Our job is to wake people up.”

However, until the system of regulation improves and trust returns, likely through a worthwhile charity law, and charities are given greater space to grow, their actions are unlikely to represent a breakthrough in the creation of a widespread culture of charity.

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