Springtime in China (1/2015)

This article is an excerpt of the article “Tender buds of philanthropy” in the magazine DIE STIFTUNG (6/2014).

by Christian Gahrmann and Li Yiqiong

It’s springtime in China. Not with regard to the weather conditions, of course. But the atmosphere of re-building the country has finally reached the nonprofit sector. Only a few years ago neither NGOs nor a donor market existed in China. Now we can observe the first – though very rare and tiny – buds of a carefully unfolding nonprofit sector. And foundations are in the front of this development.

The emergence of the first foundations is one of the most important developments of the Chinese nonprofit sector in recent years. Statistics show that Chinese foundations could accumulate in 2013 capital assets of 93 billion Yuan (11.3 billion EUR) and realizing annual revenues of 35 billion Yuan (4.3 billion EUR). A big share of the foundation’s funds is spent for educational projects (three out of ten funded projects come from this area). But Chinese foundations also like to promote health as well as children’s and women’s projects.

Foundations in China can be differentiated into public foundations, usually founded by the state, and private foundations, that were set up by individuals or companies. Public foundations are legitimized to raise funds. Private foundations this is only permitted within narrow limits and after a complicated application procedure. Hence, some private foundations are cooperating with public foundations and use them as a fundraising channel.

In theory, foreign foundations are allowed to open an office in China. So far, however, they have made little use of it – too high are the administrative barriers and too tedious is the registration process. In addition, foreign foundations – such as all foreign nonprofits – are not allowed in China to collect donations. One way to be active in China anyway, is the creation of specific funds within Chinese foundations that may only be used for specific, previously agreed upon philanthropic purposes.

The starting position for foundations in China is still difficult. According to a study by the China Research Institute of Philanthropy over 30 million new jobs in the nonprofit sector are prevented by the absence of the necessary regulatory framework for this sector. 300 billion Yuan (36.6 billion EUR) of potential donations remain unrealized. Often, the foundations themselves are not yet working professionally enough. He Daofeng, president of the China Foundation for Poverty Alleviation, recently presented admitted in an interview that foundations in China still have a rather poor image. Many do not reach their program goals, work sluggishly and hierarchically, and are far from offering total transparency.

Positive effects are attained by the launch of new private foundations by successful entrepreneurs and business people. The government is beginning to discover the potential of private philanthropy for the fight against poverty and social inequality. Against the background of growing social inequality, China is more dependent than ever on the development of a strong nonprofit sector – and foundations that make a difference.