By CARA ANNA (AP) , March 12, 2010

BEIJING — China has surprised thousands of aid groups by stepping in to regulate overseas donations for the first time, complicating efforts to get money from supporters in the United States and elsewhere. Some groups warned that losing the support could force many to shut down.

China’s leaders have only recently realized that outside help is needed on deep social welfare problems, but they worry the work of independent activist groups could turn political. Groups must find a government partner to register as a nonprofit. Many that want to stay independent have set up as a tax-paying business instead.

“I think the new rules will regulate us to death,” said AIDS activist Wan Yanhai, who runs a Beijing-based aid group.

As of this month, China-based aid groups — but not those connected with the government — must show proof that overseas nonprofit donor groups are registered in their home countries. The groups, also known as nongovernmental organizations or NGOs, must strictly follow detailed agreements with foreign donors and not use the money in other ways.

Religious groups also need approval from the State Religious Affairs Bureau for any donation that exceeds 1 million yuan ($146,000).

“I think it’s inevitable that they were going to start tightening the noose on NGOs,” said Meg Davis, executive director of New York-based Asia Catalyst, which works with a number of grassroots groups in China on AIDS-related projects. “There’s a sense at the top that they’re suspicious of NGO powers.”

She spoke by phone from the southern province of Yunnan, where her group works with 90 women with HIV. The new rules are complicating efforts to wire the group money from overseas, she said. Asia Catalyst has been told a representative must be present on a specific day this month to get key paperwork notarized — a day when the group says none of its people will be in China.

“Stopping work is not an option. These women are working with a population that is sick and dying,” Davis said. “The only thing we can attempt to do is comply as best as we can.”

The rules were issued by the State Administration of Foreign Exchange, which normally has little to do with NGOs. They were posted on the administration’s Web site and came into effect March 1.

Phones at the administration rang unanswered Friday.

China never really regulated foreign donations until now, said Deng Guosheng, a lecturer with the NGO Research Center at Tsinghua University in Beijing. “I think most will not face a problem, but for those sensitive NGOs, it will become hard for them to get foreign donations.”

China has struggled to keep up with the growth of aid groups in recent years. The Ministry of Civil Affairs says about 400,000 groups are registered and many more are not. A report published by the Chinese Academy of Social Sciences has estimated the total number could be 3 million.

“No government official knows how to regulate them,” and they don’t know what most aid groups are doing, said Wang Liwei, the CEO of China Charity Media Group, which publishes Charitarian magazine.

His fellow editor, British lawyer Clare Pearson, said other countries long ago made similar moves to watch where money for aid groups comes from.

“Look at this way,” she said. “If I’m in the UK and a bunch of Chinese people come over, build a school and set up a curriculum to start teaching children, I’d be asking a lot of questions.”

But some groups worry that China is checking more for possible political challenges.

Last month, China told schools to sever all ties with the international relief agency Oxfam and bar its campus recruitment efforts, accusing the group’s Hong Kong branch of having a hidden political agenda. Oxfam has operated in mainland China for 20 years and denied that its activities were political.

Associated Press researcher Xi Yue contributed to this report.

Copyright © 2010 The Associated Press. All rights reserved.

Also see post “On the Impacts of China’s SAFE Regulation Regarding Overseas Donations“.