Many look to introducing some innovative funding strategies having recently immerged in the West  into the nonprofit sector in China. These models include micro-finance, social investment, or the earned income model.  Are these models applicable to China’s situation?  What factors are needed for the new models to work in the emerging social market of China?  What can be the way out for the nonprofits in China to get sustainable source of funding?  We will look at these questions at the lunch dialogue with Professor Michael Chu of Harvard Business School, and Grace Chiang, Founder and Managing Director of Social Venture Groups in Shanghai and Hong Kong on Dec 2nd at the Hauser Center.

Grace will speak from her personal experience of starting up the Social Venture Group, and what she and her team has learned in trying to set up a model of ”innovative philanthropy in China”, about the readiness of the field in China for innovative funding solutions, about current situation of micro-finance in China as shown by some of their clients, and about the effort to sustain their own organization through the earned income model.

Professor Chu will first brief the audience the latest development of innovative funding models for social purpose initiatives, and then comment on Grace and the Social Venture Group’s case, throwing insights on why things are working or not working well in China, and provide advices on potential way out in China for application of those models.

Event Details:

Social Enterprises & Philanthropic Investment in China:

How to Break New Ground in Emerging Markets

A  Lunch Dialogue with

Michael Chu
Senior Lecturer,  Harvard Business School Social Enterprise Initiative; Managing Director, IGNIA Fund in Mexico dedicated to investing in commercial enterprises serving low-income populations in developing countries

Grace Chiang
Co-Founder and Managing Director, Social Venture Group in Shanghai and Hong Kong

Moderator: Xing Hu

Domain Manager, Nonprofits in China Domain of Practice, Hauser Center of Nonprofit Organizations at Harvard

December 2, 2009
1:30–3:00pm

Lunch Provided

Nye B & C, Taubman Building 5^th Floor , Harvard Knnedy School

Co-organized with Harvard Initiative for Nonprofits and Social Entrepreneurship in China [HINSEC], and HKS China Caucus

中文座谈会A Panel Discussion in Chinese

Monday, November 16, 2009

5:00 pm – 6:30 pm

Location: NYE B&C, Taubman Building 5^th Floor, HKS

Huang Haoming 黄浩明

Vice-Chair and Executive Director, China Association for NGO Cooperation

中国国际民间组织合作促进会

Dr. Wang Ming 王名

Professor, Director of NGO Research Center, Tsinghua University

清华大学NGO研究中心

Liu Zhenguo 刘振国

Director of General Office, Bureau of Administration of NGOs Ministry of Civil Affairs中国民政部民间组织管理局

 Dr. Yin Lihai 殷丽海

Deputy Director, Ministry of Finance Tax Policy Department

中国财政部税政司

Commentator: Dr. Chu Songyan褚松燕

Professor, China National School of Administration;国家行政学院

Asia Programs Fellow, Ash Institute of Harvard Kennedy School

Moderator: Xing Hu
Domain Manager, Nonprofits in China, Hauser Center for Nonprofit Organizations

Speaker Bios

Chris Stone and the Chinese private foundation delegation

On 28 October, the Nonprofits in China Domain invited twelve top Chinese private foundations to a seminar on non-profit governance at the Hauser Center. The seminar was moderated by Professor Christopher Stone, director of the Center, while representatives from the Narada Foundation, China Foundation for Poverty Alleviation, Mercy Crops China, Beijing Western Sunshine Rural Development Foundation, Sun Yafang Foundation, Vantone Foundation, Beijing Ren Ai Charity Foundation, China Social Entrepreneur Foundation, Huaxia Center for Economic and Social Development Research, XinPing Foundation, and Nonprofit Incubator (NPI) served as discussants. Mercy Crops China organized this delegation in a week long program to visit relevant institutes in the United States; Harvard was the delegation’s first stop (details of the delegation’s representatives and their respective organizations are available here).

Professor Stone opened with remarks that the role of governance can be distilled into the responsibility of non-profit organizations. He stressed that an organization, such as private foundations operating in China, ought to maintain its integrity in three areas: finance, operations, and purpose. He challenged representatives from these twelve private foundations to assess the effectiveness of governance in their respective organizations and discuss in general how governance affects non-profit organizations in China.

Xu Yongguang, Vice Chairman and Secretary General of the Narada Foundation, provided an overview of governance in Chinese nonprofit organizations. Xu stated that each NGO should be held responsible to the people, to the government, and to their sponsors, regardless of their country of operations; overall the board of directors should be the ultimate decision maker for the NGO. However, such is not always the case in China. Many Chinese NGOs face structural problems to give the board its proper due: in government-operated non-governmental organizations (GONGOs) the board only ranks third after the government and management in its decision making ability; whereas in grassroots NGOs the founder often find his decisions unchallenged regardless of the board structure. For private foundations there are no external pressures to set its structure: however, donors, often entrepreneurs of strong leadership, often interfered with the decision of the board. The Narada Foundation resolved this problem by establishing a diverse board, composed of both donors and experts. The Foundation created a meticulous but effective by-law to govern its meeting procedures; last summer, the Foundation adopted a declaration of self-governance to reaffirm its autonomy of the board.

Other organizations, however, have experienced difficulties in setting a structure to effectively govern the board. The board and the management team often conflict with one another. According to Yang Dongping, founder and chairman of Western Sunshine Rural Development Foundation, his organization lacks the diversity of board necessary to make the board effective. Composed of only experts, the board is in need of entrepreneurs of business background. For many small private foundations like the Western Sunshine Rural Development Foundation, management team is the actual decision maker. On the other hand, an overactive board with diverse opinions can be equally ineffective. Yang Ping, executive officer of Sun Yafeng Foundation, shared his experience from 2004 to 2007 as the secretary-general of entrepreneur-founded Alxa SEE Ecological Association. The board, largely composed of successful businessmen with rich resources, is powerful while the secretary-general lacks real decision making abilities. To sponsor any grant over RMB 100,000, the secretary-general must submit to the board for approval. Yang noted that a strong board against a weak management has both pros and cons. It creates more incentives for entrepreneurs to participate, but at the same time leaves the experts of the organization no role in decision making. In worst case scenarios, the secretariat may retaliate through manipulation of information to gain power for decision making. Overall, Yang urged for more supervision. Chen Yimei, China Country Director of Mercy Crops, agreed with this view and urged state legislature to impose rules in standardizing non-profit governance.

The Hauser Center accepts gift from the Chinese delegation

Answering Stone’s question on whether members of the board should be compensated, both Xu Xiaodong of Vantone Foundation and Gan Dongning of China Social Entrepreneur Foundation agree that they shouldn’t. Gan further called board member to serve as examples for other members of the organization, suggesting that many staff of some Chinese non-profit organizations are given little or no compensation. Stone further commented that boards, like people, develop their own identity and culture.

Lu Zhao, founder and director of Nonprofit Incubator (NPI), explored the question of non-profits governance in China from a different perspective. Speaking from his experiences in helping numerous grassroots organizations, Lu noted that many of these organization’s problem lie with their founders—many of whom are eccentric and stubborn in character. These creators of grassroots organizations are unwilling to give up their own ideas and seldom pull themselves out. They would only seek help from others and seek diversity of the board when realizing the limit of their own resources; even then few could check on these founders’ decisions. Thus, the lifespan of these organizations are likely to be bound by the limits of the founder’s personal ability and resource. Lu highly esteemed founders of organizations willing to quit their organization, if not disbanding the organizations all together once the organizations’ social purpose is accomplished or effectively absorbed by the government. But this ideal found in many well established civil societies is perhaps still a bit distant from China.

(Article contributed by Hong Liu of Harvard University)

Since then, the number of registered and non-registered NPOs (nonprofit organizations) has increased in China in the recent decade, and along with this growth, the philanthropic and policy environment has gradually changed. Such changes were the focus of the afternoon panel discussion at the Hauser Center for Nonprofit Organizations on September 30, 2009, moderated by Professor David Brown, Senior Fellow at the Hauser Center, which brought together main figures from different sectors of the Chinese philanthropic world: Zhuang, Professor Hanlong Lu from the Institute of Sociology at the Shanghai Academy of Social Sciences, an expert on social policy in China, and Zhaomin Jin, Executive Director of the NDC and previous Deputy Secretary General at Shanghai Charity Foundation, a government owned foundation.

Zhuang began the panel discussion with a brief introduction to the development and expansion of her NPO Development Center in Shanghai, emphasizing the importance of such NPO support organizations to help enhance the capacity and legitimacy of grassroots NPOs—an “NPO for NPOs” of sorts. Such capacity and legitimacy may be difficult for grassroots NPOs that often lack professional resources to achieve on their own, especially given the rising expectations for Chinese NPOs by the government, donors and beneficiaries.

According to Zhuang, the key points to cultivating NPO success are to provide a supportive policy environment, good promotion and advocacy on the part of the media, and access to services such as training, coaching and networking. NDC’s influence and strength grew rapidly by strategically levering such needs and creating its niche as one of the few capacity building organizations. In addition to coaching NPOs in important skills such as grant writing and strategic planning, NDC has also helped bring together and forge partnerships between NPOs and the local government. NDC has expanded its services to NPOs throughout China and has created constituents in different areas such as health, disability and the environment. 

Over the past five years, NDC has trained over 4,000 executives and managers in the nonprofit sector in China, and has provided consulting to over 100 NPOs and corporations.

However, like most other nonprofits in China, NDC still faces major challenges of sustaining funding and recruiting highly qualified professionals.

Professor Lu followed up Zhuang’s introduction to her own NPO with a broader discussion of the policy and attitude changes towards NPOs and philanthropy in China throughout the last few decades. 1989 was the baseline year for recognition of NPOs with the establishment of the “Management Regulations of Social Associations,” one of the first documents outlining the Chinese government’s policy towards NPOs. Another key year was 2002, when China officially entered the World Tread Organization. Finally, he pointed to the 2008 earthquake in Sichuan that saw thousands of volunteers and donors gathering to help the victims, and the 2008 Beijing Olympic Games, which also inspired thousands of volunteers to action, as the most prominent signs of the emerging importance of philanthropy in China.

Lu divided Chinese social organizations into three categories: social organizations (such as the Chinese Handicapped Organization), civic non-profit enterprises (such as the NDC), and foundations. Between 1999 and 2008, the total number of social organizations in China increased by an astounding 290%, from 142,665 to 413,660.

Despite this increasing presence of social organizations, however, the official registration process continues to be restrictive. Registration requires the approval (or sponsorship) of a government agency at the county level or above. To prevent unnecessary competition, there can only be one of each type of organization in a given district.

Recent changes see, however, some regional government directing more resources towards NPOs; with greater provision of funding and even free NPO office space, the government is starting to include the development of the nonprofit sector into its long-term strategic plan.

Zhaomin Jin concluded the presentation portion with a brief overview of the current status of foundations in China, coming from her own previous experience of working at the Shanghai Charity Foundation. She noted that philanthropic donations in China are very unevenly distributed:  the top six foundations out of close to 1,600 foundations in China had collected 700 million dollars in donations out of the 1,200 million dollars collected by foundations in total last year. Furthermore, about 90% of all donations were received by “GONGOs”—governmental-operated NGOs—such as the Olympic Games Committee and the China Charity Federation.

According to Jin, most foundations in China run their own relief programs (operational foundations, rather than distributing grants to other nonprofits); for example, the Shanghai Charity Foundation operates nineteen branches throughout China and mostly allocates its funds to those programs. Even if funding is provided to other relief programs, very limited support is given to NPO support organizations like the NDC. However, recently, more and more foundations are moving towards becoming grant-making foundations, with Red Cross and Shanghai Charity Foundation giving out 8 million dollars for grassroots NPO programs last year.

When asked what they think will happen in the next ten years, all three speakers were hopeful about the increasing dialogue between the government and NPO sector and the gradual transition to a more enabling legal environment. Considering the immense rise of awareness of NPOs by the general public, especially following the 2008 Sichuan earthquake public relief efforts, the role of NPOs in Chinese society seems poised to increase.

Zhuang’s analogy of the philanthropic environment in China as a stage perfectly summarizes this optimism: “Currently, the government is the main actor on the stage; nonprofits are the ‘side figures’ running behind the stage. They’re there, but it’s hard to know what they’re doing or how they’re doing it. Eventually, the threshold to get on the stage will be lower; NPOs can then join the government on the main stage for equal assessment by all.”

(Written by Yongtian Tina Tan of Harvard University)

This deal symbolizes the fruition of the Green Commuting Carbon Credit Action, a program jointly sponsored by the China Association for NGO Cooperation (CANGO) with some media like Beijing People’s Broadcast Corporation, People’s Daily Net and Sohu.net, in collaboration with the Environmental Defense Fund based in the U.S since 2008.

Money from this transaction would be wholly donated to the Green Commuting Fund operated under CANGO. The purpose of the fund would be to continue to organize relevant activities that advocate for and promote reduction of carbon emission in China.

As the 2010 World Expo in Shanghai approaches, negotiation is underway with Shanghai EPA to launch similar Green Commuting campaign, following the example of this trading of credit collected during 2008 Beijing Olympics.

The carbon offset is the use of market-based mechanism aiming at a reduction in greenhouse gas emissions. Under the framework of the famous Tokyo Protocol, there are mainly two markets for carbon offsets, the compliance market and the voluntary market. All required companies, governments, or other entities purchase carbon credits in order to comply with the quota of carbon dioxide they are limitedly assigned, while the much smaller voluntary market provides extra environment-concerned entities to buy credits to mitigate their carbon footprints incurred from transportation, heating, etc.

Though a “non-annex I country” without carbon-reduction obligation, China set up the Beijing Environment Exchange (CBEX) to make it possible for voluntary trading. CBEX is the country’s first professional environmental equity trade institution authorized by the Beijing Municipal Government in August 2008. Since its founding, CBEX has taken the lead in establishing the registration and trading system of voluntary carbon reduction.

According to the statistics of the World Bank, about $5.5 billion of carbon offsets were purchased in the compliance market worldwide in 2006, and several million of carbon offsets in the voluntary market.

As Obama highlighted “reducing emission of greenhouse gases and addressing climate exchange around the world” in the China-USA Strategic Economic Dialogue in Washington on July 27th, the market of carbon credits will promisingly surpass the petroleum oil market around 2015. Hopefully this deal will serve as a good tryout for the sprouting of legal and structural framework for environmental equity trade in China.

(Compiled by Yongmei Shen at Harvard, based on Chinese article at http://www.cleanair.net.cn/pages/FG/newsContent.jsp?id=345. Edited by Xing Hu at Hauser Center at Harvard.)

Self-Discipline Declaration of China Private Foundations

（July 3rd, 2009. Beijing）

Under the direction of China Social Organizations Management Bureau of the Ministry of Civil Affairs,  China Social Organization Promoting Association, Narada Foundation, China Social Entrepreneur Foundation, Peking University Education Foundation, Sun Yefang Foundation, Beijing Vantone Foundation, Beijing Western Sunshine Rural Development Foundation co-organized the first Forum of China Private  Foundation on September 1st, 2008.

July 2-3,2009, with the participation of more than 110 domestic foundations，the 2009 annual conference of ” China Private Foundation Forum ” was held in Beijing. This meeting with “The Growing China Private Foundation” as its theme has discussed the issues on “Ways to Giving”, “Ways to Management” and “Ways to Conduct Self-discipline”, which fully demonstrated the great development China private foundation has achieved ever since “Foundation Management Ordinance” has been officially implemented on June 1st, 2004, especially after we involved in 5.12 earthquake relief work. In this annual meeting, we have shared work experience with each other, and also had a wide range of dialogue with government departments, academic institutions, and the media as well.

During the meeting, the forum organizing committee held a “China Private Foundation Leaders Roundtables”. The leaders of private foundation agreed that the conditions are favorable enough for us to do a good job of internal governance, professional management, and by means of its capital, we could contribute a lot in optimizing the ecological environment for social charity and then guide and promote the social charity to healthy, standardized and sustainable development.

To this end, forum organizing committee issued Self-discipline Declaration of China Private Foundation in accordance with “The Outline of The Eleventh Five-Year Plan for National Economic and Social Development of People’s Republic of China” and “Decisions of CPC Central Committee on major issues including building a harmonious socialist society ” ：

First, private foundation shall comply with the “Foundation Management Ordinance” and the provisions of relevant state laws, and consciously regulate the organization and activities of the Foundation, maintain the legitimate rights and interests of donors and beneficiaries, play an exemplary role in guiding and promoting the social forces to participate in public welfare.

Second, private foundation take serving the public interest as its mission and objectives, make strategic planning and conduct work in accordance with its missions and goals.

Third, the personal interests of private foundation council and execution team members should not be a potential conflict of the interest of foundation. When the personal interest of the foundation council members or other members is associated with the interest of foundation, they shall not participate in matters relating to the decision-making; foundation council, supervisors and their close relatives may not trade in the Foundation where they work with. Transactions and related business should be done in conformity with the best interests of the foundation.

Fourth, private foundation charter should prescribe that the foundation council is the decision-making bodies, and should explicitly stated the establishment of the Council , the appointment and removal of members, their responsibilities, and operational procedures. Members of the Council should ensure the normal and effective operation of foundation and the operation is in accordance with the quorum.

Foundation Council should have the power to decide the appointment and removal of the executive team members, and should make periodic assessment on the performance of team leaders to ensure that the strategic planning is conducted on the basis of the mission of the Foundation.

Private foundation council should audit foundation’s annual budget and final accounts and decide whether to pass them or not.

Fifth, financing of fund sources and ways of financing should be consistent with the private foundation’s missions and values. Relevant information and data provided by financing activities should be authentic and reliable. Private foundation will not raise funds publicly from non-specific objects. Financing should respect the legitimate interests of donors, including donor wishes, privacy and the right to know.

Private foundation should use funds in accordance with the wishes of the donor, special fund for special use. The use of contributions should be recorded, and foundation should regularly inform donors about that, and provide donation receipts to donors.

Sixth，the use of the funds in private foundation should be in line with the foundation’ missions and goals, foundation should carry out the work according to the annual budget adopted by the council.

Private foundation should implement the State Accounting System, carry out accounting job legally, establish a sound system of internal accounting controls and conduct internal audit in order to improve financial management within the organization.

The financial sector should provide a financial statement which can clearly reflected the financial information in every work.

Private foundation should accept the audit which is done by the independent audit institutions. The selection criteria of an audit institution should be formulated by the Council. No qualified opinion in audit reports should be involved in matters of principle.

Every year, private foundation should announce the annual financial accounting report, accept monitoring and questioning from the public.

Seventh, the project design and feasibility studies of private foundation should comply with the foundation’s missions and objectives, and should have a complete project program (or project proposal), which will point out the objective of the project, the audiences, plans, outputs and budgets. Private foundation should have open and complete procedures in funding a project.

Private foundation should have self-monitoring and evaluation on its projects. Project evaluation should be based on the views of beneficiary groups, and also reflect comments and suggestions of other stakeholders.

In accordance with the needs of the project，Private foundation could determine whether to invite external assessment, or third-party assessment. Project evaluation and monitoring process should be open, transparent and fair.

Eighth, Private foundation should establish standardized personnel and human resources management system, in order to attract, manage, nurture and inspire talents, so that they can provide high-quality and efficient services. Employment should be conducted in the principles that are open, equitable and without conflict of interest.

Private foundation should sign a standardized contract with their employees. At the same time, the Foundation should have an open, realistic assessment on staff performance and incentive mechanisms.

Foundation should carry out the recruitment and management of volunteers on the basis of mutual respect and mutual benefit, and should have the foundation’s missions and values accurately and clearly understood by volunteers. Foundation should let volunteers be well aware of their work, skill requirements, time investment, working environment (including hardware and software environment), as well as the possible risks involved, and clearly show that the voluntary nature of this work as well as the possible subsidies.

Ninth, Private foundation should establish a good partnership with other philanthropic organizations, especially with those who share common areas of concern with them.

Private foundation respect and uphold the reputation, intellectual property rights and trademark rights of peers. The logos, trademarks and achievements protected by IPR from other philanthropic organizations should not be used without permission.

Tenth, Private foundation should disclose authentic information of the foundation to the public in an appropriate way, which should include: mission, services; the council membership and their background; financial information, including complete audited annual financial report and financial information that is promised to be displayed to the public ; project information, in addition to the respect for the wishes of donors and the protection of intellectual property right, projects information (including project evaluation report) should be shown in an open and transparent way, and supervised by the public and the media.

Eleventh, Private foundation is willing to be supervised and managed by the Registration and Management Authorities and the Business Departments in charge of Supervision and Management, and accept the supervision, management and annual inspection.

Supplementary Provisions:

This declaration rests on the achievements of the “Self-discipline Guidelines of  China’s Non-profit Organizations” , co-developed by China Foundation For Poverty Alleviation, China Youth Development Foundation, Amity Foundation and China NPO Network.

(Translation at the courtesy of the Organizing Committee of China’s Private Foundation Forum. For original Chinese version, see http://www.chinadevelopmentbrief.org.cn/newsview.php?id=773)

At the Forum, leaders from China’s Private Foundations will gather for the first time, to review the achievement of China’s private foundations since China’s promulgation of Regulation of Foundations in 2004, share experiences, and have conversations with the governmental agencies, academia, and the media.

The agenda items of the forum include:

1. Keynote speeches
2. Unveiling 2008 Development Report of China’s Private Foundations
3. Publishing the China Private Foundation Self-Discipline Vow
4. An round table for leaders of private foundations
5. An exhibition of the philanthropic activities of China’s private foundations
6. An fair of philanthropic projects and grants

For more details see (in Chinese) http://www.cpff.org.cn/Default.html.

On May 1st, the Hauser Center Nonprofits in China Domain organized a panel discussion, China’s Think Tanks: Roles and Implications for Civil Society in China. The panel started with a presentation by James C. McGann, Director of Think Tanks and Civil Societies Program, Foreign Policy Research Institute Assistant Director, International Relations Program, University of Pennsylvania. Xufeng Zhu, Visiting Scholar, Harvard Yenching Institute, Associate professor from Nankai University of China followed with a response. And commentary was provided by Xijin Jia, Associate Professor at Tsinghua University of China, Visiting Scholar, Hauser Center for Nonprofit Organizations. Julian Chang, Executive Director, Asia Programs, Ash Institute at Harvard Kennedy School moderated the panel. Below are notes of the panel:

McGann’s presentation “Think Tanks in China’s Civil Society”

McGann began with a definition of civil society and think tanks, followed by a broad overview of the roles they play in society. Civil society refers to “entities that operate outside the state and market that are organized, non-governmental, non profit-distributing, self-governing, and voluntary”. In China these organizations “play a crucial role in providing social services and educating the public on key issues such as HIV/AIDS, education and rural development”. Think tanks are “public policy research, analysis, and engagement organizations that provide advice on domestic and foreign policy issues”.

Civil society is an “essential prerequisite for sustainable development”. “The participation of stakeholders leads to better policies and planning because potential problems are identified and stakeholder interests and concerns are incorporated into the decision making process”.

Think tanks have both civil society and policy functions. Their civil society functions include the “creation of an informed citizenry through public education about key issues”. Think tanks also serve as “a key indicator of civil society”. In addition, think tanks serve as a “bridge between the government and the public, and are often at the vanguard of democratization movements around the world”. The policy functions of think tanks include “promoting rationality and transparency in the policy making process, and assisting the government in the analysis of policy problems and formulation of public policy”.

The challenge that think tanks address is how to harvest knowledge, information, and energy that exist in public policy research organizations for public good. McCann quoted George McGovern’s idea, to “skim globally, reinvent locally” emphasizing the need to figure out how to scan effectively for the best policy ideas.

McGann then turned to think tanks in a global setting, particularly in China. Currently, there are approximately 5,465 think tanks in the world, 34% located in North America, 22% in Western Europe, and 12% in Asia. Chinese think tanks make up 12% of the total in Asia, Hong Kong 4.4%, India 18.7%, and Taiwan 5.5%.

McGann prefaced his discussion of Chinese think tanks with several caveats: he is not a China expert; his research focused on the 136 think tanks he was able to identify; lists of think tanks in China are non-existent and access to these institutions and their research is limited; while he was able to conduct interviews with various think tanks, resources did not permit him to conduct extensive field research.

China, with 73 think tanks has the bulk of think tanks in the region (53%), followed by Taiwan with 36 (26%) and Hong Kong with 29 (21%). The similarities among the think tanks include shared cultural heritage, policy priority given to economic growth and development, and a Confucian tradition of deference and respect for authority. In addition, policy analysis and decision making processes are not conducive to civil society input as these processes are concentrated in bureaucracy and political parties. Finally, McGann notes that the need for think tanks and policy advice exceeds supply. The differences between the three were in the divergent modern political and economic culture. Comparative case studies       highlight the unique set of challenges each case faces and perhaps lessons on effective catalysts for change.

McGann then narrowed his discussion to think tanks in China. In an overview from a historical perspective, he divided the history of think tanks in China into three periods: 1956-1966 Soviet-style ideological think tanks that served to justify government policy and were hierarchically structured and housed in government ministries. 1976-1989 Emergence of “semi-official think tanks” (Governmental) that focused on economic issues, had greater autonomy and influence on policy but still existed within the formal structure of governemtn. 1989-present Tentative growth of scholarly, “civilian think tanks” (quasi governmental), which is marked by the gradual reemergence of think tanks after Tiananmen, increase in civilian think tanks and university-affiliated research organizations, and are still controlled by the Chinese Communist Party and government despite being located outside of government.

There are two types of think tanks that have emerged in China. First, semi official (governmental and quasi-governmental) and civilian (businesses, NGOs, and universities). Independent think tanks are virtually non-existent, and current government policies are designed to limit the number, role, and influence of think tanks.

With regard to think tanks in China, McGann highlighted some key findings. There is an obvious trend of gradualism. The impact of the economic revolution on think tank proliferation is slow, and while there is openness there is no independence and intellectual freedom is constrained. The government is interested in policy research, but not in independent think tanks. Another key finding is that think tanks are government or university affiliated and funded almost exclusively by the government (65 out of 72 think tanks). Areas of research focus on economic and international issues, while issues like democracy and human rights as are sensitive social and political issues. The target audience is policy-makers and political elites, not the public or media.

The limitations that think tanks face in China include: government control and monitoring (what McGann refers to as NGO pushback), dependency of think tanks on government funding and authority to operate, increase in think tanks providing policy advice on a narrow set of issues, and the heavy influence of political climate and lack of independence. The implications of these limitations are self censorship, limits on critical analysis and innovative ideas, the rewarding of group think and bureaucratic babble, and leaving the government unprepared to respond to challenges and seize opportunities.

McGann outlined three sets of recommendations. First, increase the legal and operating framework for think tanks and NGOs. This would allow for independence and transparency, encourage cooperation among think tanks, and free up resources to expand analysis capabilities. Second, increase independent sources of funding. This could be accomplished by creating regulations that allow for independent sources of funding, create domestic funding mechanisms independent of the CCP, and increase government funding for public policy resources. Third, increase the quality and strategic capacity of all think tanks. This would result in increased public engagement on key public policy issues and diversification of research areas and public discussion on previously taboo policy issues.

In conclusion, think tanks help “increase the legitimacy of governments while reducing the crisis of confidence that many governments face today. Think tanks are an important indicator of a healthy civil society”, which is necessary to sustain economic growth and development. It is “in China’s national interest to build independent policy capacity that will enable it to meet the challenges and opportunities it will face as a global superpower”.

Zhu “Behavior Patterns of China’s Think Tanks: Political Brainpowers or Civil Society Organizations?”

Zhu’s main argument is that think tanks function “simultaneously as political brainpowers and civil society organizations”, exhibiting different behavioral patterns in influencing policy, using inside access (as political brainpowers) and through public opinion (civil society organizations).

In terms of structure, he divides the organizations that play a role in Chinese policy decision making into official government institutes, semi-official think tanks, and civilian think tanks. Zhu has chosen to concentrate on the latter two because official government institutes serve as the internal brains of the government, and therefore are not think tanks.

His empirical data are based on a 2004 nationwide survey of 301 think tanks from 25 provinces, 160 semi-official think tanks and 141 civilian think tanks.

Zhu to help measure the influence of Chinese think tanks highlighted three levels of influence: decision-maker influence (by political brainpowers), social elite influence (by academic activitists), and public influence (by civil society organizations). Zhu’s empirical findings were based on three different regression models that focused on political brainpower, academic activists, and civil society organizations. He found that organizational control variable have no influence on think tank behavior. Linkages to the state did contribute to the behavior of think tanks, and that semi-official think tanks have the advantage in political brain power. In terms of personal networks, the social elite contribute most to the political brainpower, while media contribute to civil society. Among civilian think tanks there was no correlation with administrative ranks.

In conclusion, Zhu argues that evaluations of think tanks should look not only at what their identities are, but what they actually do. There are two component forces that determine the kind of behavior patterns think tanks select. The first is the relationship with the government that causes think tanks to choose inside approaches to influence policies, in this case functioning as political brainpowers. Semi-official think tanks tend to relay mainly on administrative networks, while civilian think tanks depend on personal decision-maker networks of civilian experts. The second force is local knowledge development surrounding think tanks that causes think tanks to select roundabout approaches through public opinion to influence policies. In this case think tanks operate more like civil society organizations and think tank experts resemble public intellectuals.

Zhu’s research will continue by exploring the social consequences of think tanks different behavioral patterns in China.

Commentary by Jia

Professor Jia offered some commentary to round out the panel. She argued that it is important to realize that think tanks are also concerned with their legitimacy, and that semi-official think tanks, which she grouped into GONGO and grassroots, follow different rules to guard their legitimacy. The GONGO think tanks are more inside and part of the current system, therefore their legitimacy is derived directly from the current political and social system. They have more open space as they do not have to worry about being shut down by the government, but at the same time are more self-disciplined. Grassroots think tanks, on the other hand, have to carefully guard their legitimacy, which they acquire through registering officially with the government. They are in the process of trying to explore their space.

Jia also made the distinction between the goals of semi official think tanks and civil society think tanks. Semi-official think tanks try to affect more change and change attitudes. Civil society think tanks are involved more in policy itself rather than politics. The interaction between the two kinds of think tanks is very high.

In assessing the influence of think tanks in China, one must distinguish between policy and political resources and take into account the political framework in China. GONGO think tanks focus more on policy issues, and have more influence. Grassroots think tanks focus on more political issues and have limited influence.

Jia said that in the future, grassroots think tanks might have more resources that would enable them to become involved in political issues. GONGO think tanks might, in turn, think more on the political side. So in the future it might be more mixed, and a change in the political situation might come from both sides. Perhaps civil society will be shaped by the political ideas and government in the process of changing their attitudes and behaviors. So both government and civil society are changing.

Discussions:

1. Funding is mentioned as an indicator of autonomy. Are there any variations in the government funding of think tanks?

McGann answered that he is skeptical of the claim that most money for funding is not from the government, based on the information that he looked at. Zhu said that there are three types of funding from the government: administrative preparation, government research project contracts, and free rang application. Jia added that she does not use funding as a criteria to distinguish jungle or grassroots think tanks. Instead, the key criteria is who makes the essential decisions. In addition, the background of who establishes the think tanks, for example former government officials, is also important.

2. Suggestions: Focus more on the local level. Different regions have different think tanks. For example the Chinese Academy of Social Science in Shanghai is very different from that in Beijing.  Also, on the issue of funding, most money does not come from the government, but from the market, enterprise, and international aid.

3. International NGOs and organizations act more aggressively in China. Many researchers argue that grassroots organizations are supported by international NGOs and think tanks.

4. These institutions change over time. For example, a think tank that is originally research oriented can later focus more on public policy.

5. Question: How do you measure access and influence of think tanks? Comparing India and China, India has many more think tanks but nothing like the Chinese Academy of Social Science, which enjoys great influence. How do you see this dichotomy?

(Notes by Peiting Li)

Below are notes of his talk.

Given the shortage of time, I will focus my remarks on the subset of US foundations that make grants directly to grantees in China, whether or not they have resident staff in China. Not included are US foundations that grant funds to international intermediaries (such as Oxfam or World Resources Council), which in turn fund activities in China, or support the study of or exchanges with China (such as Luce and Freeman).  In excluding these groups as well as those in other countries (such as Volkswagen, Adenauer and Ebert in Germany or Toyota, Nippon and Sasakawa in Japan) I do not mean to denigrate in anyway their important contributions.

Direct Grantmaking by US Foundations in China has evolved over the past 100 or so years – 3 broad periods

(1) Pre-1950 – Rockefeller Foundation (public health and higher education – physics bldg at Nankai University), China Medical Board (Peking Union Medical College), Harvard Yanching Insitute (six Christian universities during 1930’s and 40’s )

(2) 1950-1978 – support to  major centers of  Chinese studies in US, UK, Australia, HK, India, Taiwan + library collections, pre- and post-doc research.  In mid 1970s efforts toward normalization of relations (National Committee on US-China Relations, CSCPR (initial exchanges)

(3) 1979-2009 – As China began to reform and opening to the non-communist world, US foundations began tentative explorations to see what they might do.  Ford Foundation (FF) and The Asia Foundation were among the first to put their toe in the water or, like Deng Xiaoping, to search for the stones to cross the stream.  Others followed and the field has continued to evolve.

Since 1979, 3 successive stages using Ford Foundation (FF) as an example:

- 1979 special appropriation of $200k. Mutual access and understanding (China Academy of Social Sciences, The Committee on Scholarly Communication with The People’s Republic of China, US-China Arts Exchange Center, Winrock International) visits, conferences, workshops

- Early 1980s, shift from exchanges to capacity building in three fields – economics education and research (Harvard Professor Dwight Perkins was involved), law and legal reform (Harvard Professor Bill Alford was involved), and international relations including area studies. These fields were ones that were important to China’s reform and opening, in which FF had experience elsewhere, and could be managed by a part-time program officer working from NY and using joint committees for decision making.

Enabled FF to broadened institutional connections beyond CASS and CAAS to include leading universities, State Council and/or ministry related research institutes. Also enabled FF, the case of area studies, to expand its geographic reach beyond US to include Africa, Middle East, LA.

- 1988 with the opening of the office in Beijing, three Program Officers plus the Rep on the ground – new programs in poor area development, RHP, and higher education &community colleges; greater outreach within China; broader range of institutions GONGOs and NGOs. Direct Grantmaking by US Foundations in China has grown significantly in recent years.

Statistics: Indebted to Foundation Center – Interactive map of direct grants by US grantmakers to non-US recipients (2003-09). During the period 2003-9 US foundations grants to Chinese recipients increased from $26m in 2003 to a peak of $58m in 2007, then declined to $40m in 2008 and to only $5m so far in 2009 (presumably reflecting primarily the state of the US economy). The number of grants has ranged from a low of 176 in 2004 to a high of 364 in2006. The number of recipients has ranged from 161 in 2003 to 260 in 2004 and to some 200 in each of the past three years. Unfortunately, for our purposes, the IFC data does not total the number of US  grantors.)

Y            $        G       R

2003 26m 286 161

2004 30m 176 260

2005 36m 252 137

2006 40m 364 202

2007 58m 322 192

2008 40m 322 192

2009 5m 33 24

Nature of Grantmaking since 1979 (as indicated earlier) has changed in 3 significant ways:

   1. Increasingly diverse range of recipients: National to provincial, urban/rural, ministries, research institutes, universities, ministries, GONGOs and NGOs
   2. Growing number of grantors: private foundations (FF, TAF plus Trace, Energy, Gates, Clinton + diaspora Cyrus Tang); corporate (Intel, Caterpillar, Eastman Kodak, Merck, Agilent Technology, GE, UPS, BP)
   3. Broader range of issues: environment, poverty alleviation, children’s and women’s rights, legal aid, RHP

Why the Changes?

In US

    * Growth in US economy, increased foundation endowments and in wealth of diaspora
    * Major new foundations
    * Energy, Gates and Clinton- Greater societal engagement with China – governmental, academic, commercial, nonprofits
    * Increasing appreciation of China’s growing international importance

In China

    * Reform and opening. Shift from all embracing party-state. Disaggregation
    * Changing roles and responsibilities vertically and among different sectors of society. Big Government, small Society to big Society, small Government. Greater space for NGOs. Tensions: reform vs. control. Relaxation vs. restriction. Cyclical vs. secular
    * Evolution in fiscal and regulatory framework governing nonprofits and foreign foundations 1999, 2004 regs
    * Growth in local NGOs, emergence of intermediary organizations, and now private foundations.Looking ahead

Six Challenges Facing US Grantmakers in China (half full vs. half empty)

(1) Still undeveloped legal and regulatory framework for the NPOs including foundations. Framework continues to evolve, with the timing and specific outcomes difficult to predict. Various laws and regulations beginning with 1989 Law on Registration of Civil Organizations, with primary objective of restriction and control. More are in the works.  Ministry of Civil Affairs (MOCA) is promoting a Charity Law. Others prefer a foundation law for public welfare, and still others argue for a basic NPO law.   Latest estimate is that draft Charity Law will go from the drafting committee to MOCA in June, from MOCA to SC LAO in July, and to NPCs sometime in the indefinite future. Lack of clarity makes both outside funders and local NGOs uneasy and less active than they might otherwise be.

(2) Achieving scale – linking local with national – is as difficult in China as it is elsewhere. National government has limited ability to assure its policies are implemented at provincial level and below. Challenge for those seeking national impact is embody local experimentation locally within an institutional framework capable of extending the lessons learned.

(3) Local civil society still relatively weak, but the number of registered and non-registered NPOs continues to grow rapidly. Up to 400,000 civil organizations (independent social organizations, foundations, and private nonprofit enterprises) are now said to be registered with MOCA, others with bureaus of commerce and industry, and with some 2 million still unregistered.

Growth reflects increasing recognition that government no longer has all the resources – human and financial – to meet China’s rapidly changing needs. Growth also reflects the lessons learned from crises such as SARS and AIDS. The combination has markedly increased the space of nongovernmental activity.  Has also led MOCA to be active in encouraging growth in the NPOs.  Local NPOs are finding it easier to register and some are now receiving government support for local service delivery in fields such as AIDS and poverty alleviation.

A part of this environment is the recent and rapid growth in the number of Chinese private foundations. Since the 2004 foundation law was passed, some 1531 are said to have registered including some 500 at the national level.  Increased wealth generally and the Sichuan Earthquake in particular help to explain the increase.  Potential for further growth in private foundations is huge; only 1-2% of private individuals who could afford to do so have set up private foundations.  The 2004 law also permitted foreign foundations to register and several of the largest, Gates and Clinton, have recently opened offices in Beijing, and other such as MacArthur have been exploring that possibility.

(4) Coordination among funding bodies (foreign and domestic) is generally lacking; more information exchange is needed as is greater transparency and accountability. Also need to foster ties between groups in China and counterparts elsewhere in Asia and the West.

(5) More attention is needed to developing indigenous support for the NPOs. The future of the sector will increasingly depend – not on foreign governments or foundations – but on funding from within China. This argues for more attention to the generic needs of the sector (a more supportive fiscal and regulatory framework, accounting of contribution of the sector by Center Statistical Office, encouraging public interest and attention, support for intermediaries – training, representation in policy making circles, facilitating exchange of experience – and greater transparency and accountability).  These activities have received relatively little attention from US grantmakers, which prefer to focus on particular sectors or problems.

(6)Finally, need for humility. Grantmakers may sometimes be a necessary but rarely, if even, a sufficient condition for something of significance happening.  Foundations are fortunate if given the opportunity to be associated with activities that improve human welfare, but the outcome – and the credit –belongs primarily to the grantees. Foundations need to be modest about successes as well as failures.

This workshop is right in time in China, as the need for micro-finance services in China’s vast rural areas is ever greater during the current economic situation, and the recent promulgation of relevant policies has boosted the number of businesses and organizations in the micro-finance field.

The recent policy changes opened up new space for micro-finance services in China. At the end of 2007, the China Banking Regulatory Commission (CBRC) lowered the threshold for financial institutions to do business in the rural areas, allowing investments to go into village and town level banks, loan institutions, and village co-operatives. Later, the government unveiled a policy to encourage experimenting with micro-finance services in a number of regions in China.

Microcredit organizations offer a new path for securing credit for China’s vast low-income rural populations, breaking through the funds bottleneck that small and medium enterprises have encountered, especially in the current economic situation.

With the support and encouragement of local governments, various micro-credit institutions are sprouting up across China. According to an interview with Liu Kegu, a member of the Chinese People’s Political Consultative Conference (CPPCC) and former vice president of the China Development Bank, China’s micro-finance falls into four categories:

1. Rural community micro-credit projects that have been initiatives and supported by China Foundation for Poverty Alleviation since 1996. The program covered 26 poverty-struck counties in 11 provinces, serving over 28,000 families in rural China with up to 300 million RMB of investment.

2. A Indonesian farmer+merchant model implemented by China Postal Service Bank piloted since 2007 with over 37 billion RMB’s investment.

3. A European “capital+technology” model piloted by China National Development Bank since end of 2005 in 12 mid-level cities, with a total investment of over 4.6 billion RMB.

4. Micro-credit companies supported by China’s People’s Bank and capital-cooperatives piloted by CBRC since two years ago, with a total investment of over four billion RMB.

China’s microcredit organizations face a series of problems, including controlling risk, technology to manage loans, securing follow up funds, and regulation.

The Second Grassroots Finance Forum and Microcredit Organizations Training Workshop is designed to increase the overall quality and professional skills of microcredit organization employees, aid microcredit organizations to steadily operate in credit markets and achieve sustainable development.

(Translated and edited by Peiting Li and Xing based on the following Chinese-language articles http://www.cgjr.org/Article/2009-04-18/20090418234503_1024.shtml and http://www.cgjr.org/Article/2009-04-10/20090410120959_1013.shtml).