by Meg Davis

Since March 2010, we’ve received a flurry of calls and emails from reporters, donors and lawyers asking about the new regulations on NGOs in China. Here’s our take on the regulations that have been causing trans-Pacific headaches, and a few thoughts on what this means for Chinese NGOs in the future.

First, a review of some of the basics in regards to nonprofits in China (for more details, see our report on restrictions on AIDS NGOs in Asia or the HRW report, which I actually wrote also, on NGOs in China). China permits NGOs to register as nonprofits only with the sponsorship of a government agency. This gives the government agency control over the activities of the NGO, which is why many outside observers call these registered NGOs “Government-organized NGOs” or GONGOs. Because of the restrictions, many small and independent NGOs in China use a legal loophole to register as commercial enterprises, meaning that they are required to pay taxes.

The new regulations have hit these little grassroots groups, and foreign organizations working in China, especially hard. Here’s why.

The Wire Transfer Regs

In March and April 2010, news hit the wires about new regulations on foreign wire transfers to Chinese “domestic enterprises”. Since it’s the flurry of new little grassroots nonprofits that receive overseas funding lack the capacity to meet these new requirements, the regs have hit them especially hard.

The regulations, actually just a circular published by the State Administration of Foreign Exchange (SAFE), has the following requirements for domestic enterprises that receive donations from overseas institutions:

- Chinese organizations have to open up new, special bank accounts

purely for the purpose of receiving foreign donations;

- In order to open up these bank accounts, organizations need to

provide an application, a copy of their business license, a notarized contract with the overseas donor explaining the purpose of the donation, documents proving that the overseas donor is legally registered in its home country, and (possibly) “other required materials” if the notary deems the above documents to be insufficient;

- Religious organizations receiving more than 1 million RMB in

donations need to have documents showing the approval of the State Religious Affairs Bureau — and in some cases, also the approval of the local government; and

- Banks are required to report “suspicious donations” to SAFE.

On the face of it, this is not too tough. Chinese organizations already had to show banks a copy of their contract with the overseas donor in order to receive wire transfers from foreign donors. But in practice, weak implementation of the new regs has caused the whole system of foreign support for Chinese NGOs to break down in many areas. It’s not clear when, if ever, things will be fixed; before they are, some small groups may suffer so much from the months without funds that they have to shut down entirely.

What Could Possibly Go Wrong?

The first problem has been understandable, from a certain perspective.

Banks are by nature conservative institutions, and no bank wants to be the first to implement the new rules; as the saying goes, the nail that sticks up gets hammered down. Thus, the Global Times reports, “Two months since the regulation came into effect, banks, notary service providers and non-profit outfits are in the dark about how to get a donation agreement ‘notarized’” – and even if they know how to do it, they may be reluctant to follow through.

This leads directly to the second problem: the outlandish process of getting contracts notarized. The circular does not explain this, but in order to obtain the notarization of the contract between donor and grantee, both the donor and the grantee are required to have representatives physically present at the notarization office in person.

How many international donors have representatives in China, ready and able to show up at a notarization office at any time? Let alone staff poised to visit multiple notarization offices around the country, in every town where the donor funds local NGOs? Very few. Not to mention that the notarization offices, we have heard, are often not exactly models of Confucian bureaucracy, and so NGOs have to go back and forth on multiple visits to the notary office, which may be located in another town from the NGO.

This notarization morass leads us to the third problem: requiring this many bureaucrats to stamp this many documents in China simply provides endless opportunity for lethargy, incompetence, red tape, corruption, and plain old meanness if you’re unlucky enough to run into the wrong person across the desk.

To sum up, the wire transfer regs are onerous, but they’re not a sweeping shutdown of all NGOs. The fact that most independent NGOs can only register as commercial enterprises and pay taxes has long left them vulnerable: if the government was serious about conducting a clean sweep of NGOs, they could probably use those regulations to shut the whole sector down in about a week. But that, of course, might actually result in an international outcry.

Creating a chill that shuts some NGOs down, allows others NGOs to survive but limits the overall growth of the sector — and without sparking an international outcry — is a more complex maneuver, and the new foreign exchange regulations accomplish this delicate feat quite neatly. All they do is to create a few minimal bureaucratic hurdles, and then let nature — or in this case, the world’s oldest and grandest bureaucracy — take its due course. The end result is likely to be that a few NGOs will collapse, a few with good government connections will manage to get the new foreign exchange accounts set up, a few donors will throw up their hands and quit funding Chinese NGOs, and a lot of new organizations will never get off the ground…

Meg Davis is the founder and executive director of Asia Catalyst.

Also see post “Chinese Government Promulgated Regulation Regarding Donations from and to Overseas.”

 By ANDREW JACOBS, New York Times, Published: December 2, 2009

 (Abridged from artilce entitled “H.I.V. Tests Turn Blood Into Cash in China“)

 …Although not trumpeted in its promotional materials, the foundations (Gates Foundation) other goal is more far-reaching: to empower the small but growing crop of nongovernmental groups that stand a better chance of addressing the AIDS epidemic than Chinas lumbering bureaucracy does.

To carry out its mission, the foundation has linked up with the Ministry of Health, which funnels $20 million to about 200 nonprofits, many of which exist in a bureaucratic gray zone and are viewed suspiciously by Chinas authoritarian government.

The distrust flows both ways.

By compelling the government to work with privately run organizations, the foundation is hoping to foster a lasting relationship between them and over time contribute to creating more profound changes in Chinese society.

Dr. Ray Yip, who runs the foundations China effort, acknowledges problems with the program but likens them to growing pains.

We are experiencing some of the hiccups of a less-than-perfect arrangement, but we expected that, he said. If you look historically at arranged marriages, some of them last.

Dr. Yip, who is the former director of the Centers for Disease Control and Prevention office in China, embraces the Gates Foundations philosophy of bold initiatives and risk taking traits often lacking in government-run global health behemoths. He said that if some of the money ended up in the pockets of corrupt officials running fake organizations, it was the cost of doing business in China, where government malfeasance is endemic.

We dont expect every grant in every city to be spectacularly successful, he said. Thats like buying 30 stocks and expecting them all to go up.

Sun Jiangping, deputy director of Chinas National Center for AIDS/STD Control and Prevention, said the program had already had a positive impact on government attitudes toward private AIDS organizations, whose numbers have increased to more than 400 from just a few dozen when the initiative started. He said his agency was working to weed out illegitimate groups.

Compared with the rates in other developing nations, the prevalence of H.I.V. in China is relatively low, with fewer than a million people thought to be infected, according to government figures released last week.

But public health experts are alarmed by an infection rate among gay men that has been doubling annually. By the end of 2008, nearly 5 percent of gay men in Chinas largest cities were thought to be H.I.V.

positive; in some cities, that figure exceeds 10 percent. Health officials say gay men now account for a third of all new transmissions, up from 12 percent in 2007.

Advocates for people with AIDS say the government has been ham-handed in its efforts to prevent the spread of H.I.V., in some cases banning condoms in bars or hounding activists who become too vocal.

In recent years, organizations have sprung up to help those with AIDS who are refused care by hospitals. Many, like Deep Blue, a group that operates from an apartment on the outskirts of Tianjin, are largely financed by grants from abroad.

Deep Blues two counselors meet with the 50 people who come each week for an H.I.V. test.

If you have any questions, contact the volunteers with the red armbands, says one poster. You can stop the testing at any time,

says another. About 65 percent of those who test positive come back for counseling, said the groups director, Yang Jie.

Tong Ge, a veteran AIDS activist who has advised the Gates Foundation on its China program, said he was pleased with the foundations work, though he said he wished there was more of an emphasis on training government workers and less money spent on testing. His biggest regret, he said, is that the foundation chose to funnel the money through the government.

So much of the Gates money has ended up nurturing corruption in a place it didnt exist before, he said. Then, after a pause, he added:

But the truth is we cant blame them. The real problem is with China.

 (Orginal article available at http://www.nytimes.com/2009/12/03/health/policy/03china.html?_r=2)

 “The global AIDS epidemic continues to worsen and is one of the leading develop­ment challenges of our era.” Facing this global crisis, “NGOs have played a decisive role in the response, both for advocacy and for services”, such as providing voices for the underrepresentative groups, promote risk-reduction education, providing HIV testing and treatment, and advocating for policy formulation.  

 China witnessed AIDS epidemic in the early 1980s and is now estimated to have 650,000 HIV infections throughout all of its thirty-one provinces, municipalities, and autonomous regions, with an annual growing rate of 30 percent. “Half of new infections are sexually transmitted, mainly among commercial sex workers, sexual partners of injecting drug users, and men who have sex with men.” Separately, in the late 1990s, a retired doctor revealed to the media a severe epidemic among former paid plasma donors due to tainted blood donation practice in Henan province, central China, as well as the indecent cover-up by the local government. While little care is given to the notorious groups of drug users and sex workers, public sympathy gradually arose for the “innocent victims of AIDS”, the farmers who rely on blood donation to improve their poor life a little bit.

 Learning from the failure of emergency preparedness and early response of SARS in 2003, China’s Center for Disease Control and Prevention’s National Center for AIDS Prevention and Control (NCAIDS) decided to take initiatives this time. To address the plight of AIDS-infected farmers of central China, “a free national AIDS treatment program was launched in 2003 by the Chinese government, called China Comprehensive AIDS Response (China CARES)”. China CARES not only “signaled the increase of political will to tack this problem”, but also increased funding substantially, put accountability on local governments and sent out intervention supplies. However, it soon realized that it was a mission impossible to resolve AIDS problems by the government alone, because “twenty years of fiscal decentralization and devolution of financing responsibility to lower levels has reduced the availability of social services, particularly health and education, in poorer areas”, thus opening up for the partnership with social organization or NGOs.

 “China’s overall NGO sector is unlike its counterparts in other parts of the world. In China’s one-party state, the political space for NGOs to operate is still very restricted, and government remains the main service provider, even for services that in the rest of the world NGOs have traditionally played a major role in deliv­ering. Paralleling the government service network, however, China’s mass orga­nizations and government-organized non-governmental organizations (GONGOs) operate through vertical hierarchies to local levels paralleling the government system…There are probably about two million civil society organizations in China, including foreign NGOs, trade and science associations, charity groups, farmers’ organizations, and doctor’s organizations…The working environment for Chinese NGOs is still beset by a climate of dis­trust. “It follows that “Chinese NGOs fall more into the sociological than into the political definition of civil society in terms of their relative levels of autonomy from the state and their shared goals.”

 “As with the overall context for NGOs in China, government remains the main service provider in the AIDS response, unlike in other countries, where NGOs play an important role in service delivery to marginalized groups. The government role has been mainly played by China’s Center for Disease Control and Prevention’s National Center for AIDS Prevention and Control (NCAIDS). The national CDC operates under the leadership of China’s MOH. At the provincial and local levels, the provincial health bureaus and their affiliated CDCs have led the AIDS response with designated responsibility for carrying out the official China CARES program of free testing and treatment provision and HIV prevention activities (with sub­stantial financial support from GFATM and other international donor programs), and are the main government counterparts for most international AIDS funding programs. Even though local CDCs are bureaucratically accountable to their own local governments (through local health bureaus), earmarked vertical funding from the GFATM through the CDC and health bureau system has increased their resources and independence to carry out technical work.

 However, because government-funded services such as public health educa­tion have been significantly weakened in the past two decades under China’s fee-for-service health system, which is focused on curative care, the need for greater local NGO involvement in China’s AIDS response is clear, especially to reach groups that avoid government scrutiny. And because the AIDS epidemic is expanding faster than the political space for NGOs at the local level, local CDCs have been engaging in pragmatic partnerships with grassroots NGOs and defend­ing that work to local government, therefore pushing the boundaries of what might normally be allowed. These pragmatic partnerships between local CDCs and grassroots NGOs are helping to improve understanding of the value of NGO roles, possibly to the benefit of all local NGOs in China.”

 On the other side, the diverse grassroots NGOs proliferate with specific focus on most at-risk populations like gay men, frequent migrants, youth, and on hard-to-reach populations. As we can imagine, some high-risk groups for HIV/AIDS, for example, drug users and sex workers avoid government services for fear of their illegal status and chances of being arrested. Unlike the government actions, NGOs are able to fill the gaps in need of most urgent services, to reach these marginalized subgroups, to provide outreach and education to gay men through hotlines and in bars and bathhouses, provide condoms to sex workers, exchange for needles and syringes, etc. In addition, online communities have been established and become an important “networking” mechanism in recent years “for groups with limited budgets for travel to conferences”. Undeniably, the value of grassroots NGOs have been more and more recognized by civil bureaus.

 Most inspiringly, NGOs have blazed their political space and made their voice heard in China. The country coordinating mechanism (CCM) founded the Global Fund in 2002 to fight AIDS “with a mandated governance mechanism that required the establishment of a group made up of civil society representatives.” Especially, Global Fund Round 6 is “an important further mechanism to institutionalize the AIDS NGO role in China’s AIDS response”, with commitment to local ownership and participatory decision making. China’s main AIDS GONGO is the Chinese Association of STD and AIDS Prevention and Control (CASAPC). Since 2000, the China STD AIDS Association has held several AIDS NGO coordination meetings, uniting grassroots NGOs to combat AIDS financially.

 Nevertheless, there is still space for improvement of collaboration between the government and NGOs for social service provision as follows:

 (1) Weak coverage of rural areas. Unless contracted and understood by the local government, even AIDS NGOs feel hard to reach rural areas, where medical professionals and employer health insurance are scarce.

 (2) Lack of operational funding. “Despite large amounts of donor funds for AIDS in China, little reaches the bottom”. To make things worse, “in-fighting between groups over funds, local ownership, and visibility has further inhibited needed coordination on advocacy and programs”.

 (3) Government’s unwillingness to cooperate under some conditions of political sensitivity. A typical example is the blood scandal of Henan province. For a quite long time following the revelation of the scandal by a retired doctor, the local government was still unwilling to respond directly on this issue. It detained and monitored the retired doctor and some media, and “conflicts between victim/patient groups and local government agencies have created a climate of distrust”. Regardless of the story-publicizing and censuring of human rights organizations outside of China, it will be very difficult for the government and NGOs to negotiate and cooperate.

 F0r more details see Chapter 8, The role of NGOs in China’s AIDS Crisis by Joan Kaufman, from Book State and Society Responses to Social Welfare Needs in China—-Serving the people, edited by Jonathan Schwartz, Shawn Shieh, Routledge, May 2009.

(Digested by Sheng Yongmei)

The history of China’s environmental NPOs is less than 30 years. Till 2005, there are 2768 environmental NPOs of various types in China. Among them, 1382 (49.9%) were initiated by the government, 202 (7.2%) were spontaneously rooted from civilians, and the portion of students associations for environmental protection were also very important (1116, 40.3%) (from All China Environment Federation, 2006). Approximately 224,000 people work for the environmental NPOs. The government-dependent NPOs have advantages on access to resources and official support, while environmental grass-roots are good at mass mobilization and inter-organization efficiency. These two types of organizations supplement with each other in the process of addressing emerging environmental issues.Chinese scholars Jialiang Xu and Fang Wan summarized the evoluntion stages the environmental NPOs in China from the 1970s to present into 3 stages: germination, springing up and expansion. Stage of Germination (1970s – 1990s)