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.”

May 10, 2010

I’ve generally been an optimist about the future of NGOs in China, but recent events have gotten me thinking otherwise. In the last few months, we’ve witnessed the Oxfam Hong Kong incident, the SAFE regulations on foreign donations, the closing down of NGOCN’s website, the Beijing University Women’s Legal Aid Center’s losing its Beijing University affiliation, and just today, the news that China’s leading AIDS activist, Wan Yanhai, has left China for the U.S. because he was being harassed by multiple government departments. So what does this all mean?

First of all, let’s get some perspective on these events. Last year (2009), Xu Zhiyong’s legal aid NGO, Gongmeng, was closed down on tax evasion charges, and Yirenping, an anti-discrimination legal aid NGO founded by Lu Jun was raided. The Olympic year saw the Sichuan earthquake, a coming out event for Chinese NGOs which played a visible role in the earthquake relief. The year prior (2007) saw the closure of an Lu Jun’s support group for Hep B carriers, a magazine called Minjian that published stories of NGO development projects, and most notably Nick Young’s China Development Brief.

In addition, the last few years has seen significant growth in grassroots NGOs, persistent rumors of revisions to the NGO registration and management regulations, a new Charity Law, and easing of the registration and management procedures for private foundations.

In short, what we have here is a mixed bag. Some bad news, and some good news. How do we make sense of all this? A few possible explanations come to mind.

One explanation is that the government is of different minds about NGOs and is trying to figure out how to best manage (codeword for control) them. The Chinese government is a very diverse, not always unified collection of agencies and individuals. The Civil Affairs department is only one of the agencies charged with supervising NGOs. In fact, there are hundreds of thousands of NGOs in China that are not registered with Civil Affairs and thus not under their supervision. Because many NGOs are registered as businesses, the Commercial and Industrial department also plays a role, as do tax authorities, and now apparently so does the State Administration of Foreign Exchange (SAFE). And last but not least, there are the security people. It’s not clear to what extent there is a coordinated campaign among all these agencies to regulate NGOs. Civil Affairs seems to be the most supportive. They are encouraging various experiments around the country to make NGO registration easier, and they support a change in the NGO regulations that would make it easier for NGOs to register with Civil Affairs. But other agencies seem to just be interested in controlling NGOs, and not figuring out a way to regulate them in ways that would improve the effectiveness and transparency of NGO work.

If this explanation is right, then we’ll see authorities continue to adopt an ad hoc approach to regulating/controlling NGOs, and continued swings in the government’s attitude to NGOs. We’ll also see further delays in the much-anticipated NGO legislation as debates and deadlock over the value of NGOs continue in policymaking circles.

Another explanation is that government leaders have arrived at a consensus about how to deal with NGOs, and that consensus is not to liberalize the environment or find a smarter way to regulate them, but to continue restricting their development. This means tightening an already restrictive regulatory environment, and cracking down on “illegal” NGOs that are engaged in advocacy and sensitive issues such as migrant worker rights, and are particularly open to foreign influences. What seems to be new here is the way in which the government is cracking down on NGOs. They are doing so not by closing down NGOs as they did with China Development Brief, but by harassing them for improper finances, or fire codes, or not properly registering their website. But they are not doing this across the board, but only targeting selected NGOs. A form of “salami tactics” or “death by a thousand cuts”.

If this explanation is correct, then recent events represent the start of a chilling trend. It means we won’t see revised NGO regulations come out, or if they do come out, they will reaffirm the status quo or be even more restrictive.

Still another explanation is a combination of the previous two explanations. That is, authorities have arrived at a consensus but that consensus represents a compromise whereby certain sectors are encouraged, but NGOs with more foreign connections or engaged in more sensitive work are targeted for harassment.

If this explanation is right, then we should see the revised NGO regulations, and other related legislation, coming out soon. Those revisions will probably represent a gradual change, e.g. liberalization, and their content will give us a better idea of what sectors are being encouraged.

Which of these explanations is closer to the mark of course requires an understanding of what is going on in high-level decision making circles. Unfortunately, that arena is a black box that we can only speculate about.

At this point, I favor the first explanation because I don’t see a consistent line or approach toward NGOs which suggests there is still debate and deadlock over just how to regulate this growing sector. But I may change my view as I get more information. Stay tuned!

( http://ngochina.blogspot.com/2010/05/why-chill-in-air-for-ngos.html  )

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)

Nonprofit Law Prof Blog commented on this report saying that  ”the increasing assertiveness of advocacy groups in pushing China’s government to follow its own rules and account to the public for its actions. Such confrontations may become more common as China seeks to expand its cooperation with NGOs in alleviating poverty, stemming the spread of AIDS and halting environmental degradation.”

In one of Beijing’s oldest neighborhoods, a citizen-activist group with five full-time employees is challenging China’s powerful Ministry of Foreign Affairs over its plans for a historic residence the government owns.

Beijing Cultural Heritage Protection Center says the ministry may be violating national preservation regulations by renovating parts of the 19th century property – about 2.5 acres, of courtyards and classical gardens of bamboo groves, rock formations, ponds and pavilions. In November, the Foreign Ministry said it would restore the property to remove “safety threats” and eventually open it for public visits. The Ministry has not submitted its plans to preservation authorities for approval yet, and the center has received conflicting responses from other government departments, so it has continued its campaign.

“NGOs help the government solve a lot of problems,” said Kang Xiaoguang, head of a research center at Renmin University in Beijing dedicated to the study of nonprofit groups in China. The groups also “have begun to challenge government policies and its administrative processes more and more.”

The shift is part of China’s transition from a socialist system centered on an all-powerful state to a market economy in which even the government must obey the law. Now, citizens have far more personal freedom and choice, and the government no longer provides many social guarantees such as lifetime employment and universal health care, leaving gaps that private groups can help fill.

The China Statistical Yearbook counted 386,916 NGOs at the end of 2007, without defining what the category encompasses. Kang said most are small, underfunded or dependent on the government for money. So far, they are much more prominent in service roles that support official policy aims than as gadflies or checks on power.

Chris Spohr, an economist based in Beijing for the Asian Development Bank, helped pilot the first program in China that allowed NGOs to bid competitively to run poverty-alleviation programs for the state. He says some people in government want to expand the initiative, because partnering with nonprofits produces better results and greater participation by the intended recipients – and also saves money.

While this has encouraged officials to support the expansion of citizens’ organizations, they have not welcomed groups that delve into what they deem sensitive topics or that they feel are too critical or otherwise threaten their legitimacy. “We know the government likes our services but not our advocacy, so it’s a contradiction,” said Wan Yanhai, director of Aizhixing Institute, a nonprofit AIDS and human rights organization in Beijing. He was detained for three days in 2006 and forced to cancel a forum on blood safety that touched on compensation for people infected with AIDS through transfusions. He said many citizen groups do not push the government, for fear of having their funding or projects shut down.

Aizhixing, which had a program budget of 6 million yuan, or $878,000, last year, provides health training and education and is introducing rapid testing of people at risk for AIDS. The institute also offers legal services that challenge the government, such as protesting abusive police treatment of drug users. Its push for greater privacy of health information for job applicants was reflected in a labor-contract law that went into effect last year. It also issued requests for release of policy information from five agencies – and got responses from all of them. “That’s a big change,” Wan said. He said activist groups like his are preparing the way for a different kind of government – based on law – that is more transparent and responsive.

“NGOs will eventually push democratic change,” he said. “Whatever the Chinese government thinks about that, it will happen eventually.”

(Original link: http://www.nytimes.com/2009/01/13/world/asia/13iht-letter.1.19312617.html)

On May 4, 2009, Hauser Center invited Zhang Jiang, Professor and Dean, News & Communication Department, China Youth University for Political Sciences to give a talk on Media as a Venue for Civil Participation in China. Jia Xijin, Associate Professor of Tsinghua University of China and Visiting Fellow at Hauser Center for Nonprofit Organizations was invited to make comments.

Professor Zhan used five examples of how media created public events that eventually led to policy change to make the case of media’s role as the venue for public participation in China.

Below are notes of the talk and discussions:

Under the current policy environment in China, when citizens cannot easily register nonprofit organizations to convene people with the same interest to pursue the same agenda, today’s civil society in China do not typically feature nonprofit entities, but rather, “media + public intellectuals”.  Since 1990s, there are a number of incidents highlighting media’s role as creating public event, and setting public agenda.   Media has been playing an important role in today’s China in initiating, heating up, or leading civic movement in China.

Media has become an important venue for civil participation in policy change or public agenda setting.  The media driven civil participation follows the following formats:
1.    Court case driven
2.    Issue or agenda driven

Zhan then gave a number of examples under each category.

Court case driven

First the Sun Zhigang incident in 2003. Sun Zhigang, a college gradate was arrested as a vagrant for not carrying ID and was later beaten to death under police custody.  China Daily’s reported: “Sun’s case has triggered a major debate on the validity of the holding system and the two-decade-old Measures for Internment and Deportation of Urban Vagrants and Beggars.  The holding measures, an administrative regulation issued by the State Council in 1982, are currently the legal basis for internment and deportation by public security authorities.  The measures require urban vagrants and beggars to be housed and deported to their hometown and urge the local governments to make proper arrangements for them.  Stirred up by Sun’s case, three candidates for doctorate of laws have written to the Standing Committee of the National People’s Congress (NPC), the country’s top legislature, appealing for an investigation of Sun’s case and a review of the constitutionality of the measures.  The Law on Legislative Procedure stipulates that any provisions concerning deprivation of the human rights and democratic rights of citizens must be made in the form of laws by the NPC or its standing committee. In other words, the State Council does not have the power to deprive such rights with administrative regulations. Later, five prominent legal scholars backed up the three students by calling for the launch of special investigation into the case and the status quo of the holding system itself and its enforcement. ”

This incident has demonstrated how “public intellectuals” and media worked together to mobilize public participation that led to public change.

Media typically adopts the two methods in participating public affairs: investigative reporting, and commentary.  Since investigative reporting tends to bring risks to the reporter and the newspaper, as the aftermath of the Sun Zhigang incident has shown (It is said that the Police revenged the newspaper and two top leaders were brought down as a result.), newspapers began to use more of commentary as the channel to participate in and lead civil participation.   News commentary enjoys more freedom, and less susceptible to censorship as local authorities tend not to care about the commentary on incidents happening outside of their jurisdictions.  Internet forums and blogs, as well as media commentary columns played an important role in stirring up public awareness, and creating public voice and public pressure for policy changes.

A second incident is the PX chemical facility construction plan in Xiamen. When citizens used internet and cell phone messages to coordinate a mass public “walk” that eventually aborted the construction plan in Xiamen.

Issue Driven

The example is promulgation of Government Information Transparency Regulation (the Regulation).

China’s national Regulation was promulgated in April 2007. Before that since 2003, some regions such as Shanghai and Guangzhou City began to pilot it.

On June 2, 2006, China Youth Daily covered the story of an journalist suing the Shanghai Municipal Government on violating the Shanghai Regulation on Government Information Transparency. That report initiated a wave of discussions in the media on the people’s rights to know, that the government’s obligation to share information. Eventually, the national government promulgated a nation wide regulation on government information transparency.

Comments by Jia Xijin

While in today’s China, there are a lot of restrictions on civil participation through association, media initiated and magnified  participation by diverse individual citizens plays a major role in current society in China. I would like to refer  this force as NGP (nongovernmental persons).

Such bottom up government/policy transformation has the following features: transitional, hot-topic focused, explosive, easy to shift a way, temporary, and mainly about issue on public-sphere (individual interests and private rights are missing on this arena).   How to form a rational, sustainable and strategic civil participation campaign that helps shape a healthy political and governmental environment is the key.

Discussions and Commentaries from the Audience
1.    Though there is no empirical study that has established that media coverage will eventually lead to policy change or government behavior change, coverage has a long-term public awareness impact.
2.    The essence of media’s role in the above examples, are media’s role in “social mobilization”.   When organizations are missing, media is playing such a role.
3.    Small victory in civil participation means a lot: though media these days are not so much about campaigning for democracy or political reform, progresses like these examples helps the citizen gain more freedom and civil rights. This seems to be a more practical path.

However, a recent survey pointed out that on average, less than 50% of people in China fulfill this obligation. As for the corporation units which are a very important structure in China, about 64% organize their employees to plant trees annually, 26% do so sometimes, and 10% never.

This year, China Green Foundation (CGF), China Population Welfare Foundation and the SETV co-organized the first “China Online Trees Planting Festival” in Beijing. The number of Chinese using internet has exceeded 300 million and become No.1 in the world. Therefore, the organizers of Online Trees Planting Festival expect that the wide coverage of internet can not only bring about great changes to the society and life, but also create diverse and convenient platforms for the greenery and philanthropy career.

China Green Foundation  is a national non-profit organization focused on supporting and developing forestation in China. CGF raises and utilizes funds to expand green land, plant trees, and contribute to the development of a global ecological balance. It claimed 120 million trees planting in 2007 and more than 150 million in 2008.

The CGF initiated the New Green Carbon Fund two years ago, mobilizing enterprises, organizations and individuals to join forest protection activities to sequestrate carbon dioxide. Forest is the largest carbon storage in terrestrial ecosystem, serving to absorb carbon dioxide from atmosphere via photosynthesis and alleviate worldwide climate change. It is reported that each cubic meter grew of tree can absorb 1.83 tons of carbon dioxide and release 1.62 tons of oxygen. The idea of “purchasing carbon currency online” generated from this New Green Carbon Fund became a crucial inspiration fountain for the current Online Tree Planting Festival.

People can easily register on the website, fill in the number of trees they want to “be responsible for” (5 Yuan for each tree), and pay the fees by credit or debit cards online. The money raised by this way is allocated to trees planting in Western China. After donation, people will “get” a virtual tree online, and they must “water” it regularly toward fruition and receive supervision and comment from others. Up till now, 2117 people, 80 organizations have contributed to over 800 thousand Yuan and 150 thousand trees. The data is under frequent update.

So where on earth are the trees actually planted? The answer is Tongwei County, Gansu Province. The local eco-environment in Gansu Province has deteriorated seriously. About 94% of the land in this place has been encroached by desert and the sand dunes are still advancing in a speed of 3 to 4 meters per year toward the green land. At the same time, Gansu residents are inflicted by poverty, thus forming a vicious loop. CGF chooses to plant Hippophae rhamnoides here and let local communities take care of them. Hippophae rhamnoides is suitable for growing in semi-dry regions and boasts very high medical functions and economic values. Therefore, local people can expect future profits from the trees they are looking after now. In one word, people can kill two birds with one stone, or solve two problems with one wise policy.

Compared with forestation activities performed by the government, the survival rate and preservation rate of the voluntary-planted trees are relatively low. The reason is that people put more emphasis on how many trees have been planted and neglect whether the proper species of trees have been planted according to local natural conditions and the subsequent management. From this perspective, the novel form of online trees planting which separates the subjects of donating and implementing might help to get rid of the limitations of time, space, knowledge, optimize the allocation of resources and avoid such problems.

(Translated and compiled by Shen Yongmei, edited by Xing)