China takes steps forward in foundation accountability and social innovation


Karla Simon

Karla Simon

Karla Simon

It seems that the summer months, with torrid heat and torrential rains in various places in China, including Beijing and Shanghai etc., have slowed the process of change in the legal and fiscal environment for CSOs in China. One of the important national events was the publication on 30 July of new draft regulations (for public comment) on foundation transparency. The new regulations do not, as in the past, apply only to public fundraising foundations but to the 1486 private foundations ‒ about 54% of the 2744 foundations in China (data resource retrieved from China Foundation Center), This regulation also has a big impact on private foundations, as the requirement of information disclosure will add to their information costs. The new regulations are available to read here (in Chinese). And there is a good description in English in the South China Morning Post for 30 July (subscription only).

In essence Circular 124 (2012) reiterates many previously stated rules, but it puts them all in one place. The new rules state that foundations may not engage in any profit-making endeavors (but the 2004 regulations said that anyway). ‘Foundations should not use their names, images or charity projects for non-charitable purposes,’ according to the new rules. This was originally stated as ‘foundations may not support for-profit organizations’ in the April version, but considering that many grassroots CSOs are registered as for-profit organizations due to registration constraints, this change helps to open doors for many grassroots CSOs at the policy level. However, this leaves the problem of defining ‘not-for-profit-making endeavours’.

According to the regulations, organizations must disclose how money is spent, donors have the right to know how their money is spent, and foundations must ‘give truthful answers in a timely manner’. Charities undergo annual reviews; if they are found to have violated the rules, they risk being disqualified from registration or receiving administrative punishment.

In Guangdong Province, where the first province-wide direct registration regime went into effect on 1 July, innovations continued to occur. In Shenzhen, the municipal bureau of civil affairs (BCA), began to implement changes the city Political Consultative Conference (PCC) suggested in January. The PCC proposal explicitly called for third-party auditing of CSOs, including well-established GONGOs like the Red Cross, etc. This was required under national rules issued in December 2011 and effective in January 2012. The new plan announced by the BCA, while providing for greater transparency, essentially boils down to government control over CSO accounting. The proposed ‘credit database’, for instance, will be part of the city government’s information system, and probably not immune to political interventions.

Also in Guangdong, a new social innovation plan has been proposed. You can also find out more here. According to two experts, Professors Zhu Jiangang and Xu Jialiang, who are now leading two of the nine member research centres in the innovation alliance plan, although the Guangdong government is very open to critics and it is most likely to make reform efforts, it is still very cautious about essential reform.

In Xiamen, which became famous in 2007 for the important PX protests (which involved an estimated 10,000 people silently marching around city hall to force the city to move a petrochemical plant), a recent visit by MCA Deputy Director General Li Yong stressed the importance of an improved legal environment for civil society. DDG Li has been one of the most forceful proponents of reform (gaige) at MCA in the last 20 years. He is a person who cares deeply about the sector and wants to make more space for it. While Li Yong stressed the importance of improving legal environment for civil society, in his visit to Xiamen he was referring specifically to CSOs that are working in the culture field. Since those CSOs focus more on entertainment and are very weak in policy advocacy, it would politically easier for the government to improve their legal environment. Click here to find out more.

Like Shenzhen, Xiamen is a special economic zone, which means that it has province-level authority and a local people’s congress with decision-making authority. As such, it is able to more quickly innovate than other cities in China. In Xiamen’s case, the registration of Taiwan CSOs in the economic and trade field under the municipal bureau of civil affairs (BCA) is a very interesting case. As Taiwan and Mainland China are enhancing their economic cooperation through legal approaches, there are both special economic and political implications behind this new registration practice.

Meanwhile, however, a meeting was held in Xinjiang at the end of July to discuss a draft of the new measures for banning illegal organizations. Xinjiang is a very unstable area and the current authorities are highly aware of the possibility of unrest there at this sensitive time. Thus, the meeting clearly indicates the wariness of national and local officials about organizations being formed to protest the current regime, perhaps even elsewhere than just in Xinjiang.

Karla Simon (奚文雅) is professor of law and director of faculty development at the Catholic University of America and has worked in China for over 16 years

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Tagged in: Accountability China Regulations Social innovation

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