In China, a philanthropy evolution

Several decades after China opened its economy to the outside world and allowed private enterprise to flourish, the country is home to approximately 350 billionaires – second only to the United States, according to Forbes. And they want to give back.

Many of the nation’s wealthiest residents, including Niu Gensheng, proprietor of milk company Mengniu Dairy, and He Qiaonv, founder of landscape architecture firm Beijing Orient Landscape, are forming their own charitable foundations. China now has 4,211 private foundations, more than double the number it had five years ago, according to the United Nations Development Program.

China’s new tycoons aspire to channel some of their wealth into solving the mounting social and environmental problems at home. But that can be hard in a country where mistrust in a nonprofit sector largely run by an authoritarian government has long put a damper on individual giving.

Chinese donors give about 4 percent of what their American or European counterparts give to charity, according to the UN, and most of that comes from corporations. In the US, 70 percent of charitable giving comes from individuals.

China doesn’t “have the organizations with the depth and capacity that we have in the [US] nonprofit sector,” says Melissa A. Berman, head of Rockefeller Philanthropy Advisors, a nonprofit that helps philanthropists around the globe give wisely.

Lately, however, a confluence of government reform, academic efforts, and collaboration with Western philanthropists and charity experts have charitable giving in China poised for change.

“There is a lot of money in China ready and waiting to be deployed for good,” says Carol Fox, a director at East-West Center, a Hawaii-based organization that promotes relations between the US and countries in Asia and the Pacific.

Tackling corruption

This year brought about a major turning point for charity in China. As part of a larger anticorruption campaign, President Xi Jinping’s government introduced laws that for the first time will regulate the country’s fledgling nonprofit sector, helping to build accountability and trust in an area of society that’s mired in scandal and uncertainty.

Such monitoring was long overdue, say many industry observers. This became especially clear after several scandals surfaced in recent years, one involving the misuse of millions in donations by the government-run Red Cross Society of China (which is not connected to the International Committee of the Red Cross).

The new laws aim to rebuild public trust in the sector and get more private money flowing to charity. In September, China’s “Charity Law” took effect, freeing organizations working in poverty alleviation, disaster relief, environmental protection, and public health from some government bureaucracy and fees.

The legislation also introduced tax incentives for donors and requires charities to report how they spend donations.

“It’s bringing order to a sector that before was really operating in a gray zone,” says Edward A. Cunningham, whose group at Harvard University tracks philanthropy in China. “There’s progress in many ways.”

But critics argue the reform doesn’t go far enough. Legal, political, and religious organizations are not covered by the new law. And the new “Overseas NGO Law,” due to take effect in 2017, introduces strict government reporting requirements for international nongovernmental organizations that operate in China.

Still, the new laws are important steps in the right direction, supporters say. “It’s a huge step forward for China, and not recognizing that is a big mistake,” says Ms. Fox. The new laws could unleash a wave of philanthropy, she says, much like the one the US first saw a century ago when Andrew Carnegie and John D. Rockefeller found systematic ways to invest some of their massive fortunes into American education, literacy, and science.

Learning from others

China also has sought inspiration from abroad. In 2010, Bill Gates and Warren Buffett traveled there to encourage the nation’s wealthy entrepreneurs to give. Today, there are university programs to train future leaders of China’s burgeoning charity sector, philanthropy training fellowships hosted by American foundations, and international workshops connecting China’s biggest givers with those in the US and Europe.

Last year, six leading philanthropic organizations from the US and China launched the China Global Philanthropy Institute, a think tank that aims to help build out the sector.

The East-West Center, Fox’s organization, brings together US and Chinese foundations for a summit in Hawaii. At the 2015 meeting, the participants pointed out that China has an advantage as it’s shaping its culture of philanthropy: “It doesn’t have to deal with an established infrastructure as in the US, so it can take the best ideas and leapfrog,” concluded the group. “Philanthropy is so new still in China,” says Fox. “But it’s growing faster than you ever dreamed possible.”