10 May The Rise of Foundations: Hope for Grassroots Civil Society in China?
Posted at 08:38h in Analyses by Jessica C. Teets
After the new Regulations on Administration of Foundations were promulgated in 2004, foundations (jijinhui)—that is not-for-profit organisations that promote public benefit undertakings through grants and donations—experienced rapid growth in China. In light of this, some observers considered private foundations to be the hope of China’s third sector. The rapid expansion of the foundation sector indeed occurred as international foundations and organisations were withdrawing funding from Chinese grassroots NGOs, and many civil society leaders hoped that foundations would replace the international funding deficit. According to a report by the China Development Brief, ‘NGOs cannot rely solely on international foundations. In the future, international foundations will move on to other countries. Even now you see international foundations will not use the majority of their funding on a country like China that is developing so fast.’ In fact, the Global Fund withdrew funding from China in 2013, the Ford Foundation changed its funding profile so that less than one third of its funding went to grassroots NGOs, and the new Foreign NGOs Management Law passed in 2016 restricts foreign funding of domestic social organisations. In this essay, I explore whether the rise of foundations in China could serve as a potential funding source to replace foreign grants for domestic NGOs.
Despite the promise of the rise of Chinese foundations, I find that they function differently from their counterparts in the United States, in that very few foundations make grants to other non-profit organisations. This might be a result of differences in the identity (or missions) of Chinese foundations, or simply due to their relatively early stage of development. Regardless of the reason, since foundations mostly finance their own projects rather than funding other organisations, they often compete with, rather than support, NGOs. If this trend continues after the implementation of the Foreign NGOs Management Law further restricts foreign funding, grassroots NGOs will depend entirely on private donations and government-awarded service contracts for funding. Government contracts do not help grassroots NGOs build capacity in the same way that grants often do, in that most contracts prohibit the use of funding for salaries or restrict other administrative costs to ten percent of the total value of the contract. In order to promote a more diverse and active civil society sector, foundations in China should partner more with grassroots NGOs to build civil-society capacity and replace lost international funding. For example, the Narada Foundation provided ten million yuan to NGOs for over sixty-two projects related to disaster relief and to aid reconstruction after the 2008 Sichuan earthquake. This undoubtedly had a large impact on the groups receiving funding, and arguably helped them build capacity.
The Rise of the Foundations Sector in China
Although the first foundations were established in 1981, the rapid expansion of this sector did not occur until after the 2004 Regulations were passed, reducing capital barriers to two million yuan. The earliest were public foundations, mostly funded and managed by the government, and the 2004 Regulations distinguish between ‘public fundraising foundations’ (gongmu jijinhui) which are allowed to raise funds publicly, and non-public fundraising foundations (feigongmu jijinhui), which are not allowed to raise funds publicly. Before 2004, over eighty percent of all foundations were government-initiated public foundations; but after 2004, private foundations increased to forty percent. Although private citizens started some of these private foundations, many are established by companies, especially those in real estate. In 2010, the number of private foundations overtook public ones, and by 2013 the total number of foundations reached 3,082—1,753 private and 1,329 public. At the latest count, 5,209 foundations were registered in China. Education is their most common focus, with fifty-three percent of all foundations focusing on education as a key area. By 2013, there were 422 education foundations, with net assets, income and charitable spending accounting for nearly half of the total spending of private foundations.
Why is the emergence of a foundation sector so important? According to Joel Fleishman, in the United States, foundations represent ‘the operational secret of America’s civic sector’ by playing ‘the priming role … in starting new civic–sector organisations, they nurture them into self-sustainability, and provide a continuous supply of social venture capital to the civic sector.’ While almost eighty percent of the foundations in the United States are grant-making, private Chinese foundations mostly operate their own projects; one study found that only 1.6 percent of all public foundations and 13.2 percent of all private foundations could be categorised as grant-making. Thus, despite the promise of private foundations becoming ‘the hope of China’s third sector’, very few foundations currently make grants to other non-profit organisations: 43.5 percent provide some grants to grassroots organisations, but only nine percent are solely grant-making foundations. As Xu Yongguang, the President of the Narada Foundation and Emeritus Chairman of the China Foundation Center, notes, private foundations that fund NGOs are still in the minority. This results in insufficient support for grassroots NGOs—a situation that will take time to change.
Despite its growing number of wealthy citizens, China has also been criticised for having little charitable giving. For example, the 2015 ‘World Giving Index’ ranked China 144 out of 145. Furthermore, while many foundations have been established, indicating the potential for an expanded charity sector, the China Foundation Ranking—a survey of grassroots Chinese NGOs that looks at their experiences with funders—criticised these organisations for not engaging in promoting the development of the sector or supporting the work of local NGOs. In the words of Chen Yimei, the Executive Director of the China Development Brief, ‘[the China Foundation Ranking] helps to make foundations realize that they should treat NGOs with more equality in their partnerships, rather than just assume a top-down relationship…. It’s a critical moment, a time when foundations are thinking about their operating model and the philanthropy sector is contemplating whether we should have more grant-making foundations.’
Sources of Change?
The lack of NGO support on the part of Chinese foundations might be due to a number of reasons, including legal impediments, habits of donors and foundations, or just an early stage of development. For example, over eighty-five percent of foundations have been registered with low levels of initial capital, under eight million yuan. As regulations and habits change, will we see that more Chinese foundations assume a grant-making role, similar to the foundations in the United States? Or, as these foundations continue to develop, will we see persistence along a unique path of development, i.e. ‘foundations with Chinese characteristics’?
Regarding legal impediments, there is a great deal of change in the regulations governing this sector. The 2004 Regulations promoted the expansion of the foundation sector due to changes in tax laws, as well as the formation of private foundations. More recently, the 2016 Foreign NGOs Law restricts the ability of international foundations to fund grassroots NGOs in China. This means that Chinese NGOs will need to depend more on domestic sources of funding. In addition to increasing services contracted by local governments, the 2016 Charity Law allows any registered charity to apply for permission to seek public donations (see also the article by Simon and Snape in the present issue of Made in China). This major change might provide more funding sources for NGOs, in addition to funding from foundations which, Shawn Shieh notes, is slowly increasing through mechanisms like ‘special funds’ and ‘joint fundraising’. The regulations governing registration and management of the three types of ‘social organisations’ (shehui zuzhi) are currently under revision, and amendments are expected to be issued related to the Regulations on the Registration and Administration of Social Associations (1998); the Interim Regulations on the Registration and Administration of Civil Non-Enterprise Institutions (1998); and the Regulations on the Management of Foundations (2004).
In addition to legal changes that seem to encourage philanthropic giving and the expansion of the foundation sector, there is also a shift in habits of both donors and foundations regarding willingness to fund NGOs. This began in 2008 after the Sichuan earthquake. In 2016 the top one hundred Chinese philanthropists donated 37.9 billion yuan, up nearly twenty-five percent from the record 30.4 billion yuan given in 2014, underscoring the philanthropic potential in China. Since, as Xu Yongguang notes, public foundations control most of the public donations in China, it may be more important to convince these types of foundations to support NGOs, as when the Chinese Red Cross offered funding to grassroots NGOs for the first time in the wake of the 2008 Sichuan earthquake. Xu and other foundation leaders are also creating initiatives like the China Private Foundation Forum and the China Foundation Center to encourage greater cooperation between foundations and NGOs.
These changes in the laws supporting foundations and philanthropy, shifting norms around charitable giving, coupled with the continued development of the foundation sector in China, might encourage foundations to take on more of a grant-making role similar to foundations in the United States. However, becoming a grant-maker is not inevitable, and is instead a decision that the founder must make. In this way, the unique path of development for Chinese foundations might influence whether foundations choose a grant-making mission over a project-based one. As Shawn Shieh contends, ‘In our interviews, a surprising number of foundations who did commit to grant-making did so either because their founders had participated in or were in some way influenced by international philanthropic approaches.’ If the American model of grant-making influences the development of Chinese foundations, this would provide an invaluable source of funding for Chinese NGOs, especially as these grants might allow for a stronger focus on capacity building, unlike government service contracts. Although there remain many obstacles, the collaboration between an increasingly vigorous foundation sector and Chinese NGOs would thus end up reinforcing the continued development of each.
Photo Credits: Jet Lee, HRH Communications.
Translation by HRIC
In August 2007, the Financial Times reported that at least five Chinese Internet entrepreneurs had introduced websites similar to Twitter. This was barely one-and-a-half years after the original Twitter was introduced on March 21, 2006. At present, if a website model has found success internationally, such as YouTube, Facebook, or Amazon, there is sure to be a local version in China.
In May 2010, China’s State Council Information Office issued its latest statistics on the extent of Internet use in the country—China’s online population has reached 404 million.1 In addition, the number of users accessing the Internet with mobile phones reached 233 million, with an overall Internet penetration rate of 28.9 percent of China’s population. 99.1 percent of villages and towns have Internet connections and more than 95 percent have broadband access. Moreover, 3G networks essentially cover the entire nation. These statistics show that Internet access is not only available to urban white-collar workers, university students, and intellectuals, but also to hundreds of millions of migrant workers, and even peasants in villages. Perhaps more importantly, the overwhelming majority of Internet users are under the age of 40.
When we put these two notions together—advances in technology and the number of users—one question frequently arises: Can the technology of the Internet propel Chinese civil society forward? It is difficult to give a simple “yes” or “no” answer to this question. True, knowledge is power, and the Internet can provide the masses with increased channels for understanding the world more rapidly while sharing experiences and information, which may ultimately bring about a concrete civil movement. But at the same time, the Internet is only a new kind of tool, and like any tool, its use is limited by many factors. For example, the historical advent of printing technology broke the upper class monopoly on knowledge. But the information that those who were literate might in fact read was not necessarily useful knowledge. Those who were literate might have wallowed in romances or martial arts fiction to escape reality.
Internet as Driving Force of Civil Society
Following the Wenchuan earthquake of 2008, a flood of ordinary citizen volunteers and NGOs suddenly emerged, astonishing both civilians and officials. In international settings during that period, I was often asked: How do you see this? Is the Wenchuan earthquake the turning point for Chinese civil society? It is very difficult to predict the future. Moreover, though personally I might feel this was a good trend, to call it a turning point is overly optimistic. And as far as the flood of volunteers goes, I feel that we must not overlook the Internet as a contributing factor. Whether it was sohu.com, gongyi.qq.com, or groups of private concerned netizens, all of them progressively and rapidly promoted the formation of an Internet culture for the public good. And this culture provided NGOs with a growing number of fresh troops.
As far as existing NGOs are concerned, the Internet has strengthened their capacity to a certain extent.
The Internet has helped NGOs to begin to break through publishing restrictions. Inside China, publication is controlled by the General Administration of Press and Publications through the ISBN or International Standard Book Number system. This system, originally set up for readers’ convenience in looking up and purchasing books, has created a finite resource in China— nothing can be published without an ISBN. Every year, every publisher has a fixed quota of ISBNs, so publishers regularly treat them as commodities. As a result, even if an NGO publication can get passed government censors, it would still have to pay a fee of 10,000 to 30,000 yuan for a book number. Most grassroots NGOs cannot afford this kind of cost. But the Internet has solved this problem. Many NGOs have their own online publications. The content and page format of these electronic publications may not compare with those of formal publications, but writers can freely expound on cutting-edge issues and share their personal experiences and views online. Furthermore, the official inspection and management of online “publications” is more relaxed than those for print publications. Disseminated as electronic magazines and books, these publications may contain content that could not be published in print. For example, in the summer of 2007, Minjian, a well-known magazine that provided a forum for those working in the NGO world to share real-life experiences , was shut down. But even though the print publication was stopped, an electronic version has been in circulation for more than a year. Through the medium of electronic publication, NGOs now have the opportunity to more efficiently communicate and exchange ideas with one another.
The Internet facilitates access to government information. One important NGO task is advocating for government reform and enactment of laws and policies that guarantee human rights. The foundation of this advocacy built upon both production of cutting-edge investigative reports, as well as an understanding of government information and figures concerning laws, regulations, policies, programs, action plans, financial investments, and statistical reports. If an NGO does not understand this content, it has no way to put forth targeted proposals. Prior to the Internet, such data was very difficult to find. But now, government departments have begun to set up their own websites. Although the richness of content varies among the websites of different provinces and different levels of government, there is already a great deal of information available on these websites. The contents of central government level websites in particular are extremely comprehensive. For example, on the Ministry of Education website one can find statistics on education from 1997 to 2008.
The Internet promotes international exchange. Nearly every large international NGO has a website. So, theoretically, Chinese NGOs could understand international NGOs’ work experience and establish contact with them through their websites. In fact, there is only a small number of NGOs that are already doing this. Many more are limited by their English ability. They would not even know how to search the useful sites among the tens of thousands of hits that come up on a Google search. Luckily, websites in Taiwan and Hong Kong provide NGOs with a certain amount of Chinese information sources. For example, Taiwan Nonprofit Information Center’s website offers a great deal of non-profit data for Taiwanese and international sites.
The Internet helps uncover and address grassroots issues. Before the Internet became popularized, individual cases highlighting social problems were extremely hard to uncover. To begin with, local government departments habitually concealed such cases. Moreover, because the parties involved had little chance to make their voices heard, NGOs had little access or understanding of the cases. The Internet solved this problem. They can now post their stories—or issue an invitation, so to speak—over the Internet and wait for public opinion to ferment. They can also search for NGOs involved in the relevant advocacy and contact them directly.
This way, not only do parties have more opportunities to solve problems, but NGOs also have the chance to address grassroots challenges. For example, a resident living on the banks of the Huai River can very easily take digital photos of paper mills discharging sewage and transmit those photos to an online environmental forum, and thus have a real chance in reaching an NGO that might take action. At the same time, the message can reach many more environmental NGOs and volunteers through e-mail groups and other methods.
The Internet helps strengthen connections among civil society organizations. In addition to using popular instant messaging tools such as QQ, MSN, and SKYPE, NGOs have established QQ groups, e-mail groups, online forums, and information exchange sites to share information. This enables NGOs to realize one of the most basic Internet functions—building virtual communities and convening meetings that cross space and time. This also promotes the special needs of civil society—NGOs in different provinces can communicate through e-mail groups or QQ groups, form formal or informal coalitions, and discuss a particular action to be taken on a particular international day or on behalf of a particular project, or provide their own views and signatures for a proposal submitted to a government department.
Civil Society Actors Energized by the Internet Still Face Heavy Resistance
Although the Internet offers development opportunities for civil society in the ways described above, there is still room for doubt about the reality of the situation. We still do not see substantive changes in the development of civil society in China. The reasons are many, but a simple list would include the following.
Websites have learned to impose self-censorship. At the beginning of this essay, I mentioned Chinese clones of Twitter. The most famous are Fanfou and Jiwai. Fanfou was set up in May 2007 and shut down on July 8, 2009. Jiwai was closed down the same month, on July 22, 2009, and there are presently no signs that either will re-open. According to official information on Fanfou, the company was informed by the relevant Internet Data Center that “as per notification by the authorities, you are required to suspend services.”2 No specific reason was given, but the reason was understood by everyone: microblogs along the lines of Twitter, with their high degree of freedom of speech, are not tolerated in the current political space. Large Web 2.0 sites in China, like kaixin001.com, renren.com (a Facebook clone), and tudou.com (a Youtube clone) are, after all, commercial sites. The prospect of losing one’s shirt in the event of a shutdown inevitably causes investors and managers to impose strict self-discipline. For example, a video was recently uploaded on tudou.com highlighting the issue of modern slavery worldwide, including a map marking countries where modern slavery existed. China, the United States, and India were all marked. China was not singled out—the United States, which has always been seen in China as freedom’s paradise, was identified. Moreover, the slave labor incident in the brick kilns of Shanxi has been widely reported in the official media. Still, the manager of tudou.com demanded that those few seconds highlighting China be cut—otherwise the video upload would not be approved.
NGOs are not very good at making use of the Internet. There are two reasons for this. First, Chinese NGOs exist in inferior environments and most lack a regular source of funding, so much so that some basically have no funding at all. A lack of funding leads to a lack of staff. If these NGOs want to improve their services, it is very hard for them to have additional energy to expend on using the Internet. Second, the pace of progress in science and technology is fast. NGO workers have already fallen behind the Internet age and do not understand the present technology landscape. I have a joke about this myself—a colleague once told me that if I posted information about an action on the “campus net” (now renren.com), a lot of people would see it. For a long time I thought the “campus net” meant the nets on the campus tennis courts when we were at university in the 1990s.
NGO exchange websites are not promoted. For the last several years, many websites have begun to provide exchange or publicity platforms, such as dedicated blog spaces for NGOs, or setting up web platforms where NGOs and businesses can interact. But almost none have achieved the desired results. (One exception that nearly succeeded was the “NGO fazhan jiaoliu wang,” loosely translated as the “NGO Development Exchange Network.” However, that site was closed down as of March 2010.) Except for sites that are very visually appealing, those that want to attract large numbers of visitors and participants must rely on advertisements and public relations. However, grassroots NGO websites lack not only funds for publicity; in China, they lack even proper legal status. The majority are not officially registered with the government, or otherwise registered as corporate entities. They must rely on occasional reports produced by friends in the media, constituting much less than effective publicity. Because they lack a public profile, it is difficult to attract visitors to their websites. If NGOs are willing to put the time they would spend serving social groups into attracting visitors to their website, it would certainly be beneficial to their own work. But when the number of website visitors is small, the number of those willing to offer help or information is small, and even the number of readers is pitifully small, NGOs will not spend time posting their own information. In turn, if an NGO posts little information, the attractiveness of the site will decline, thus further perpetuating the negative cycle.
Most Internet users are after entertainment. Though there are strict controls on freedom of speech on the Internet in China, they are only aimed at political and human rights topics. By way of compensation, there is everything one could wish for in the areas of finance, entertainment, and leisure. Online, you can watch movies, read novels and celebrity gossip, download and play online games, and find restaurant reviews. These sources of online entertainment are conveniently available, and through them one can obtain temporary happiness in the midst of a life filled with pressures. There is also online education, from elementary school on up, as well as day-to-day news media. Yet, there is little content that would inspire awareness of citizens’ rights and subsequent action. This being the case, how many netizens would think of making a dedicated search to understand serious issues of civil society?
The space for NGOs to grow is still not large. Though NGOs proliferated following the Wenchuan earthquake, as far as NGOs themselves are concerned, three conditions are needed for smooth growth: people, including staff, volunteers, and supporters; money, including subsidies from foundations, the government, and individual donations; and experience in planning and carrying out projects. And all NGOs are weak in these three areas. Outside the NGO realm, government policy continues to center around economic development, which is to say that any actions by civil society that might impact economic development may come into conflict with the government. Thus, there is a paradox here: if a certain NGO supports an action based on principles of human rights, such as an exposé of sweatshop conditions at a factory, local government fears of investment outflow will rise and the NGO will inevitably face local government pressure. If we speak in terms of a grassroots NGO’s actual strength, it is certain to be defeated. Yet if the NGO abandons principles of human rights to save itself, it loses its fundamental purpose. In 2006, it was the “Survey of Chinese Environmental NGOs” that provided a real answer to this problem. That survey revealed that the majority of environmental NGOs adhered to the principle of “help without adding trouble; engage, not intervene; supervise, not take over; and work without breaking the law,” and sought to cooperate with the government. Over 62 percent cooperated closely with the government; 32.1 percent chose neither cooperation nor confrontation; and only 3.3 percent were at odds with the government over the issue of environmental protection. Thus, the Internet may allow large growth in NGO numbers, but it is still difficult for a newly minted NGO to mature to the point of playing its social role adequately.
Suggestions for How to Use Internet to Promote Civil Society
In short, the Internet is only a tool, and whether or not it can really promote civil society depends on its users and the way it is used. At least at present, a very long period of time will be required for civil society to be realized in China. But a long time is not necessarily a bad thing, for it means we will have time to become more fully prepared. In my opinion, several things could be done immediately to realize the Internet’s potential in promoting civil society.
Specialized Internet technology support groups can help. The science and technology of the Internet change every day, not only in terms of speed, but in their enormous variety. Young people and students who have grown up in the Internet era have no difficulty understanding all this. But for NGO staff busy with work offline, one or two training sessions will not suffice to keep them abreast of online technology or reach any serious level of understanding. Organizing a specialized Internet technology support group seems a realistic approach. The group would be made up of specialized technical personnel who would act as consultants to the NGOs, helping them to choose appropriate Internet technology and formulating promotion strategies.
Translation support groups can help. Although online information and data concerning international NGOs are as vast as the sea, if one cannot understand it, it might as well not exist. Yet the information and experience of international NGOs are quite valuable for Chinese NGOs, which have only been around for the last 20 or so years. It would be very difficult to expect every international NGO to have its own translators, but if there were a group of volunteers, like the Chinese resource yeeyan.org, this would hugely increase Chinese NGOs’ capacity and effectiveness in accessing information. Yeeyan.org was a group that translated international news reports into Chinese, but it was shut down for a period of time in late 2009 and no longer translates such material.
NGOs should be trained in using the information on government websites. Even though a great amount of statistics and data have been made public on government websites, hardly any NGOs use this information in their advocacy work concerning the government, contributing to a lack of data and policy analysis on which to base their advocacy.
Online human rights education can help. Though government censorship of the Internet is extremely strict and much of the content is difficult to access, we should not waste the Internet as a platform. A lot of civic and human rights educational content can still be discussed, especially the principles of anti-discrimination and respect that are part of human rights education—these are not sensitive issues and they have a substantive effect on society. Moreover, no social transformation is achieved in a short time. The reason government currently values the economy and devalues human rights is that no one in government, let alone the masses, understands why human rights should be respected. People get the kind of officials they deserve. Most government officials come from the people, so if we can use the Internet to teach people to respect human rights, we will gradually be able to influence the formulation of government policy.