Monday, August 27, 2018

The Draft Regulation for Registration and Management of Social Organizations

On the first week of this month, the Ministry of Civil Affairs (MCA) issued an important draft regulation governing the registration and management of social organizations (the official Chinese term for nonprofits) for public comment. The draft Regulation for Registration and Management of Social Organizations, and instructions for sending in comments, can be accessed using the links below. The deadline for sending in comments in September 1.

ChinaLawTranslate has an English-language translation of the regulation here.

At this writing, the word is that the MCA has received only around 100 comments, so if you know any Chinese NGOs, encourage them to submit their comments in the next few days.

Some Background

This draft regulation will replace the three previous regulations that formed the core of the regulatory system for social organizations: the "Regulations for the Registration and Management of Social Groups" issued on October 25, 1998; the "Provisional Regulations on the Registration and Management of Civil Non-enterprise Units" issued on October 25, 1998; and the "Foundation Management Regulations" issued on March 8, 2004. Note: The draft regulation has replaced the term "civil, non-enterprise units" with the much improved "social service organizations".

Given the rapid changes in the NGO sector in China, including the passage of the Charity Law in 2016, these regulations were seen by many observers as outdated and in serious need of revision. In the last half of 2016, we finally saw drafts of revisions to all three regulations issued for public comment, but then silence for two years before this draft regulation appeared this month.

Given the very short time frame allowed for public comments, the draft regulation has already stimulated quite a bit of discussion in the sector, including calls to slow down the drafting process to ensure that different views are heard.

For those interested, NGOCN has two posts here with feedback on the draft regulation:

CDB has also collated a number of posts about the draft regulation here in Chinese,

There have also been some forums organized about the draft regulation. Here's a Weixin post that has been getting quite a bit of attention citing the views of Yang Tuan, a long-time and respected observer of the sector, and other analysts and observers of the sector.

Some Impressions and Comments

I've only had the chance to skim through the regulation, and the various discussions, but here are some quick impressions and comments based on what I've been reading.

First of all, I'm surprised they came out so quickly. I was on record that I didn't think we'd see a draft this year, so now I'm going to eat my words. I’m also surprised that MCA is only allowing about four weeks for public comment given the importance of the draft regulation.

Second, the draft regulation is going in the right direction in terms of creating a more enabling environment for NGOs, but the details of the regulation are fraught with a number of problems, including inconsistencies with the Charity Law. Below are some problems that have been raised:

The draft allows direct registration (e.g. registering with Civil Affairs without needing a PSU) for four categories of social organizations: 1) chambers of commerce and trade associations; 2) science and technology groups; 3) charitable, public welfare organizations; and 4) rural and urban community organizations. One complaint is that the definition of the third category- charitable, public welfare organizations – is overly narrow, even more so than the definition of charity and public welfare spelled out in the Charity Law, and that the definition should be broadened.

Another problem is Article 4 which prohibits social organizations from engaging in “for-profit business activities. This seems to be overly restrictive and not in line with the Charity Law which has a more expansive view of the activities social organizations can engage in. Article 9 of the Charity Law states that charitable organizations may not have a “profit-making purpose,” which implies that profit-making activities would be acceptable as long as they support a charitable purpose.

In another improvement, the draft regulation allows social organizations to set up branches, but not “regional branches” so apparently branches can only be set up in the administrative area in which that social organization is registered, but this is not clearly stated.

The draft regulation makes it more difficult for smaller foundations to register. The minimum registered capital for foundations of 8 million RMB was raised above the 2 million RMB amount required in the previous regulations, and the 2016 draft regulations. Also the 2016 draft regulations allowed foundations to register below the provincial level, a move that would have helped smaller, community foundations. This draft regulation now states that foundations can only register at or above the provincial level.

There is quite a bit of language in the draft regulation about the need for social organizations to establish Communist Party organizations, and carry out Party activities. Social organizations are required to prepare the conditions, and provide a workplan, for setting up party organizations. None of this language requiring Party organizations was in the Charity Law or in the previous regulations.

The draft regulation also spells out very specific, and onerous, penalties for social organizations that violate their legal responsibilities, and allows law enforcement wide discretion in investigating violations. Language clarifying limits on law enforcement investigative powers should be included to protect the legal rights of social organizations and their staff.