More Comments on the Charity Law Draft (public comments due November 30!)

In an earlier post on November 11 (Some Good News Regarding the Overseas NGO Law Draft and the Long-Awaited Charity Law), I discussed the first draft of the Charity Law which was released for public comment at the end of October. Tomorrow (November 30) is the last day to post comments on the draft so I thought I would provide some more thoughts on this draft. I was fortunate to be able to attend a talk on Friday at the Chinese University of Hong Kong by Professor Anthony Spires, who is an expert on Chinese civil society and has been monitoring the Charity Law since it was first proposed almost 10 years ago, and will include some of his commentary here.

In my earlier post, I noted that the Charity Law draft, on the whole, provides a positive, enabling environment for charitable organizations.  The Overseas NGO Management Law draft, in comparison, looks stifling and draconian. Professor Spires confirmed that earlier drafts of the Charity Law did cover the activities of overseas charitable organizations before a different division of labor was suddenly decided on late last year. The Charity Law would only address Chinese organizations and come under the supervision of Civil Affairs, while activities of overseas NGOs would be regulated by the Overseas NGO Law under the supervision of the Ministry of Public Security.

My earlier post examined three positive highlights of the Charity Law draft[1].  Here, let me elaborate a bit more and add some critical discussion of some of the language in this draft that I would like to see revised.

One highlight of the draft is that it upholds a quite expansive view of charity or philanthropy to include the promotion of health, environmental protection and “other activities consistent with the societal public interest”. Of course, we will see have to see how this law is implemented, but the language here would theoretically allow for work on HIV/AIDS, labor and legal advocacy to be considered charity. That would be a big step in the right direction given the importance of the term “charity” in Chinese discourse on civil society.

Second, the draft appears to allow for the direct registration of charitable organizations, thereby doing away with the old “dual management system” in which NGOs had to find a professional supervising agency before they could register with Civil Affairs. The language in the draft could be clearer on this point, but an article posted on the NPC’s website confirms that this is the intent. Article 9 states that charitable organizations would also have to meet “other conditions stipulated by law and administrative regulations” so it does it leave open the possibility that other laws such as the Overseas NGO Law or the various regulations for registration and management of social organizations would need to be considered. There has also been talk about drafting a Social Organizations Law that would address the registration and management of all social organizations, not just charitable ones, but also trade and professional associations, scientific associations, community organizations, among others. Given that the Overseas NGO Law and other related regulations are currently being drafted and revised, their impact on the Charity Law remains to be seen.

Third, the last article in this draft law notes that “even when a non-profit organization with the purpose of conducting charitable activities is not registered, it can still conduct charitable activities within its limits, but shall comply with the relevant provisions of this Law and benefit from relevant rights and interests according to law.” As I said in my previous post, this clause essentially says that unregistered NGOs should not be considered as illegal and should be allowed to carry out charitable activities. That is a very significant step forward from seeing such NGOs as illegal, and recognizes that small, community groups or groups consisting of marginalized populations such as sex workers may not have the capacity or desire to register but may still perform an important societal purpose.

To these positive highlights, Professor Spires adds a few more optimistic observations:

One is contained in Article 24 which states that “charitable organizations can form professional associations (hangye zuzhi). These professional organizations  shall reflect needs of the profession, promote professional, strengthen  professional  self-discipline,  raise  the  credibility  of  the  charity  sector and promote the development of charitable causes.” This article encourages something that used to be discouraged which is for charitable organizations, NGOs to come together to form networks and associations that can represent their interests and help to develop the sector. One example that comes immediately to mind is the China Private Foundation Forum (中国非公募基金会论坛) that was formed several years ago and meets annually to promote discussions on developing and regulating the philanthropic foundation sector. This type of self-regulation among charitable organizations within the philanthropic sector is precisely the kind of regulation that the Charity Law should be encouraging, while minimizing regulation by government agencies.

Another is that there is no corporatist language restricting the number of charitable organizations or their scope of work. In past regulations, it was common to see clauses that stated that only one social organization working on that issue area was allowed to register within a given administrative area, or that a social organization registered in an administrative area could only work within that area. For example, an organization working on water pollution in Beijing could not register if a similar organization was already registered in Beijing. And if a water pollution organization was able to register in Beijing, it could only legally work within the administrative borders of Beijing, even though water pollution does not respect such borders.

Finally, Article 100 states that charitable organizations only need to submit an annual report. Under past regulations, social organizations were required to go through an annual review process. If they did not pass that review, then they could have their registration annulled. Under this draft, charitable organizations only have to submit a report to the Civil Affairs authorities; they do not need to have that report approved by the authorities.

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While this draft sets a good model for forthcoming legislation in the NGO sector, it is not perfect. There are a number of areas for improvement if you want to dive into the details. Here are a few of the major issues that stood out for me:

1) Chapter 3 of the draft addresses Charitable Fundraising and, following past practice, separates charitable organizations into two classes: public fundraising (公募) and non-public fundraising (非公募). The former are allowed to fundraise through public channels such as television, radio, newspapers, setting up collection boxes in public spaces, holding charitable performances, sales, competitions, gala dinners, etc. The latter are only allowed to accept private gifts and donations. Articles 25-26 in this chapter allows charitable organizations that previously had public fundraising status to keep their privileged status, while other organizations need to wait for a two-year period and show they operated within the rules and have not violated the Charity Law.

This stipulation sounds reasonable but it maintains a two-class system in which charitable organizations with public fundraising status (most of these are GONGOs or NGOs with government connections) are grandfathered in, while other organizations have to prove their credentials. Yet the former are by no means deserving of that status. In 2011, a number of scandals such as the Guo Meimei  incident rocked the philanthropic sector, and all of them implicated public fundraising GONGOs such as the Chinese Red Cross and the China Soong Chingling Foundation. These charitable organizations should also have to prove their worth, and not automatically be given public fundraising status simply because they are big, “professional” and have government connections.

We also should keep in mind that in the past, small, grassroots organizations doing sensitive work can, and have been, cited by authorities for violating various laws and regulations as a way to close these organizations down or discourage them from continuing their work. In this context, charitable organizations that have been cited for violating the law should not be automatically disqualified. This draft states, to its credit, that Civil Affairs authorities will only consider violations of this Charity Law rather than of other existing laws and regulations, but still the authorities’ selective application of laws and regulations to silence organizations doing more sensitive work should be kept in mind; these organizations should be given a second chance to apply for public fundraising status.

2) There are also various references to the tax benefits of charitable organizations, but these references should be made clearer in terms of which tax laws and regulations apply since this is an area that is unclear not only to charitable organizations but also to tax authorities. A great deal of work needs to be done to raise awareness about, and simplify procedures, for obtaining tax benefits for both charitable organizations and donors to those organizations.

3) There is quite a bit of emphasis in this draft on transparency and information disclosure, with an entire chapter (Chapter 7) devoted to this issue. While it is understandable that charitable organizations should be accountable and transparent, this draft goes too far in requiring charitable organizations to report on how they use their donations. Articles 76 and 77 in particular, require a level of reporting that would make it difficult for smaller, grassroots organizations that lack staff to do report at this level. More emphasis should be placed on self-discipline and self-regulation, and relying more on professional associations and industry standards, and less on government authorities, to regulate this area.

4) Finally, the drafters need to be careful of using overly broad language such as “endangering national security or the public interest” to justify investigations of charitable organizations. Article 109, for example, states: “Where charitable organizations engage in or fund activities that endanger national security or the public interest, the relevant organs investigate in accordance with law, and where the circumstances are serious, the civil affairs departments revoke registration certificates; where a crime is constituted, pursue criminal responsibility in accordance with law.”

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In conclusion, the Charity Law draft is a promising piece of legislation. Too often, we see laws and regulations issued seeking to discourage and restrict the tremendous interest in philanthropic and public interest activities in Chinese society. With some further revisions, this draft could set an important standard for legislation that finally enables the development of the charitable, civil society sector in China.

As Professor Wang Ming of Tsinghua University said in his address earlier this month announcing the launch of Tsinghua’s Institute of Philanthropy, we need to start thinking about how best to develop philanthropy and civil society once this law passes. We need to start thinking about what philanthropy and civil society in China will look like in the post-Charity Law era.

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[1] There are two English-language translations of the Charity Law draft provided by China Development Brief and ChinaLawTranslate.