The International Journal
of Not-for-Profit Law

Volume 2, Issue 2, December 1999

A quarterly publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor


Should the Rules Governing Foundations be Placed in a Civil Code?
By Ulrich Drobnig

Strategic Options for Building the Chinese NGO Sector in an Open World
By Li-Qing Zhao

The Regulation by Public Bodies of Charities in Scotland and Northern Ireland
By Dr. Christine R. Barker and Dr. Kerry J. O’Halloran

Legislation for Non-Profit Organizations in the Republic of Moldova [Russian]
By Ilya Trombytsky

Endowments of Foundations Receive Contributions from the State Privatization Fund of the Czech Republic
By Petr Pajas

A Canadian Charity Tribunal: A Proposal for Implementation
By Arthur B.C. Drache, Q.C. with W. Laird Hunter

Case Notes

Asia Pacific:
the Philippines

European Court Cases:
European Court of Human Rights (Turkey)
| European Court of Justice (Belgium)

Newly Independent States: Belarus

South Asia:

Western Europe:

Country Reports

Asia Pacific:
| China | Japan | Korea | New Zealand | the Philippines | Taiwan | Vietnam

Central and Eastern Europe: Regional | Bosnia and Herzegovina | Croatia | Czech Republic | Kosovo | Montenegro | Slovakia

Latin America:
| Chile | Colombia | Uruguay | Venezuela

Middle East and North Africa: Iran | Israel | Palestine

Newly Independent States: Azerbaijan | Belarus | Kazakhstan | Moldova | Turkmenistan | Ukraine | Uzbekistan

North America:
Canada/ the United States

South Asia:

Sub-Saharan Africa:
| South Africa

Western Europe:
France | Germany | the Netherlands | Portugal | Turkey | the United Kingdom

International Developments

Recognition and Protection of NGOs in International Law
By Frits Hondius

NGOs for Transparency and Against Corruption
By The Europhil Trust

International Grantmaking

Grantmaking and Embargoed Countries: An Overview Using Kosovo as a Case Study
By Timothy S. Burgett and Timothy R. Lyman

Dissolution Dos and Don'ts
By Karla W. Simon

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Editorial Board

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Strategic Options for Building the Chinese NGO Sector in an Open World

By Li-Qing Zhao


Since the 1980s, dramatic changes have been taking place in both China and the globe, and they seem to be even more significant in the former. China used to be a country totally dominated by the State with a so-called centrally planned system insulating it from the outside world. After twenty years of reform and opening, China now has a new look in the world: the market system has been built up step by step, the control of the state on the society has been loosened greatly, the country’s ties with outside world have become closer and closer, and accordingly it has become a new major actor in global affairs. However, China’s NGO sector nowadays is still in its infant stage: to varying degrees, most social organizations are controlled by the Chinese government, and few are genuine NGOs.

Facing an open world, China needs greatly to build up its NGO sector. The demands originating from an open world: economic globalization, new types of international aid, the formation of international civil society, and so on, require Chinese NGOs to react and play a positive role both at home and abroad. The demand originating from China’s reform and development: the transition towards the market economy and the new role and functions of the Chinese government, require Chinese NGOs to assume many essential functions previously taken by the government and to provide various social services.

Building up the Chinese NGO sector requires efforts from various sides, including intellectuals, government officials, journalists, and people from many other circles. One major task is to separate the existing social organizations from the government. The Chinese Government should create a more positive legal and policy environment for NGOs. Chinese NGOs should establish more sound internal organizational structures, and so forth.

If the Chinese NGO sector is set up, Chinese NGOs should devote themselves to the process of China’s sustainable development, promote the transition to market economy, cooperate with the Chinese government, and foster China’s civil society. Internationally, Chinese NGOs should try to establish ties with foreign NGOs, multilateral and bilateral development agencies, and other foreign institutions or people, promote mutual understanding, and cooperatively engaging in global sustainable development.

I. China Facing an Open World

Since the 1980s, great changes have been taking place in the world, most notably, the globalization of economies, the end of cold war and the resulting reformation of world economic and political regimes, the revolution of information technology, the freer and freer flow of products, capital, people, and information across national boundaries, and the emergence of global civil society and its most active organizations-- NGOs.

For China, all of these changes have historically unique meanings. Until 1978, China was a country closed to the outside world for nearly 30 years. During that period, no external changes could severely affect the internal affairs of China. Yet since 1980s, things have been extremely different. Paralleling the dramatic process of globalization, China has been becoming an increasingly open country.

In 1978, Mr. Deng Xiao-Ping launched and led China’s reform and opening. Twenty years have passed and China has greatly changed. In vast rural areas, the old system of people’s communes was disintegrated, and the new responsibility system of farmer household was established. In industrial and commercial sectors, the reaches of direct state intervention have been substantially lessened: traditional state planning is canceled, the proportion of state-dominated industrial activity has decreased from almost 100% to the current level of one-third.

Most importantly, China now has a much more plural and open economy. By the end of June 1998, 314,533 foreign enterprises had been ratified by the Chinese government to open their business in China. The amount of direct foreign investment by contract was 545.366 billion US dollars, and the amount of actual direct foreign investment was 242.321 billion US dollars. (Hu 1998, p. 4) Since 1993, China has become second only to the United States in absorbing foreign direct investment in the world. According to the statistics of China’s customhouse, in 1997, the total amount of its foreign trade was 325.06 billion US dollars. Exports were 182.7 billion US dollars, and imports totaled 142.36 billion US dollars. (IECM No.2 1998. P1) China is now the tenth largest trade country in the world. Relative statistics are more meaningful. In 1998, the output of foreign industrial enterprises in China accounted for 18.57% of the gross output of domestic industry; the number of laborers employed by foreign enterprises in China, 17.5 million people, accounts for 10% of China’s non-farming labor force. In 1997, the amount of export and import of foreign enterprises in China was 152.62 billion US dollars, accounting for 46.95% of the total amount of China’s export and import. (Hu, 1998, pp. 4-5) In addition to the speeding up of internationalization of Chinese economy, there has been an increasing flow of population across China’s boundaries. For instance, in 1997 the number of overseas tourists entering China reached 57.588 million. (Zhou, 1998, p. 4)

The facts illustrated above demonstrate that China has been increasingly integrated into the process of globalization and can no longer avoid the impact of major changes in the outside world. As an important part of the interdependent world, China should not only understand and introduce those changes, but also positively react to them.

II. The Necessity of Building the Chinese NGO Sector

In the past two decades, China has made great achievements in its development. However, several factors are threatening the sustainability of its development, such as population explosion, severe scarcity of resources, degradation of environment, and polarization of the rich and the poor, etc. To resolve these problems and make its development sustainable, China needs to establish its NGO sector.

China used to be a country dominated almost totally by the state. There were no enterprises, let alone NGOs. During the process of reform and opening, the market mechanism was introduced, enterprises established. Meanwhile, the state mechanism has not been given up—a new “planned and market” system is being built. However, China cannot avert those problems emerging in the name of market failure and state failure. Although both the market and the state have their positive roles in development, it is also undeniable that both of them have limits. Furthermore, the two cannot mutually eliminate their flaws completely. Hence, it is increasingly obvious in China that a NGO sector is inevitably needed in addition to the enterprise sector, which is profit-oriented, and the government sector, which is power-driven.

The outside demand for China to develop its own NGO sector is also important. For the past twenty years, increasing numbers of bilateral and multilateral development agencies and foreign NGOs have been entering China and conducting various activities to promote China’s development. Especially in recent years, both foreign government organizations and NGOs have expressed their strong will in seeking out Chinese NGOs as their collaborators in implementation of development projects in China. Foreign organizations provide knowledge, equipment, and financial resources to their Chinese partners or potential NGOs to support their activities and capacity building.

In China, a sound NGO sector will be able to promote sustainable development and benefit China’s society in many respects. Chinese NGOs, as new actors engaging in development, can do what both the government and enterprises cannot do, are reluctant to do, or cannot do well. Such things are education, poverty elimination, protecting women and children, environmental protection, family planning, and so on. Chinese NGOs can mobilize, organize, and support ordinary people to participate in the process of social and economic development. Chinese NGOs can also contribute much by promoting the current government restructuring and fostering the formation of a new ethical system adapted to the newly established market economy, and pushing the progress of political democracy. Internationally, Chinese NGOs can promote mutual understanding between peoples, establish relationships of cooperation with foreign counterparts, exert increasing influence on the decision making process of the international community, and play a more positive role in international civil affairs.

III. The Strategic Option for Building the Chinese NGO Sector

Although public-spirited activities conducted by citizens have been flourishing since China’s reform in the 1980s, a NGO sector has not been formed until now. On one hand, most social organizations still are internally under government controls to varying degrees. On the other hand, only a very few private NGOs have registered and gained legal status, and the scale and capacity these NGOs are very limited. To establish a NGO sector is a new and exciting challenge in China.

Considering the current state of Chinese society, there are two ways for would-be Chinese NGOs to pursue. The first type of NGO originates from the state system, and is created by and has a close relationship with the government. These organizations may be called government-NGOs. The other type of NGO originates from the nascent civil society. These organizations are independent from the government, and may be called private NGOs. Both types of Chinese NGOs have advantages and disadvantages in their organizational building respectively. Currently, there are many government-NGOs in China. They have large membership, can play important roles in China’s development and exert relatively strong influences on the process of China’s policy making, and do not rely on foreign aid. However, since almost all of them are created and, to some extent, supported financially by the Chinese government or its affiliated organs, their ways of doing things are more or less bureaucratic and lack independence. Private NGOs, independent from the Chinese government, but financially rely on foreign donors, their membership is small, and their influence on Chinese society is marginalized.

At this current stage, both government-NGOs and private-NGOs have not developed as real NGOs. The former has a close inner relationship or in some cases even overlaps with the government. The latter is still in its infancy. Both types of NGOs have to pursue an uneasy way to become real NGOs. The particular contexts for the building of Chinese NGOs both internally and internationally represent different prospects for these two types of NGOs. There are four major factors affecting the strategic options for building the Chinese NGO sector.

  1. The social conditions. Social conditions are the institutions, customs, attitude, knowledge and experiences in Chinese society which affect the process of building NGOs. Since China has no experience with contemporary civil society and the whole Chinese society as a whole had been controlled exclusively by the state for nearly forty years, it lacks social conditions as a starting point to build its NGO sector. Any NGOs originating outside the state system have to make huge efforts to carve a way and strive to maintain existing rights in a strange social environment. It needs time to be understood and accepted by the public, perhaps most importantly by people inside the state system, because until now most of the resources, money, skilled workers and educated people are still contained in that system.
  2. Legal and policy environment. The attitude of the Chinese government towards the building of NGO sector is essential. The communist party of China, which is in power, has declared that it will respect and apply itself to establishing the rule of law and the small government with big society. Generally speaking and from a long-term perspective, the current leadership of the party and government is positive towards a civil society with an active NGO sector as one of its most important organizational forms.

    Nevertheless, in the near future and concretely speaking, the leaders of the Chinese government are very cautious towards any movement in this newly emerging sector. They are on guard against any threats to the political stability and social order in China. This can explain why the Chinese Government recently enacted two new provisional regulations. The first is the Regulation of the Registration and Management of Social Groups (shehui tuanti dengji guanli tiaoli). The other is the Regulation of the Registration and Management of People-Organized Non-Enterprise Units (minban feiqiye danwei dengji guanli zanxing tiaoli). It seems that these regulations are too strict for any attempts by Chinese citizens to organize a NGO. This is so because any Chinese NGO must obtain the sponsorship of a government organ as its “lean-and-depend-upon unit” (gua kao dan wei). These sponsoring units have responsibilities to supervise and monitor the NGOs under their patronage. Although the Chinese government to some extent understands the necessity of building the NGO sector and does not intentionally oppose its formation until it can be ensured that the forms of NGOs will not be used in a corrupt way or against the Chinese government, the process of deregulation cannot be initiated in China. The newly enacted regulations of Chinese NGO sector demonstrate that the Chinese government demands a sound and orderly NGO sector in promoting China’s development. To reach its goal, it has first to eliminate any possible threatening elements.
  3. The making of leaders and staff of Chinese NGOs. To set up China’s NGO sector requires a number of people who are intelligent, educated, and competent to take on such work. However, most qualified persons in China are inside the government or its associated institutions, such as universities, research institutes, state-controlled social organizations. Even those people who are willing to undertake the cause of building Chinese NGOs, they will not ready to give up their positions inside the state system, which provide economic security, political status, and social reputation. These benefits are difficult to obtain in current Chinese society outside the state system.
  4. The foreign donors and partners of Chinese NGOs. Since the 1980s, and especially in recent years, more and more foreign NGOs have been entering China. In its 1995 China Report, UNDP listed more than twenty foreign NGOs which have been active in China’s development. Furthermore, many government organizations, such as World Bank and other multilateral aid institutions and bilateral development agencies have been seeking Chinese NGOs to participate in their sponsored development projects. Their efforts have gained few results, but these are fairly limited. For instance, two private Chinese NGOs, the Friends of Nature, set up in 1994, and the Global Village of Beijing (its legal status is a company, not a NGO), set up in 1996, have conducted some activity concerning environment protection relying financially on foreign aid. However, the scale and influence of the two are quite limited.

    Along with the global trend of moving away from foreign aid to a new type of international cooperation, China’s NGO sector can not expect too much of foreign aid. In 1995, the amount of total disbursements to China by foreign NGOs was 22 million US dollars, and accounted only for less than 1 % of the total amount of foreign aid to China. (UNDP 1997, p. 40) The prospect of shifting the assistance of foreign government agencies away from their current counterparts in the Chinese government to Chinese NGOs is not very promising. Foreign government aid to China has been experiencing a decline since 1994. (UNDP 1997, p. 27)

In view of the above-mentioned factors, the appropriate strategic option for the building of Chinese NGO sector should be to take the government-NGOs as the base to start with and keep their dominant status in China’s emerging NGO sector for a certain time.

Government-NGOs enjoy some major advantages to expand organizationally and institutionally. Since the leaders and staff of government-NGOs are usually former government officials (and in some cases officials currently with the government), their activities are often a continuum of those taken by the government. Any initiatives and innovations made by government-NGOs will be much more easily understood and accepted by the Chinese society and ordinary people than that by private NGOs. Government-NGOs enjoy the trust of the government and they are able to do many things which the government cannot do or do well. The Chinese government does not need to always monitor them in order to avoid being misused by political opponents, dubious Westerners, and other corrupt persons. The strict, newly promulgated regulations have little actual effect on government-NGOs, which are created and financially supported by some agencies of the government themselves. It is natural for them to have a “lean and rely-upon unit.” Government-NGOs can easily find suitable persons as their leaders and staff. The current administrative reform which is aimed at streamlining the Chinese government, moves out more and more unnecessary officials and gives a strong push to the building of government-NGOs. Government-NGOs can expand their networks into the bottom of China’s society by the assistance of administrative system of the government. Although government-NGOs require foreign aid, they are not necessary to rely on it. Compared with private NGOs, they have much more solid domestic bedrock.

As for private NGOs, things are quite different. Leaders of private NGOs nowadays in China often have some experience in Western countries and can speak English well. Usually they have a strong desire to engage in the cause of China’s sustainable development, and have done a lot in particular fields. However, not only do the various social conditions in China restrict their activities, but the Chinese government also lays a heavy burden on them so as to limit their number and scope of activity. According to the newly enacted regulations of NGOs, it is very difficult for Chinese citizens to privately organize a non-profit organization, providing that they could find a government agency to rely upon. There are not enough persons both trusted by the government and capable of leading the activity of NGOs, and some people have little opportunity to privately organize a NGO. The declining and shrinking of international aid constrains the potential of external support of Chinese NGOs. That means those Chinese NGOs which depend absolutely upon foreign aid will be small in number, narrow in scope of activity, and perhaps more importantly, their sustainability of surviving will be a serious problem in the future. Furthermore, the Chinese government might doubt the intention of those Westerners who exclusively assist private Chinese NGOs. If a private Chinese NGO solely relied on foreign aid, that would hamper its efforts at sinking its roots into the Chinese society.

IV. Two Stages of Building the Chinese NGO Sector

Establishing the NGO sector in China is hard work and time-consuming. In the foreseeable future, the process of constructing this new sector should be divided into two stages. In the first stage, the main tasks should be as follows:

  1. To let Chinese NGOs assume some major and extremely urgent work to promote sustainable development in China which the government and the enterprises can not do or do well, such as poverty elimination, family planning, women and children protection, environment protection, etc.
  2. To make the transition process of China’s economic system from a centrally planned one to a market-based one more smooth, rapid, and especially more ethical.
  3. To help the Chinese government accomplish its scenario of administrative reform and restructuring, and promote the transition process toward a smaller but more efficient government.
  4. To make adequate rules and standards for the new NGO sector. The emerging Chinese NGO sector primarily requires institutional construction, such as rules and standards to govern the behavior of NGOs and their relationships with the Chinese government, the public, and foreigners.

Under the current contexts of China’s society and severe policy and legal environment toward private NGOs, only government-NGOs have the potential to fulfill the above tasks. Although government-NGOs do have their limits, their experiences and achievements demonstrate that some of them are not only capable of engaging in the building of NGO sector, but also are enthusiastic to do so. For government-NGOs, the great challenge they face is how to transform the current status of semi-NGOs to real NGOs. That means these organizations must separate from the government and obtain independent status in the society—i.e. they should not always be the subordinates of the government, and they should gradually become independent social organizations which enjoy the rights of self-governance.

The Chinese government is the most essential actor for the transformation of government-NGOs. The current Chinese government is development-oriented. It has been leading China’s reform and opening for 20 years. Without its leadership dismissing the traditional rural people’s commune system, introducing the market system, absorbing foreign direct investment, the restructuring of government itself, and other major achievements during the process of twenty-year reform and opening are unthinkable. The establishment of the NGO sector in China requires the leaders of the Chinese government to understand the values and significance of this new sector in the context of the market economy, thereby devoting themselves to its establishment, just as they have been leading the market-oriented economic reforms.

In the near future there is not much possibility for registering more new private NGOs in China. However, the importance of existing private NGOs, though very few, should not be overlooked. They should treasure the rights gained of surviving and operating in the unique circumstance of Chinese society. They should dedicate themselves to particular fields to promote sustainable development, to focus on capacity-building, to establish partnerships with the government, and to sink their roots into the Chinese society. With these efforts, private NGOs may set good examples, illustrating that a private NGO could be beneficial to the transition toward the market economy, the stabilization of politics, and the auspiciousness of society, further building their constituency and allowing the government to put its trust in them.

Once government-NGOs have separated from the government and become real NGOs, and private NGOs have developed and become mature, the Chinese NGO sector will have its broad foundation and sound structure, then the second stage of building the Chinese NGO sector begins. Chinese NGOs should become independent in society, but keep a close, cooperative relationship with the government. They should be friends, partners, and collaborators of the government. By that time, the government will not worry too much about negative possibilities with a NGO sector as before. The crucial time for the Chinese government to release its strict control on private NGOs will be coming, and the current provisional regulations concerning the NGO sector will be replaced by relevant laws which are rational, sound, and permanent. The NGO sector combined with the market sector and the state sector in China will play its ideographic role in China as well as in global sustainable development.

Foreign people can help with the cause of building Chinese NGOs in many ways; they can provide relevant information, expertise and funding; hold relevant conferences or workshops; promote intercommunion; conduct relevant research and investigation either jointly with Chinese scholars or financially supporting them; and create a positive international environment in order for Chinese NGOs to participate in international affairs more easily and effectively.


International Economic Cooperation Magazine, No.2 1998. News and Commentary: the National Working Conference on Foreign Economic and Trade.

Zhou Xiao-Ming, 1998. A Study of China’s Tourist Industry: Expansion, opening, and absorbing foreign investment. No. 8. International Economic Cooperation Magazine.

China’s State Council. 1998. The Provisional Regulations of the Registration and Management of Social Organizations (shehui tuanti dengji guanli tiaoli).


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ISSN: 1556-5157