NGO Law Monitor: China

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Last updated 17 May 2012

Introduction

Civil society and its accompanying legal framework have become considerably more complex in China in recent years. The range of nonprofit, philanthropic and other social organizations (hereafter, civil society organizations or CSOs) has expanded rapidly, as have their fields of activity, including their partnerships with the government and business sectors. CSOs of various kinds are moving gradually but steadily from the margins of society into the mainstream.

Management of the emerging civil society sector by Communist Party and state agencies remains restrictive but also is unable to keep up with the growth of CSOs. As Yu Keping, a well-known scholar who has written extensively on civil society, points out, the actual space for CSOs in China is much larger than the institutional space allowed by formal laws and regulations..

Many CSOs are managed in a considerably less intrusive way than others. These include a large number of organizations that provide social services or conduct other work that the state supports and that are not perceived as threats to the state. But advocacy, religious, critical and policy-oriented groups are often much more closely monitored by Party and state authorities. In some cases, organizations have been closed and civil society activists have been detained, tried and imprisoned for their peaceful activities.

The legal framework to manage this highly differentiated process of state control – in which some organizations are supported and facilitated and others are repressed – has its origins in China’s 1982 Constitution and in an array of regulatory documents promulgated and enacted since the late 1980s. These regulate the full range of legally-registered non-profits which the Chinese refer to generically as "social organizations" (shehui zuzhi, 社会组织) "Social organizations" are separated into three major categories: social organizations (shehui tuanti, 社会团体) which are the equivalent of membership associations and include many trade and professional associations; civil non-enterprise institutions (minban fei qiye danwei, 民办非企业) which are the equivalent of nonprofit service providers; and foundations (jijinhui, 基金会). China is a civil law jurisdiction with very strong political and executive authority; judicial activity plays very little role in the treatment of civil society groups.

In an effort to improve its regulatory capacity and in coordination with CSOs, the government has in recent years sought to revise the legal framework governing CSOs, fundraising and charitable donations, and worked with local governments to carry out experiments in these areas that will inform national legislation. It has also made improving "social management" a focal point of its 12th Five Year Plan (2011 - 2015). "Social management" here refers to the party-state's ability to manage and coordinate with a range of CSOs and other non-state actors in addressing the country's many pressing social problems. It calls for the state and CSOs to engage in a collaborative relationship to address common goals.

At a Glance

Organizational Forms	Social organizations (shehui tuanti), civil non-enterprise institutions (minban fei qiye danwei), and foundations (jijinhui). The last category includes two types of foundations: public fundraising and non-public fundraising foundations.
Registration Body	Ministry of Civil Affairs
Barriers to Entry	System of “dual registration” for all social organizations; Extensive documentation requirements; Broad prohibitions in certain activities and areas such as advocacy, legal assistance, labor, religion, and ethnic minority affairs; Extensive discretion to deny registration;
Barriers to Activities	Government discretion to limit establishment of more than one organization in activity area; Government discretion to intervene in internal affairs; Burdensome reporting requirements; Invasive government monitoring and inspections.
Barriers to Speech and/or Advocacy	The Government has discretion to limit speech and advocacy for specific organizations and types of organizations and for specific cases that might be seen to negatively impact national security.
Barriers to International Contact	Organizations are sometimes required to report international contacts to authorities and sometimes to seek approval for visits, international cooperation, foreign donations, etc. They are also discouraged from working with or receiving funding from overseas organizations which are engaged in "democracy promotion". These include the National Endowment for Democracy (NED), the Open Society Institute (OSI), and the International Republican Institute (IRI).
Barriers to Resources	There are restrictions on fundraising and networking. With the exception of public fundraising foundations, CSOs are not allowed to engage in public fundraising. CSO networks are also a sensitive issue. A number of networks have emerged in recent years but they are all informal in nature. Approval is also required for receipt of external resources. A 2009 regulation requires CSOs to go through more paperwork to transfer donations from oversees organizations into their bank accounts.

Key Indicators

Population	1,336,718,015 (2011 est.)
Capital	Beijing
Type of Government	Communist State
Life Expectancy at Birth	Male: 72.68 years Female: 76.94 years (2011 est.)
Literacy Rate	Male: 96% Female: 88.5% (2008 census)
Religious Groups	Daoist, Buddhist, Christian: 3%-4%; Muslim: 1% -2%; (official atheist) (2002 est.)
Ethnic Groups	Han Chinese: 91.5%; Zhuang, Manchu, Hui, Miao, Uyghur, Tujia, Mongol, Tibetan, Buyi, Dong, Yao, Korean, and other nationalities: 8.5%; (2000 census)
GDP per capita	$7,600 (2010 est.)

Source: The World Factbook. Washington, DC: Central Intelligence Agency, 2009.

International Rankings

Ranking Body	Rank	Ranking Scale (best – worst possible)
UN Human Development Index	Rank: 101	1 – 182
World Bank Rule of Law Index	45^thpercentile	100 – 0
World Bank Voice & Accountability Index	5^th percentile	100 – 0
Transparency International	Rank: 75	1 – 180
Freedom House: Freedom in the World	Status: Not Free Political Rights: 7 Civil Liberties:6	Free/Partly Free/Not Free 1 – 7 1 – 7
Foreign Policy: Failed States Index	Rank: 72 Human Rights: 8.8	177 – 1 0-10

Legal Snapshot

International and Regional Human Rights Agreements

Key International Agreements	Ratification*	Year
International Covenant on Civil and Political Rights (ICCPR)	No	--
Optional Protocol to ICCPR (ICCPR-OP1)	No	--
International Covenant on Economic, Social, and Cultural Rights (ICESCR)	Yes	2001
Optional Protocol to ICESCR (OP-ICESCR)	No	--
International Convention on the Elimination of All Forms of Racial Discrimination (ICERD)	Yes	1981
Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW)	Yes	1980
Optional Protocol to the Convention on the Elimination of Discrimination Against Women	No	--
Convention on the Rights of the Child (CRC)	Yes	1992
International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families (ICRMW)	No	--
Convention on the Rights of Persons with Disabilities (CRPD)	Yes	2008

* Category includes ratification, accession, or succession to the treaty

Constitutional Framework

The Constitution of the People’s Republic of China (1982, as amended) includes the following relevant provisions which relate to the nonprofit, charitable and philanthropic sector:

Article 1
The People's Republic of China is a socialist state under the people's democratic dictatorship led by the working class and based on the alliance of workers and peasants.
The socialist system is the basic system of the People's Republic of China. Disruption of the socialist system by any organization or individual is prohibited.

Article 2
All power in the People's Republic of China belongs to the people.
The National People's Congress and the local people's congresses at various levels are the organs through which the people exercise state power.
The people administer state affairs and manage economic, cultural and social affairs through various channels and in various ways in accordance with the law.

Article 5
The People's Republic of China governs the country according to law and makes it a socialist country ruled by law.
The state upholds the uniformity and dignity of the socialist legal system.
No laws or administrative or local rules and regulations may contravene the Constitution.
All state organs, the armed forces, all political parties and public organizations and all enterprises and institutions must abide by the Constitution and the law. All acts in violation of the Constitution or the law must be investigated.
No organization or individual is privileged to be beyond the Constitution or the law.

Article 28
The state maintains public order and suppresses treasonable and other criminal activities that endanger state security; it penalizes criminal activities that endanger public security and disrupt the socialist economy, as well as other criminal activities; and it punishes and reforms criminals.

Article 33
All persons holding the nationality of the People's Republic of China are citizens of the People's Republic of China.
All citizens of the People's Republic of China are equal before the law.
The state respects and guarantees human rights.
Every citizen is entitled to the rights and at the same time must perform the duties prescribed by the Constitution and the law.

Article 35
Citizens of the People's Republic of China enjoy freedom of speech, of the press, of assembly, of association, of procession and of demonstration.

Article 36
Citizens of the People's Republic of China enjoy freedom of religious belief.
No state organ, public organization or individual may compel citizens to believe in, or not to believe in, any religion; nor may they discriminate against citizens who believe in, or do not believe in, any religion.
The state protects normal religious activities. No one may make use of religion to engage in activities that disrupt public order, impair the health of citizens or interfere with the educational system of the state.
Religious bodies and religious affairs are not subject to any foreign domination.

Article 50
The People's Republic of China protects the legitimate rights and interests of Chinese nationals residing abroad and protects the lawful rights and interests of returned overseas Chinese and of the family members of Chinese nationals residing abroad.

Article 51
Citizens of the People's Republic of China, in exercising their freedoms and rights, may not infringe upon the interests of the state, of society or of the collective, or upon the lawful freedoms and rights of other citizens.

Article 52
It is the duty of citizens of the People's Republic of China to safeguard the unification of the country and the unity of all its ethnic groups.

Article 53
Citizens of the People's Republic of China must abide by the Constitution and the law, keep state secrets, protect public property, observe labor discipline and public order and respect social ethics.

Article 54
It is the duty of citizens of the People's Republic of China to safeguard the security, honor and interests of the motherland; they must not commit acts detrimental to the security, honor and interests of the motherland.

National Laws and Regulations Affecting Sector

Some of the key national laws and regulations affecting the sector are as follows. This list is by no means complete. For additional information, see the website of the Ministry of Civil Affairs (www.mca.gov.cn) and the U.S. International Grantmaking site, http://www.usig.org/countryinfo/china.asp#_ref1

Constitution of the People’s Republic of China (1982, as amended, see selected provisions above)
Law of the Red Cross Society of the People's Republic of China (adopted by the Standing Committee of the National People's Congress, October 31, 1993)
Regulations on the Registration and Management of Social Organizations (adopted by the State Council October 25, 1998, currently in revision)
Interim Regulations on the Registration and Administration of Civil Non-Enterprise Institutions (adopted by the State Council October 25, 1998)
Interim Regulations on the Registration and Administration of Public Institutions (adopted by the State Council October 25, 1998)
Public Welfare Donations Law (adopted by the Standing Committee of the National People’s Congress June 28, 1999)
Law of the People's Republic of China on Individual Income Tax and Detailed Rules for the Implementation of the Individual Income Tax Law of the People's Republic of China (as enacted in 1999 and later amended)
Provisional Measures Regarding the Management of Social Welfare Organizations (issued by the Ministry of Civil Affairs, April 10, 2000)
Trust Law of People’s Republic of China (adopted by the Standing Committee of the Ninth National People's Congress April 28, 2001)
Non-State Education Promotion Law of the People’s Republic of China (adopted by the Standing Committee of the Ninth National People's Congress December 28, 2002)
Circular of the Ministry of Finance on the Relevant Issues Concerning the Preferential Taxation Policies for the Poverty-Relief and Charity Donation Materials Imported for the Purpose of School Education. (issued by the Ministry of Finance, March 10, 2003)
Regulations on the Management of Foundations (adopted by the State Council March 8, 2004, currently in revision)
Regulations on the Administration of Names of Foundations (issued by the Ministry of Civil Affairs June 23, 2004)
Accounting System for Nonprofit Organizations (issued by the Ministry of Finance September 2004)
Reply of the State Administration of Taxation on Tax Exemption of 33 Permanent Representative Offices of Foreign Enterprises, such as the Beijing Representative Office of the Ford Foundation (issued by the State Administration of Taxation June 11, 2004)
Measures for the Information Disclosure of Foundations and Measures for Annual Inspection of Foundations (issued by the Ministry of Civil Affairs January 12, 2006)
Enterprise Income Tax Law of the People’s Republic of China; Provisional Regulations of the People's Republic of China on Enterprise Income Tax and Detailed Rules for the Implementation of the Provisional Regulations of the People’s Republic of China on Enterprise Income Tax (as enacted in 2007 and as amended)
Notice of the Ministry of Finance and the State Administration of Taxation on the Policies and Relevant Management Issues Concerning the Pre-Tax Deduction of Public Welfare Relief Donations (promulgated January 18, 2007)
Measures for the Administration of Donations for Disaster Relief (issued April 28, 2008)
Notice of the State Administration of Foreign Exchange on Issues concerning the Administration of Foreign Exchange Donated to or by Domestic Institutions (issued by the State Administration of Foreign Exchange December 25, 2009)

Pending NGO Legislative / Regulatory Initiatives

Key pending legislative and regulatory initiatives at the national level include:

Drafting and debate over of a national Charity Law that has been under discussion for a number of years;
Revision of the Regulations on the Registration and Management of Social Organizations (originally promulgated in 1998);
Revision of the Interim Regulations on the Registration and Administration of Civil Non-Enterprise Institutions (originally promulgated in 1998)
Revision of the Regulations on the Management of Foundations (originally promulgated in 2004);
Further detailing the framework for nonprofit tax status and deductions; and
Other legislative and regulatory initiatives, mostly under the aegis of the Ministry of Civil Affairs and the national tax authorities.

Local Experiments

Over the last few years, there have been important local policy experiments in the Chinese nonprofit and philanthropic sector, mostly at the provincial level. These policy experiments are important because they provide the central authorities with policy ideas and experiences that play a role in shaping national-level legislation. They therefore serve as harbingers of changes in national-level legislation. In July 2009, for example, the key regulator of charitable and philanthropic organizations, the Ministry of Civil Affairs, announced a Cooperative Agreement on Advancing Integrated Reforms in Civil Affairs with the municipal government of Shenzhen, a major economic area in the southern province of Guangdong and China’s original special economic zone.

Under the Cooperative Agreement, Shenzhen will serve as an “experimental site” for reforms in a wide range of civil affairs for assessment by the Ministry of Civil Affairs and other government agencies. Shenzhen is the largest Special Economic Zone in China and located in the southern province of Guangdong which borders Hong Kong. Shenzhen's reforms include new steps in the registration and management of social organizations, including allowing certain categories of social organizations to register directly with the Shenzhen Civil Affairs Bureau without the sponsorship of a professional supervisory agency (normally a government agency). Under the old "dual management" system, social organizations were required to find a supervisory agency as a sponsor before they were allowed to register.

Such steps mark the first real potential reforms in the “dual management” structure of Chinese social organizations in several decades. The Cooperative Agreement also allows Shenzhen to take over regulatory jurisdiction over domestic and foreign foundations based in Shenzhen; reform and expand government contracting with social organizations to provide social services; develop new measures to encourage charitable giving (including potential new tax incentives at the local level); and reforms in other areas of civil affairs. Activities under the Cooperative Agreement will be carried out from 2009 to 2015 and continuously assessed by the Ministry of Civil Affairs and other government agencies for potential expansion in other areas of China. [1]

Direct local regulation of social organizations and foundations in addition to national regulation is also starting in other areas of China. Until recently, local civil affairs and other governmental units merely implemented national regulations on social organizations, foundations and other groups without the power to directly regulate at the local level. The power to directly regulate at the local level is, of course, a key step in giving provincial and local authorities real legal authority over the nonprofit sector.

Over the last few years, a few provinces and province-level municipalities have followed Shenzhen's lead and with the blessing of the Ministry of Civil Affair, begun issuing e-formal regulations and other legal documents governing the various forms of charitable and nonprofit groups that are based in or active in their jurisdictions. Jiangsu and Hunan provinces, for example, have issued local-level regulations governing foundations and fundraising. Guangdong, Shanghai, Beijing, Chengdu and other provinces and cities are carrying out their own local legislative experiments governing the registration and management of different categories of social organizations.

Jiangsu led the way in the provincial regulation of philanthropy in October 2007 with the first sub-national regulations on foundations, the Jiangsu Province Interim Regulations on the Supervision and Management of Local Foundations, which have been implemented by provincial measures for approving, inspecting and requiring annual reports from foundations in addition to the national rules on these matters.[2] In an even more important local experiment that is being assessed at the national level (like the Shenzhen measures that are being undertaken under the 2009 Cooperative Agreement) the Jiangsu provincial people’s congress adopted what may be the first provincial regulations on charitable organizations in January 2010. Under the Jiangsu Provincial Regulations on the Advancement of Charitable Activities, Jiangsu is now expected to adopt a range of rules and measures to regulate, encourage and manage its rapidly growing charitable sector. [3]

[1] For the Chinese text of the Cooperative Agreement, see here. For an English translation, see here.
[2] For the Chinese text of the Jiangsu regulations on foundations, see here.
[3] For the Chinese text of the Jiangsu regulations on charity, see here.

Yunnan has also been experimenting with regulations governing the registration and management of international NGOs in the province. Over the last two decades, Yunnan has become a popular destination for international NGOs and provincial authorities have for the most part welcomed them because of their contribution to the local economy. But the province’s attitude has changed in recent years as they face the challenge of managing a growing number of international and domestic nonprofits that are not registered with Civil Affairs. In December of 2009, the province issued the first-ever regulations in China specifically governing international NGOs. This development deserves scrutiny because it may serve as a model for future national regulations governing international NGOs. The Yunnan Province Interim Regulations Standardizing International NGO Activities provides international NGOs with a way of gaining legal status in the province through a registration process known as bei’an ors depositing their file on record with the provincial Civil Affairs Department. Interviews with NGOs in Yunnan indicate that the regulations are being welcomed by international NGOs which have been operating in China for years without legal status. At the same time, the regulations are also requiring international NGOs to submit to much more paperwork and control and discouraging some partnerships between international and Chinese nonprofits. As part of the registration process, international NGOs are required to report and get approval for every project they operate in the province and for every partnership they engage in with Chinese nonprofits.

Of all the local experiments, Guangdong province’s have been the boldest and garnered the most attention because of its size and importance in the national economy. In November of 2011, the Guangdong Civil Affairs director announced that the province would be making it easier for several different categories of social organizations (social services, charitable organizations, etc.) to register by doing away with the professional supervising agency requirement. The province would also decentralize the authority to register social organizations to the township and subdistrict levels of government, open up the space for trade associations by allowing more than one association per sector, and encourage more government purchasing of services provided by social organizations. If implemented, the Guangdong regulations would be the most liberal in the country, and serve as a bellwether for similar changes in the national regulations governing social organizations.
Guangdong’s reforms have been actively promoted by the province’s top leader, party secretary Wang Yang, who is a member of the Politburo, and mentioned as a candidate for the Politburo Standing Committee – China’s most powerful decision-making body - when it changes its leadership in the fall of 2012. Wang Yang is generally seen as a more liberal-minded leader due in part to his public position in support of nonprofits.

The Minister of Civil Affairs, Li Liguo, recently was quoted endorsing the Guangdong reforms raising expectations that the more Guangdong model will be used as the blueprint for revisions to the national-level regulations governing registration and management of social organizations. In addition, other news out of Guangdong shows that the reforms are expanding and making their way down to the local level. Recently, Guangdong announced it would also relax restrictions on fundraising for nonprofits, and interviews with Guangdong NGOs and academics indicate that Guangdong will also be issuing more favorable regulations governing the tax deductibility of charitable donations.

The Fate of the Charity Law and Other National-level Legislation

While local legislation has been making significant headway, national-level legislation appears to be on hold. The long-awaited revisions to the regulations governing the registration and management of social organizations, and the Charity Law, have both been delayed, despite rumors that their passage is imminent. The Charity Law, in particular, received a boost in 2011 due to a series of scandals that enveloped the charitable foundation sector. One example was the Guo Meimei incident that implicated the Chinese Red Cross and exemplified the lack of transparency and accountability in China’s philanthropy sector. These scandals raised awareness among both government leaders and society of the pressing need for a Charity Law to regulate philanthropy and fundraising.

Late in 2011, it was announced that the Charity Law was been included on the legislative plan for the 11th National People’s Congress (NPC) Standing Committee for 2011. The reports note that the NPC generally agrees with the content of the Ministry of Civil Affairs draft legislation and asks the State Council Legal Affairs Office (the State Council is the highest executive body in the Chinese government) to review the legislation and submit it to the NPC for consideration. Given that the Charity Law was also included on the 2010 legislative plan, and has been with the State Council for some time, it is difficult to know whether this announcement represents any significant progress in the Charity Law’s passage. Certainly, the significantly increased public scrutiny and discussion over this last year of problems and scandals in the philanthropic sector has placed more pressure on lawmakers to get the Charity Law approved. But given the legislative logjam in the State Council, it is difficult to know when the Charity Law will be reviewed and sent to the NPC for approval.

The Guangdong and Yunnan Experiments in 2012

In early 2012, Guangdong province was still in the news as the trailblazer in reforming the registration and management system for nonprofits. In January, provincial authorities announced that by July 2012, they would eliminate what has been the main obstacle to nonprofit registration: the requirement to find a professional supervisory unit that would sponsor the nonprofit. They also announced a series of other measures that made Guangdong the most open province with regard to nonprofit registration and management. This push for a more open environment for nonprofits has been credited to Guangdong's top leader - provincial party secretary Wang Yang who is also a member of China's Politburo and possibly may enter the Politburo Standing Committee - Yang has come out publicly to state his support for nonprofits and criticize local bureaucrats for not making it easier for nonprofits to register.

Since then, the Minister of Civil Affairs has come out endorsing the Guangdong reforms, raising expectations that the long-awaited national-level revisions to the nonprofit registration and management regulations would incorporate the Guangdong measures.

These recent developments that can be seen as a continuation of the CCP's emphasis on "innovative social management" in the 12th Five Year Plan (2011-2015) issued last year. Innovative social management refers to the government carrying out innovations in the way it regulates or manages society and societal organizations (China's term for nonprofits).

With regard to the government's regulation of social organizations, two distinct trends can be observed. One involves lowering barriers to social organization registration and fundraising. The other involves standardizing management of social organizations.

We can see the first trend in the local-level experiments in Guangdong and other localities that will allow a social organization to directly register with Civil Affairs without first finding a professional supervising unit (generally a government agency or parastatal organization authorized to serve as a supervising unit) willing to sponsor it. Recently, the city of Guangzhou (the provincial capital of Guangdong) announced it was also going to be removing restrictions on fundraising for social organizations (read news article). For most of China, other than the Red Cross and public fundraising foundations, social organizations in general are not allowed to fundraise publicly. The Guangzhou announcement is consistent with what scholars in Guangdong have told me about more planned reforms in line with relaxing restrictions over fundraising and strengthening the tax-exempt status for social organizations. Together with the registration issue, the issues of fundraising and tax-exempt status pose some of the biggest obstacles for China's social organizations. The Guangzhou announcement shows that Guangdong is clearly taking the lead in lowering barriers for social organizations.

Other localities appear to be following Guangdong's lead. Recently, Shanghai announced it would be carrying out similar experiments with registration this year (read news article).

The second trend of standardizing the management system can be seen in Yunnan province's efforts to standardize management of international NGOs, and the recent information disclosure guidelines issued by the Ministry of Civil Affairs for charitable donations. This standardizing trend is often justified in the name of strengthening and professionalizing the nonprofit sector, but it can also be interpreted as an effort to strengthen government control over social organizations.

Two recent announcements fall into this category. One issued by Beijing Municipality's Civil Affairs bureau is to establish a human resource system for social organizations. The bureau hopes that this move will help to raise the salaries of social organization staff and promote the professionalization of the nonprofit sector (read news article).

The other is a Notice issued by the Ministry of Finance and Ministry of Civil Affairs which calls for major charitable projects to be audited after their completion, and the results of the audit made public. The Notice applies to major projects undertaken by foundations, representative offices of foreign foundations and public welfare social organizations that qualify for tax-exempt charitable donations (read news article).

We should expect both of these trends to continue in the coming months and years, as the government at both central and local levels wrestles with how to better manage social organizations. One area to watch is whether the second trend will raise more barriers to social organization activity, in the name of standardization, and thereby counteract the first trend which seeks to lower the barriers.

Developments in February and March 2012

In February and March 2012, there was more news of reforms lowering barriers to social organization activity in other regions and sectors. An Opinion was issued by national-level agencies allowing religious organizations for the first time to establish foundations, social service organizations, and nonprofit hospitals. Yunnan province also announced it would follow the lead of Guangdong and other provinces and cities that are experimenting with a system that would allow social organizations to register directly with Civil Affairs without needing approval from a professional supervising unit. Professional supervising units would be renamed professional guidance units under this new system, although it is unclear exactly what this means in practice.

At the same time, another news item shows how far China has to go in improving the regulatory environment for social organizations. This article is about Wang Ming, the director of the Tsinghua NGO Research Center and a member of the China People's Political Consultative Conference (CPPCC), proposing a motion at the CPPCC's annual meeting to carry out more favorable tax policies for non-public fundraising foundations and social organizations, and to promote more government contracting to grassroots social organizations. He mentions that the Beijing government had allocated 100 million yuan to purchase services from social organizations for 2010, but because many grassroots organizations did not meet the qualifications for contracting, only about 50 million was disbursed. The article also mentions a related story in the news recently: the continued difficulties that Beijing Huiling, a long-standing grassroots organization serving youth with disabilities, is having getting registered as a social organization in Beijing. Together, these stories illustrate that policy reforms by themselves are insufficient. Those policies have to be carried out and enforced in ways that actually benefit China's many grassroots organizations, and allow more resources to flow to them.

For summaries of all articles, see China Development Brief's A View from the Top

Two other news items that are not directly related to social organizations should be mentioned. One is the news coming out from the National People's Congress' (NPC) annual meeting held in early March that the Criminal Procedure Law will be amended. The earlier amendment was controversial because it allowed police to detain, arrest or hold suspects for surveillance without informing their families. At this NPC session, that amendment was revised to remove the clauses permitting arrest or surveillance of suspects without informing family members. Police must now inform the suspect's family within 24 hours after arrest or surveillance. But police will still be allowed to detain suspects without informing family members. The amendment also clarifies that confessions extorted through illegal means such as torture should be excluded from evidence during a trial.

The other news has to do with the removal of Bo Xilai as Party Secretary of Chongqing Municipality in late March. Aside from the implications this has for China's leadership transition in the fall, Bo's removal also calls into questtion the Chongqing model which has gottn so much play in the media. More relevant for our purposes, the fall of the Chongqing model should strengthen support for the Guangdong model championed by Wang Yang, the Guangdong Party Secretary who was seen as a rivel of Bo's in getting a seat in China's Politburo Standing Committee. As noted above, an important part of the Guangdong model is a more liberal approach to regulating social organizations.

Developments in March and April 2012

Several news articles during this period offer a more sobering assessment of developments in the nonprofit sector, or the “charitable” or “public welfare” sector as it is commonly referred to in the Chinese press and official documents. These articles highlight an effort by the Chinese government to cultivate and promote social organizations that are “safe” and enjoy close ties with the government.

One example is a recent initiative by the Beijing Civil Affairs Bureau asking civil servants to gradually withdraw from the charitable, public welfare organizations to ensure the voluntary and social nature of these organizations. A number of civil servants currently work in GONGOs that operate in the charitable sector, and would gradually withdraw from these organizations through different measures though no specifics are given. This initiative can be seen as an effort by the government to cultivate “safe” charitable organizations that look like NGOs or nonprofits, yet retain close ties with the government.

Another example comes from an article about a meeting at Tsinghua University attended by two officials heading the NGO Management office within the Ministry of Civil Affairs. The officials are not optimistic about new national regulations for registration and management of NGOs that have been expected to be issued for some time, and proposed another tack by calling both for direct registration of NGOs and establishing party groups within NGOs. Their unstated hope, it seems, is that the latter measure, which has been attempted before without much success, would help to comfort conservative interests that fear losing control over NGOs.

A third example comes from a 2011 document issued by the Central Committee and State Council that calls attention to the government’s effort to encourage public institutions to join the public welfare sector as social actors. Public institutions are part of the “system”. While they lack the coercive power of government agencies, they do receive financial support from the government budget and their staff enjoy administrative rank and privileges in varying degrees. This document shows that public institutions are now being encouraged to compete as quasi NGO-like organizations in an increasingly crowded public welfare sector with GONGOs and grassroots NGOs.

Taken together, these three examples, along with the recent push to promote approved social work agencies that can bid on government contracts, show that the government is making a concerted effort to cultivate a class of coopted social organizations that appear on the surface to be voluntary and independent, yet in reality enjoy close ties with the government.

For summaries of all these news articles, see China Development Brief's A View from the Top

Legal Analysis

Organizational Forms

There are three legal forms of CSOs in China:

Social Organizations (SOs) (shehui zuzhi, 社会组织)
Civil Non-enterprise Institutions (CNIs) (minban fei qiye danwei, 民办非企业)
Foundations (jijinhui, 基金会)

In addition to these legal forms, there are also CSOs registered as for-profit businesses, and unregistered CSOs. Some unregistered CSOs gain legal status by attaching themselves to another legal entity, such as a Social Organization (shehui tuanti) or a Public Institution (shiye danwei) (including, for example, a university or research institute). Neither CSOs registered as businesses nor unregistered CSOs are considered to be CSOs in a legal sense, but they are voluntary, non-governmental, non-profit, self-governing organizations in an operational sense. They are mission-driven, nonprofit organizations founded by and governed by private individuals. Many are funded by foreign governments and embassies, international organizations and foundations, and are required to justify the non-profit nature of their activities in their reports to funders.

Together, these three legal forms of CSOs, along with the informal CSOs, are the closest equivalent to what we understand to be non-governmental, non-profit organizations. A substantial portion of the legal CSOs – in particular, Social Organizations and Foundations – were either created by the government or have close ties with a particular government agency, and are often referred to as government-organized NGOs (GONGOs). In contrast, the informal CSOs generally are more independent.

The key registration body for most organizational forms in China is the Ministry of Civil Affairs. In certain cases CSOs may also register and operate as for-profit businesses, and those do so through the State Administration for Industry and Commerce.

Public Benefit Status

Chinese law distinguishes between nonprofits that have a public benefit purpose and those that serve other purposes. The Public Welfare Donations Law confers public benefit status on two categories of organizations: “public benefit social organizations” and “public benefit nonprofit institutions.” CSOs with public benefit status are eligible for tax exemption, but they are also subject to stricter government supervision [Public Benefit Donations Law, Chapters 3-5].
According to Article 10 of the Public Welfare Donations Law, “public benefit social organizations” are legally established foundations, charitable organizations, and other social organizations founded to promote public benefit undertakings. Article 3 lists which activities qualify as “public benefit undertakings" [6]:

Disaster relief, poverty alleviation, assistance to the handicapped, and assistance to social organizations in needy circumstances;
Education, scientific, cultural, public health, and athletic undertakings;
Environmental protection and construction of public facilities; and
Other public benefit undertakings promoting social development and progress.

“Public benefit nonprofit institutions” are legally established educational institutions, scientific research institutions, health institutions, cultural institutions, public sports institutions, social welfare institutions and others that carry out public benefit undertakings and are not-for-profit.

It appears that all foundations, some social organizations, and most public institutions have public benefit status. CNIs can also obtain public benefit status and accept donations under the Public Welfare Donations Law.
However, informal non-profits that are registered as businesses or unregistered are not eligible for tax exemption even though operationally, they are nonprofit and have a public benefit purpose. Some of China’s best-known independent, public benefit CSOs fall into this category.

Barriers to Entry

There are extensive barriers to entry based in policy, practice, and regulation. Registration procedures are complex and cumbersome, with extensive documentation and approval requirements. Organizations are required to operate under a system of “dual management” in which they must generally first obtain the sponsorship of a “professional leading agency” such as a government ministry or provincial government agency, then seek registration and approval from the Ministry of Civil Affairs in Beijing or a local civil affairs bureau, and remain under the dual control of both agencies throughout their organizational life. In practice, it is not easy to obtain such sponsorship, particularly if a social organization lacks good connections in the government or is operating in sensitive sectors such as advocacy, legal aid, labor, religion and ethnic minority affairs.

Broad prohibition clauses bar the registration of groups that are perceived to oppose the state and/or Party. For example, the Regulations on the Registration and Management of Social Organizations (1999) prohibit registration of organizations that fail any part of this test: “Social organisations must observe the constitution, state laws, regulations and state policy; must not oppose the basic principles of the constitution, harm the unity, security or ethnic harmony of the state, or interests of the state and society, or the lawful interests of other organisations or citizens, or offend social morality.”[4] Other broad provisions give the state wide discretion over which organizations are allowed to register.

The “dual management” requirements and broad prohibition clauses apply to all types of organizations, including social organizations, foundations, and other groups. But the barriers to entry do not end there. For example, the Regulations on the Registration and Management of Social Organizations (1999), the governing document for the largest subsector of Chinese nonprofits, also stipulate that applicant organizations must comply with a wide range of other requirements and undergo a lengthy application and approval process. Such applicants must have at least fifty individual members or thirty institutional members; a fixed location; staff with qualifications appropriate to the professional activities of the organisation; minimum assets of 100,000 RMB (currently US$9,500) for national organizations and 30,000 RMB ($2,800) for local organizations; and must supply the registration and management agency with a wide array of organizational documents. Government agencies may rely on a wide array of reasons to deny registration. Furthermore, the Regulations on the Registration and Management of Social Organizations (1999) and the Interim Regulations on the Registration and Administration of Civil Non-Enterprise Institutions (1998) both stipulate that SOs and CNIs cannot establish branch organizations or offices in other regions. SOs and CNIs get around this provision by registering their branch office as a separate organization.

After registration, organizations may seek approval in a separate process for an official seal and to open a bank account. Separate permissions must be sought from the relevant government management agencies to establish a branch or subsidiary of the group; to modify their registration or to amend their charter; to change their legal representative, and for other purposes. The government is provided with broad discretionary authority to close social organizations.

In the face of the “dual management” system, the difficulties in negotiating registration and approval, onerous reporting requirements and the opportunity for frequent government intrusion into organizational matters, many Chinese social organizations of various kinds either register as a for-profit business, or operate without formal registration. According to the Interim Measures for Banning Illegal Non-Governmental Organizations, these informal nonprofits are formally illegal, making them even more subject to state discretion and control.

[4] Regulations on the Registration and Management of Social Organizations (1999), Art. 4, available here.
[5] Regulations on the Registration and Management of Social Organizations (1999)

Barriers to Operational Activity

Barriers to operational activities can be raised or lowered by the authorities at their discretion, depending in large part on how their activities are viewed by the party-state. Generally, nonprofits engaged in social services and philanthropy tend to be viewed more favorably than nonprofits engaged in advocacy and legal aid. For some forms of organizations, such as social organizations or civil non-enterprise organizations, the government has authority under relevant regulations to bar the establishment of more than one such organization in its field in any particular locality as a way to prevent what is viewed as duplication, overlap, and competition and to maintain ties between such groups and their governmental sponsors. [6]

The government may also intervene in the appointment of directors, trustees or senior staff; narrow the boundaries of the work that organizations may engage in by reference to the government-approved original organizational application or charter; govern the banking arrangements of various kinds of charitable groups in detailed ways; undertake investigations of operational activities and terminate organizational activities through application of tax laws; and undertake other restrictions on operational activities. Even for registered organizations that have no issues with the state, reporting requirements can be quite burdensome, particularly for small organizations. The regulatory framework allows for significant government intervention and interference. Strong security forces, such as the Ministry of Public Security and other groups, intensively monitor organizations of particular sensitivity for the Party and state.

In 2009 and 2010, a number of methods have been used to restrict and control the operational activities of certain nonprofit groups. For example, the Open Constitution Initiative (Gongmeng), a Beijing-based public interest law research and advocacy group, was placed under tax investigation arising from a donation from an American organization, several of its core personnel detained, and eventually closed as a result of the alleged violations of tax regulations.

[6] See, e.g., the Regulations on the Registration and Management of Social Organizations (1999), Art. 13(2).

Barriers to Speech / Advocacy

A gap between constitutional freedoms for speech and assembly and the more restrictive provisions of special regulations and legal frameworks provides the state with significant discretion to limit speech and advocacy for specific organizations and types of organizations. The government can also prohibit advocacy, and actions such as lawsuits, in cases that it deems harmful to national security.

Such barriers are implemented through administrative decrees (such as the regulations governing social organizations and other kinds of groups), as well as criminal and administrative regulation and barriers to participation in policy debate and formulation that may favor government-affiliated groups or may restrict policy advocacy by defining it as outside the organization’s ambit of approval or its charter. Direct barriers to organizational activity, such as those discussed above, may also restrict speech and advocacy.

Barriers to International Contact

There appear to be relatively few barriers to international contact in the regulatory framework for particular kinds of organizations, such as the regulations governing social organizations (shehui tuanti), foundations (jijinhui), civil non-enterprise institutions (minban fei qiye danwei), and quasi-governmental public institutions (shiye danwei).

However, particularly at the provincial and sub-provincial levels, organizations of all kinds are often required to report international contacts to authorities and, in some cases, to seek approval for certain kinds of visits, international cooperation, foreign donations, and other contact with foreign organizations or donors. They are also discouraged from working with or receiving funding from overseas organizations which are engaged in “democracy promotion”. These include the National Endowment for Democracy (NED), the Open Society Institute (OSI), and the International Republican Institute (IRI).

Multiple written or unwritten rules can affect international contacts, and they may emerge relatively suddenly.

Barriers to Resources

In general terms Chinese organizations seeking external resources (such as foundation grants, direct gifts, and other resources) must obtain approval from their appropriate regulatory agency (such as a bureau of civil affairs at the provincial level) for such transactions. Organizations may also need approval to establish bank accounts in some cases. The laws and regulations governing the key forms of nonprofit and social organizations do not address issues of foreign funding in detail but other law and regulation makes such resource mobilization generally subject to state approval.

In early 2010, for example, the PRC State Administration of Foreign Exchange issued a formal notice, Notice 63 on Issues Concerning the Administration of Foreign Exchange Donated to or by Domestic Institutions that requires many domestic nonprofit organizations to comply with new and more complex rules for receiving and using foreign donations. These include, for certain kinds of organizations, an application attesting to the authority of the domestic organization and the foreign donor; the domestic group’s business license; a notarized donation agreement between the domestic group and the foreign donor organization with the purpose of the donation prescribed; and a registration certificate for the foreign nonprofit group. The Notice spurred significant concern in both domestic NGO and foreign nonprofit circles and its implications are still being worked out. Many nonprofits have been able to continue accessing foreign funds, but some organizations have experienced difficulties especially in cases where funding is coming from foreign organizations, such as the National Endowment for Democracy, the Open Society Institute, and the International Republican Institute, that are perceived as sensitive because of their “democracy promotion” work. [7]

[7] For the English text of Notice 63, see http://yazhoudiaocha.com/laws/518.php. For the Chinese text, click here.

There is as yet no detailed domestic fundraising regulation, but generally speaking public fundraising, which is understood to mean fundraising through the media, in public spaces and online, is restricted to a small number of organizations. These include government agencies, such as the Ministry of Civil Affairs, officially designated organizations such as the Chinese Red Cross and China Charity Federation, and one type of foundation. The 2004 Regulations on the Management of Foundations creates two categories of foundations: public fundraising foundations and non-public fundraising foundations (hereafter referred to as “public” and “private” foundations respectively). Only public foundations have the authority to engage in public fundraising. Private foundations are funded by a major gift from a company or family, and can accept donations through private channels, but cannot engage in public fundraising. Other nonprofits, such as SOs or CNIs, are also not allowed to engage in public fundraising.

Provisions in the draft Charity Law (not yet enacted as of February 2012) would provide some general regulation of domestic fundraising. There is some concern in China about several important fundraising issues, including the regulatory and tax treatment of gifts of domestic stock for nonprofit and philanthropic purposes, and the business activities of nonprofits or their for-profit subsidiaries. A series of scandals in 2011 in some prominent public fundraising foundations, such as the Chinese Red Cross and the Soong Ching Ling Foundation, have made public problems with the lack of transparency and accountability in the philanthropic sector, and the need for improved regulations governing this sector. These issues have not, for the most part, been fully worked out in the Chinese regulatory framework.

Reports

UN Universal Periodic Review Reports	Universal Periodic Review: China
Reports of UN Special Rapporteurs	China
USIG (United States International Grantmaking) Country Notes	USIG: China
U.S. State Department	2008 Country Reports on Human Rights Practices: China Advancing Freedom and Democracy Reports, 2009: China
Failed States Index Reports	Foreign Policy: Failed States Index 2009
IMF Country Reports	China and the IMF
International Commission of Jurists	Not available
International Center for Not-for-Profit Law Online Library	China

News and Additional Resources

News of importance to the nonprofit sector will be updated on a continual basis in China Development Brief’s column, A View from the Top.

While we aim to maintain information that is as current as possible, we realize that situations can rapidly change. If you are aware of any additional information or inaccuracies on this page, please keep us informed; write to ICNL at ngomonitor@icnl.org.

General News

China tells Tibetan NGOs to register or else face closure (May 2012)
Following a wave of self-immolations and mass protests in Tibetan areas, China is implementing policies aimed at striking the social and cultural backbone of the Tibetan people. In the latest development, Chinese authorities in Kardze, eastern Tibet, issued a notification requiring all non-governmental organizations in the region to be registered under set criteria, failing which the groups will be declared illegal.

Most US NGOs in China not registered (April 2012)
Less than 3 percent of US non-governmental organizations operating in China have registered with the civil affairs authorities. The low rate of registration - which gives legal identity - has hindered the sustainable development of US NGOs in China, according to a report by the China Charity and Donation Information Center. There were about 1,000 US NGOs in China, but only 23 had legal status from civil affairs departments by the end of 2009. Without a license, these organizations risk being banned from operating in China.

Will pressure make Chinese aid more transparent? (March 2012)
An article discusses China as a secretive donor country in economically poor but resource-rich countries, funding infrastructure construction in return for business deals and access to natural wealth and land. However, China is increasing aid transparency at its own pace. Notably, on 1 December 2011, China publicly declared transparency a principle it will uphold when it signed an agreement at the Fourth High Level Forum on Aid Effectiveness held in Busan, South Korea.

Revisions of law to ensure human rights related to detention, arrest and surveillance (March 2012)
Controversial clauses that permit detention, arrest or surveillance of suspects at specific places, without informing their families, have been partially revised in response to an outcry to curb possible abuses of public security measures. The new proposal requires public security to inform the suspect's family within 24 hours after arrest and surveillance. However, the proposal still permits the police not to inform the family "if the case is related to state security or terrorism, and if telling families would impede the investigation.”

Charities open to religious groups (March 2012)
Chinese authorities have given the green light for religious groups to engage in more charitable work, Preferential policies, including government subsidies and tax reductions, will be set in place when religious groups seek registration to establish foundations, nursing homes and hospitals. The new regulation stipulates that faith-based charities should strictly function as non-profit organizations and guarantee financial transparency with regular disclosure of donors and expenditures.

Political advisers argue that legislation on the charity law is "vital" for the NGO sector to grow (March 2012)
China should speed up legislation on the charity sector to ensure that more grassroots organizations can gain legal status and charity fraud is outlawed, top lawmakers and political advisers have proposed. The current regulations on social organizations in China require that a non-governmental organization must find an administrative body to oversee its activities as a precondition to registering with the civil affairs authorities as a nonprofit organization.

Charities open to religious groups (March 2012)
Chinese authorities have given the green light for religious groups to engage in more charitable work, according to an announcement by the State Administration for Religious Affairs and five other departments.

Law to ensure human rights (March 2012)
Controversial clauses that permit detention, arrest or surveillance of suspects without informing their families, have been partially revised in response to an outcry to curb possible abuses of public security measures.

News Archive

A look back at developments affecting civil society in China in 2011

China develops law on philanthropy (October 2011)

Social groups may get right for litigation (October 2011)

China human rights group blocked from EU-China dialogue (September 2011)

China jails veteran democracy activist (September 2011)

Breakthrough judicial interpretation of freedom of information regulations (August 2011)

New breakthrough for grassroots charity groups (August 2011)

Chinese civilian NGOs seek charity legislation (August 2011)

Calls for greater transparency, supervision in philanthropy (July 2011)

Carefully cultivating NGOs (July 2011)

China to ease NGO registration policy (July 2011)

Amnesty International accuses China of silencing human rights lawyers (June 2011)

China seeks to expand modern philanthropy (May 2011)

Labor question threatens China’s social compact, divides ruling party (May 2011)

China creates new agency for patrolling the Internet (May 2011)

Biden, Clinton lecture China on human rights (May 2011)

Fears in China as another human rights lawyer disappear (May 2011)

Teng Biao, Chinese human rights lawyer, released after detention (April 2011)

West needs more ‘muscular’ approach to defending China’s dissidents (April 2011)

End the silence on Ai Weiwei (April 2011)

China's human rights crackdown - interactive guide (April 2011)

EU and US urge China to free Ai Weiwei (April 2011)

Investigate police assaults against foreign journalists (March 2011)

Crack down on Egypt-inspired protests in China (February 2011)

Experts assess the progress of civil society in China (February 2011)

Additional Resources

Civil Society News from China-Wire
Nonprofits in China, Harvard University’s Hauser Center for Nonprofit Organizations
NGOs in China
China Philanthropy Blog
China Foundation Center

The foregoing information was prepared by Shawn Shieh, Director and Editor, China Development Brief (English).