NGOs and the Law

China’s Nongovernmental Organizations: Status, Government Policies, and Prospects for Further Development

The International Journal
of Not-for-Profit Law

Volume 3, Issue 3, March 2001

By Mr. Guangyao Chen

Deputy Bureau Director
Nongovernmental Organizations Administrative Bureau
Ministry of Civil Affairs
Beijing, China

Reprinted with permission from a session at the World Congress of Association Executives on August 12, 2000, hosted by the Global Forum of Societies of Association Executives and the American Society of Association Executives. Views expressed herein are solely those of the author.

Ladies and Gentlemen and Friends:

I am very happy to have been invited by the American Society of Association Executives to participate in the World Congress of Association Executives in Orlando. In accordance with this conference’s arrangements, my colleagues and I wish to take advantage of this opportunity to give you a simple introduction to the status, government policies, and prospects for future development of Chinese NGOs. In my address, I will concentrate on introducing four aspects:

1. The Basic Status of NGOs

China’s NGOs[1] are defined as not-for-profit organizations formed by citizen volunteers which carry out activities aimed at realizing the common aspirations of their members in accordance with organizational articles of association. These NGOs comprise primarily trade associations, fraternities, business associations, foundations, advocacy associations, academic associations, research associations, and friendship associations. The function of China’s NGOs is to represent the common aspirations and interests of a group among the general population and carry out activities that intend to achieve these aspirations and interests. The role of Chinese NGOs is to serve as a bridge for mutual communication that will link government and society and set definite standards for social behavior. At present, there are approximately 165,600 NGOs in China. Of these, about one-third is industry associations and another one-third is academic groups. The remaining one-third is the likes of public welfare and friendship organizations.

NGOs have two essential characteristics. The first is they are non-governmental. Since none of them is a government organization, in China they are called NGOs (Translator’s note: literal translation is “civil/public organization”). The second essential characteristic of NGOs is that in principle the activities they engage in are not motivated by an intention to generate profit, but rather their principal purpose is to contribute to the public good and to be of service to society. Because of this, NGOs are also called not-for-profit organizations.

China’s NGOs are the result of development of social production capacity at a certain stage. Their appearance and development are tied to the development standards of the society in the areas of politics, the economy, science and technology, culture and education. Since the reform and opening up of China, the reform of the Chinese economic system has achieved breakthroughs and production capacity has increased dramatically. China’s political system has progressively improved and perfected and this has forcefully pushed forward economic development and democratic progress. All this has created a positive environment for the rapid emergence and vigorous development of NGOs in China.

In recent years, China has experienced tremendous change: from a planned economy to a market economy, the gradual deepening of governmental reform and the large-scale downsizing of government employees, the gradual transition from direct to indirect governmental management of economic and social affairs and from micro-management to macro-management. Some of the micro-management functions that previously were undertaken by the government have progressively been turned over to NGOs. The active involvement of citizens in social administration and social services has grown steadily and the status and utility of NGOs grows daily more evident. This has become an important component of NGO work in China.

The development of China’s NGOs is basically healthy. They are exhibiting positive role in the realms of politics, the economy, culture, education, and science and technology. This is best evidenced by:

  1. NGOs already have become a communication bridge linking government and society. NGOs clearly represent the public interest; they represent the interests and demands of the civil society. In addition, through various means, NGOs help the government draft laws, regulations and policies and ensure the feasibility and correctness of laws, regulations and policies while at the same time pushing forward the construction of a democratic legal system;
  2. NGOs are making full use of their own advantages to support the government’s efforts to establish a market economy system. In particular, having adopted all sorts of measures and innovative mechanisms, industry associations and business associations have effectively and rationally made use of social resources, expanded the domain of social service, and are meeting the needs of Chinese society. These intermediary NGOs carry out those micro services and trade coordinating administrative functions conferred on them by the government. They do a good job of guiding, serving, disciplining, coordinating and supervising the trades, safeguarding the market system and promoting fair competition in society while at the same time advancing the establishment and perfection of the market economy system;
  3. NGOs and their members are carrying on and advancing the traditional virtues of the Chinese people. Shunning profit, their objective is to mobilize their vast, idealistic membership to assist the poor and alleviate hardship, to save the weak and help the handicapped, and to ardently undertake charity work. By engaging in social welfare work and all sorts of social service activities, NGOs help the government solve many social problems, promote the development of all sorts of public interest and charitable tasks, and mould the thoughts and sentiments of the people;
  4. NGOs have become an important channel for expanding dialogue with the international community. Some NGOs on their own fully display the characteristics as civil organizations. They actively launch their own channels of international dialogue and cooperation, increasing people-to-people interaction with international non-profit organizations. Through linkage and bridge building, they have attracted funding, advanced technology and management experience and have propelled China’s reform and opening up, thereby supporting China’s economic construction.

However, at the same time one should recognize that China is still a developing country and is affected by the objective conditions of its economic base and superstructure. The development of NGOs in China is still in its infancy and not very standardized or mature. A number of restricting factors pertain to China:

  1. The legal system is unsound. Regulations for running non-profit organizations are not yet perfected. A disconnect exists between policies and regulations and the objective, practical requirements. The legal system is lagging behind and that definitely affects the smooth development of China’s NGOs;
  2. NGOs are not yet ready to operate independently. Because the structures of some NGOs do not accord with the requirements of a market economy, they have a tendency to rely overly much on the government and are too administrative structurally. Congenitally defective, they cannot achieve their objectives. Concurrent with this problem, internal controls within China’s NGOs are imperfect as they lack a complete set of democratic management mechanisms, thereby greatly weakening their effectiveness;
  3. The general structure of the whole sector of China’s NGOs is not in a rational way. Because of the poor delineation of responsibilities and duplication of functions among organizations under the earlier planned economy system, some duplication and overlap exist now among the structures of NGOs. These irrational structures lead to contradictions that get in the way of normal development of the NGOs;
  4. There are some illegalities. Some people do not respect State laws and regulations and set up NGOs illegally. They launch illegal activities or they conduct activities that are either illegal or that ultra vires in respect to their provisions and articles. These to some degree cause clear harm to economic and social order and affect the healthy development of Chinese NGOs.

2. Basic Thoughts on Cultivating the Development of NGOs in China

Today, China is in a critical period of transitioning from a planned economy to a market economy system. An important pillar of a socialist market economy is a market system that is uniformly open and that allows for orderly competition; and an important condition of building a market system is the positive development and standardizing of NGOs. The Chinese government is fully focused on nurturing and developing NGOs. Beginning in 1996, China’s State Council proposed to amend certain provisions contained in “Regulation on Registration and Management of NGOs” promulgated in 1989 that were inconsistent with socialist economic development and insert new content fit to the new economy system. A revised “Regulation on Registration and Management of NGOs” promulgated by the State Council in October 1998 has helped standardize and legalize the administration of China’s NGOs and prepared a basis for their healthy development. To ensure the thorough implementation of that regulation, in November 1998 the State Council convened a national conference on NGO administration work. At the conference, problems in NGO administrative work were studied and a guideline was proposed to both nurture the development and strengthen supervision of NGOs and other civil organizations, in hope that this would spur reform in China’s economic and political systems.

Based on the Chinese government’s confirmed policy of NGO development, during the coming years, the Chinese government will hold fast to the principle of “scientific planning, correct guidance, improved legal framework, and normalized development” to develop and nurture China’s NGOs. The principal measures are as follows:

  1. To establish a sound NGO legal system and put the nurturing and development of NGO on a management and administration track that will legalize, systematize and standardize NGO development in a step by step fashion. A market economy is necessarily an economy ruled by law. If law does not keep pace with economic development, then NGOs will not be able to be adequately regulated. To move NGOs through the growth process as fast as possible, it is necessary to have in place a complete legal framework to normalize and standardize the behavior of NGOs. NGO legal work proposes to continue to draft a legal framework that is appropriate to the special characteristics of NGOs, based on the “Regulation on Registration and Management of NGOs.” Examples of this include laws and legal guidelines such as “Regulation on Administering Foundations,” which will be drafted and published this year, and “Financial Systems for NGOs,” which will be drafted next year. Every effort will be made so that within the next three to five years a complete legal framework will be in place that will describe how to establish and manage NGOs and how NGOs are to conduct their activities. By having a complete set of laws and regulations, we will then be able to strengthen legal administration and supervision, legally stop the establishment of illegal NGOs, investigate and prosecute illegal conduct by NGOs, and ensure that NGOs are operating within legal limits.
  2. To plan scientifically so as to lead the orderly development of NGOs. Beginning now, the government will conduct scientific planning, set comprehensive development goals, and integrate the development of NGOs into the plan for the national economy and societal development so as to find a better fit for NGOs – in terms of numbers, types and structures – with the real needs of the market and society and to avoid the pitfalls of blind development. When nurturing and developing NGOs, the government will adapt its efforts to local conditions and provide support selectively to those NGOs which merit it most. It is most important to nurture those NGOs which can take on those functions which will be relinquished by the government – disciplining, coordinating, managing and supervising trade and business associations and to support a group of public interest foundations and charities. At the same time, we will, based on actual needs, develop NGOs that are closely connected to local economies and the lives of ordinary people, such as associations that combat pirated products, and strive to build an NGO system that is comprehensive, rationally organized and appropriately structured.
  3. To speed up the transfer of functions away from government, smooth out relationships between the government and the NGOs, and give full play to the NGOs’ unique role as communications bridge. The government, now in the midst of structural reform, will accelerate its steps to transfer functions to NGOs. Direct control of the economy will become indirect, functions that are inappropriate for government to hold in a market economy will be taken away, and some public interest and social programs that in the past were the sole responsibility of government will be undertaken by NGOs. The Ministry of Civil Affairs and departments of local governments responsible for registration administration are working together with economic administrative departments to draft complete plans to gradually and steadily transfer functions to NGOs. The Ministry of Civil Affairs, which is the principal department responsible for social welfare programs, has already suggested a new socialist approach to the government’s welfare work responsibilities, arguing that they should be transferred and shared among government, society and individuals. Following implementation of this policy, social welfare work would fall all the more to public interest NGOs. Our plan is: to fully replenish the social functions of NGOs over the next three to five years and give full play to NGOs’ societal role, to make NGOs a powerful force in the construction of China’s market economy and promotion of organizational reform, and to push on all fronts for reform of China’s economic system.
  4. To continue to deepen reform in all pertinent areas and create a favorable external environment for the healthy development of NGOs. Nurturing and developing NGOs is a systematic project that requires that various departments read from the same page and work together and that relevant policies favorable to the development of NGOs. Therefore, all relevant government departments should, on the basis of expediting reform across the board, incorporate the problems that NGOs face during their development and work together with registration and management organs to research and develop comprehensive policies. Considering the civil and non-profit systems characteristics of NGOs, registration administrative organizations have already begun, in concert with tax departments, to study conferring preferential tax policies on NGOs and to study and carry out, together with personnel department specialists, systems for the exchange of NGO personnel and for wages and benefits. Next year, we, together with social welfare departments, expect to study and establish policies for medical insurance and retirement pension plans for those people who engage in full-time NGO work. These policies will be designed to give strong support and assistance to NGOs in order to help them solve the problems that they will encounter as they grow and mature. These policies will create a positive external environment for NGOs that will vitalize them and guarantee their continuing development.
  5. To assist NGOs to set up comprehensive mechanisms of internal control and standardize the way NGOs operate. The establishing of mechanisms of self-discipline, such as self-management, self-supervision and self-service, are marks of mature growth in an NGO’s organizational management work. While deliberately nurturing and developing NGOs, the government is also striving to guide NGOs to establish their own mechanisms of internal control. Review of the NGOs’ constitutions will ensure that NGO constitutions are standardized and that democratic management systems of control are established in accordance with the NGO’s constitution. Moreover, an NGO’s adherence to standards of behavior and continuing growth and maturation will further be ensured by means of governmental administrative monitoring, public scrutiny, and the press and public opinion.

We hope that, with a lot of work by the Chinese government, in the near future NGOs will be able to reach the following organizational management goals:

  • Establish a fairly complete legal framework for NGOs that match conditions in China and bring NGO management work under the law.
  • Establish a system of administrative management that is highly efficient and integrates the coordination of management and services; elevate the level of management work across the board; administer strictly according to law; and ensure the healthy development of NGOs.
  • Nurture and develop a group of NGOs that are rationally distributed and dispersed, whose structures are superior in design, which can maximize their effectiveness, that actively work to adapt to reforms in the economic and political systems, and that meet the needs of socialist life in every area.
  • Universally set up NGO internal control mechanisms, and achieve self-management, self-supervision, and self-service within NGOs while urging them toward mature development.

3. Prospects for Future Development of NGOs in China

Currently China has entered a completely new historical era. In this new era, China’s planned economy is being converted into a market economy. China’s socialist management model is progressively changing direction and moving in the direction of a “small government and large society (involvement)” management model. This brings new development opportunities for social organizations. This is because:

  1. China’s socialist market economy system is gradually establishing and perfecting itself, and that creates urgent requirements for establishing a wide variety of types of NGOs. And because of the rapidly expanding marketization of the economy, it is necessary to develop a multifaceted group of civil organizations; this opens up vast space for NGO development.
  2. Reform of government organizations and the enterprise system is constant and deepening, and this bodes well for the development of civil organizations. In the coming several years, gradual reforms at all levels of people’s government will be launched at the local level and enterprise reform will be deepened even further. To adapt to the coming changes in governmental functions and the downsizing and increased efficiency of overstaffed enterprises, some social administrative and service functions currently undertaken by government will be given up, and public organizations will have to take on those heavy historical responsibilities.
  3. Accelerated steps have been taken to build our socialist legal system and these provide strong guarantees to the healthy construction of NGOs. The promulgation and implementation of regulations relating to NGO development, the new set of policies that soon will be announced one after another, and standardizing NGO management work and bringing it under regulation by law all serve to create a favorable external environment for the healthy development of NGOs in China. So we can say that prospects for NGO development in China are vast.

At the same time we should take note that even though Chinese NGOs are looking at new opportunities, but whether they can make full use of those opportunities to develop into healthy organizations depends on two factors.

One factor is correct leadership by the government. Presently, all levels of government are taking the nurturing and development of civil organizations as an important component of answering the call for a “small government and large society (involvement).” They are trying to foster an unrestricted and friendly environment for NGOs by improving government working styles, actively working to sustain civil organizations, serving them enthusiastically, and guiding them with care and concern. Government at all levels is consolidating organizational reform, reducing the size of government staff, conscientiously studying how to transfer government functions to NGOs, and exploring ways for NGOs to take on and carry out those functions so as to empower these public institutions to serve as assistants to the government. Currently, Wenzhou, Shanghai and Shenzhen are already serving as testing sites for the transfer of government functions to associations. Further, at the end of this year when government economic management departments are abolished– including those which manage the industries of textiles, machinery, light industry, chemicals, metallurgy, building materials and domestic trade – economic associations and chambers of commerce will be tested on playing functions in coordination, discipline, supervision and guidance, which used to be taken by the above governmental organs.

The second factor which will determine whether NGOs develop successfully is the character of their own efforts. NGOs should conduct their activities under the leadership of the government and in accordance with the law. They should pay close attention to reforming themselves and strengthening their own qualities, and they should work very hard to replenish their ability to perform their functions and raise their management standards. They should make full and good use of people resources, making full use of strengths like internal talent, intelligence, information, and experience. They should think clearly about how to find ways to achieve breakthroughs and provide good services, about how to communicate, coordinate, lead and supervise, and how to adapt to the requirements of the socialist market economy.

At present, testing sites at various local areas have composed a list of seventeen functions that can be handed over by government to NGOs. These include: participating in drafting policies and laws for industries, providing pre-market consultations to new industry enterprises and on industry statistics, dissemination of information, market forecasting, drafting industry regulations, industry standards, assessing industry product quality, coordinating industry price disputes and price setting, establishing and helping develop a specialized product market in concert with each relevant industry, providing industries with simplified development and exchange services for new products and technology, providing training for people and training in new technologies, helping enterprises to improve business management, improving domestic and international cooperation in the areas of economic technology and academic exchange, promoting technological innovations, reflecting the needs of NGO members and protecting their interests, assisting the government in solving and handling the problems that industries encounter as they pursue reform and development, and aggressively developing public interest work, etc.

The government hopes that NGOs will assist with the following eight aspects as they take over these functions from government:

  1. That NGOs strengthen their ability to help enterprises improve their leadership and services
  2. That NGOs protect the interests of industries and be a voice for association membership
  3. That NGOs coordinate competition and cooperation among enterprises within an industry
  4. That NGOs can help with researching and studying developments within industries and with strategic problems in industries
  5. That NGOs can do basic work on behalf of government departments involved in these functions
  6. That NGOs can assist with developing technology and academic research
  7. That NGOs will play a role in public service and charity work
  8. That NGOs will help find solutions to social problems

We believe that under the correct leadership of the government and with the combined efforts of the civil organizations that China’s NGOs will experience great development over the next ten years. Looking at NGOs as a whole after development, the total number of China’s NGOs will increase and their quality will improve, they will be more evenly and rationally structured, the functions they perform will be more complete, they will become more specialized, their social distribution will be clearer, their areas of service will expand, they will be more disciplined, and they will possess higher status in society. In the wake of China’s deepening reform of its economic system and its full court press on reforming its political organizations, there will be more room for developing NGOs and they will have an even larger role to play in every corner of Chinese society.

4. On China’s NGO Cooperation with Foreign Countries

China’s NGOs are rather late entering into international dialogue and cooperation. They are being brought into the international arena in the wake of Chinese industries cooperating with foreign companies as China has opened to the outside world. Chinese NGO cooperation with the outside world is just beginning. For a long time, we had no legislative framework for these matters because we knew very little about this arena. At present we can mainly refer to “Provisional Regulations on Managing Foreign Chambers of Commerce,” promulgated by the State Council in 1989, but this regulation is very much at odds with today’s objective circumstances and no other law or regulation is applicable at all. Over the past few years, because of economic development, contacts between social organizations have broken out of earlier boundaries and extended farther into wider arenas. Contacts and cooperation between foreign non-profit associations and Chinese NGOs have expanded.

In addition to opportunities for cooperation brought about by contacts and exchanges, cooperation among non-profit organizations has resulted from cooperation between Chinese and foreign industries. In addition, the process of bilateral or multilateral cooperation has expanded the areas of cooperation between Chinese NGOs and foreign non-profit organizations. At present, besides projects designed to aid the poor, there are other areas of operation, such as: environmental protection (protection of wildlife, environmental protection education programs); emergency relief (support and assistance for all kinds of natural disasters); social development (independence and self-reliance for women, assistance to the handicapped, public health and medical assistance, professional training). Another example is the cooperation between the Chinese Charities Federation and The Smile Train which is providing free surgeries to heal cleft palates among Chinese and free training. This program is already underway and the plan is to provide all funding for surgical repair to 4,000 Chinese children by the end of 2000. In the future, this project will be extended to corrective surgery for other children, allowing these victims to break out in happy smiles. This kind of project is very meaningful, and it enjoys the enthusiastic support of the Chinese government.

In addition, these programs also involve areas of transfer of scientific and technological know-how and the ability to build stronger non-profit organizations in China. For example, with the connections and support of the China International NGO Promotion Association, the United Nations Development Office approved the implementation of a project to provide China with expertise aimed at solving difficult technical problems faced by Tibet’s nomadic economy, furs and hides processing, geothermal power plants, and the tourist industry. This project will speed up the economic development of Tibet by investing US$300,000 to hire twenty high-level experts from China and other countries to supply consultative and technical assistance so to raise the technological levels of the industries cited above and accelerate the economic development of Tibet.

International non-profit organizations have done much for China’s development. Cooperative projects have brought in capital that has promoted economic and social development at the local level. More channels have been opened to the outside world; in particular, the market economy concept has expanded our minds and helped us understand the role and utility that non-profit organizations can play in advancing society. Naturally, for the present a number of problems are evident. While there is an influx of international non-profit organizations coming into the Chinese market, there is not as yet a full set of laws and regulations to guide and standardize this activity, and establishing this legal framework takes time. There are at present problems that result from the inability of existing management systems to smoothly manage the activities of international non-profit organizations. Some international non-profit organizations establishing offices or representative offices are registered in Hong Kong, but operate solely inside China. Some register and establish themselves as entrepreneurs, which runs counter to the charter of non-profit organizations. We have taken note of these aberrations and are taking steps to improve this state of affairs.

On the one hand, China is beginning to study how to forge cooperative relations with international non-profit organizations and support, participate in, and hold discussions on exploring ways of interacting and cooperating with international non-profit organizations around the world. We are studying the organizational management of international non-profit organizations, including programs design, evaluating project management and ways of managing funds. We hope that during this cooperative process, China’s non-profit organizations will mature. At the same time, we will work hard to complete the legislative work that will apply to the activities of international non-profit organizations in China. At present, based on investigation and research, we have already put together and passed forward to the State Council “Regulation on Registration and Management of Foreign Non-profit Organizations in China.” Currently, the State Council Legal Office is working on it in hope of promulgating it this year in order to paving the way to putting in place a system to manage the activities of international non-profit organizations in China. This legal guideline will ensure that cooperation and activity in China by NGOs from all countries would be established, operated and managed in compliance with the law and that international cooperation among NGOs will be standardized. This legal guideline is a new mechanism that will facilitate interchanges involving international NGOs in China and Chinese NGOs with the international community and will advance the common development of NGO work around the world.

On the other hand, we hope that during the current period in which these laws are not yet complete that international non-profit associations that have been established in China will, in addition to working on those projects which have already been negotiated and funded, work together with Chinese non-profit associations in an even more comprehensive way and work together to launch cooperative programs. The cleft palate repair program that partners the American NGO The Smile Train and the Chinese Charities Federation which I referred to above is a good example of a program that brings out the best of both associations. The American Smile Train offers abundant funding and advanced techniques, while Chinese Charities Federation and local charity NGOs provide information on the distribution and identification of Chinese afflicted with cleft palate. Working together, they can solve whatever problems might arise during the treatment program. This cooperation maximizes the strengths of both partners. Moreover, this kind of cooperation makes it easier to obtain the assistance and support of local government officials. Earlier I mentioned the technology import program in Tibet. This program was able to go forward only because of support and assistance from the Tibetan Autonomous Region’s people’s government. US$133,000 of the US$300,000 was funded by Tibetan local governments. The potential for cooperation between Chinese and international NGOs is vast and huge. What we need now is for our government to work hard to provide guidance and for NGOs to take initiative on their own.

We hope that through our combined efforts that we can create favorable conditions for the healthy development of China’s non-profit associations and create a good environment for cooperation between Chinese and international NGOs. Through the efforts of China’s NGOs and dialogue with and assistance from international NGOs, we hope to achieve a brighter future for China’s public interest programs in the areas of science and technology, culture, education, public health and social welfare.

Thank you, everyone.

[1] NGOs in China are divided mainly into two categories: 1)social organizations and private non-profit organizations. Here in the paper, NGOs are meant to be social organizations only.