Mechanisms of Charitable Donations in China (Research Series on the Chinese Dream and China’s Development Path) 9811661936, 9789811661938

Table of contents :
Series Preface
Preface
Contents
About the Editor
1 Introduction
1.1 Research Background and Topic
1.2 Main Concepts Defined
1.2.1 Charity and Charitable Organization
1.2.2 Donation, Acceptance of Donation, and Benefit
1.2.3 Charitable Donation Mechanism
1.3 Literature Review
1.3.1 Studies of the General Situation for Charitable Donation
1.3.2 Studies of Charitable Donation Mechanism
1.3.3 Charitable Donation Outside China
1.4 Theoretical Basis and Research Approach
1.4.1 Theoretical Basis for Studying Charitable Donation
1.4.2 Analytical Framework
1.4.3 Research Methods
1.5 Main Content and Conclusions
1.5.1 The Donor’s Behavioral Characteristics
1.5.2 Intermediary Charitable Organizations and Their Characteristics
1.5.3 Cultural and Social Factors Affecting Charitable Donation
1.5.4 Modes of Raising Charitable Donations and Giving Assistance
1.5.5 Trends in the Development of the Chinese Charitable Donation Mechanism
References
2 Donors and Their Modes of Donation
2.1 Government Agencies
2.1.1 Current Situation for Donations by Government Agencies
2.1.2 Features of Government Donations
2.2 Enterprises
2.2.1 Current Situation of Enterprise Donations
2.2.2 Characteristics of Enterprise Donations
2.3 Individuals
2.3.1 Current Situation for Individual Donations
2.3.2 Features Characterizing Individual Donations
2.4 Donation by Individuals: A Case Study of the “One Day Charity” Square Activity
2.4.1 Survey Background and Sample Introduction
2.4.2 Features of Donors’ Charity Knowledge and Behaviors
2.4.3 Factors Affecting Individuals’ Donation
2.5 Features and Motivations of Charitable Donations Made During the SARS Crisis
2.5.1 Features Characterizing the Charitable Assistance During the SARS Crisis
2.5.2 Analysis of Motivations to Donate in the Case of SARS
2.6 Conclusion and Discussion
References
3 Donation Intermediaries and Their Behavioral Characteristics
3.1 Types of Intermediaries for Charitable Donations and Their Current Status
3.1.1 Types of Charitable Donation Intermediaries
3.1.2 Types of Charitable Foundations and Their Current Status
3.2 Organizational Operation Mechanisms of Charitable Foundations
3.2.1 Features of the Fundraising Mechanism
3.2.2 Features of Expenditure
3.3 A Case Analysis of the Operational Mechanism of SD Charity Federation
3.3.1 Organizational Mechanism
3.3.2 Management Mechanism
3.3.3 Fundraising Mechanism
3.3.4 Resource Allocation and Use Mechanism
3.3.5 Summary
3.4 A Case Study of the Fundraising Mechanism of SD University Education Foundation
3.4.1 Organizational Mechanism
3.4.2 Sources of Funds
3.4.3 Fundraising Mechanism Based on Social Capital
3.4.4 Summary
3.5 Conclusion and Discussion
References
4 Cultural and Social Factors Bearing on Charitable Donation
4.1 Cultural Factors
4.1.1 Traditional Cultural Factors Influencing Charitable Donation
4.1.2 Charity Awareness Affecting Donation Behaviors
4.1.3 China’s Current Charity Awareness
4.1.4 Main Paths of Elevating Charity Awareness
4.2 Economic Factors
4.2.1 Economic Level and Charitable Donation
4.2.2 Impetus and Influence of the Economic Benefit Factor
4.2.3 Paths for Promoting the Benefit Feedback for the Development of Charitable Donations
4.3 Tax Factor
4.3.1 Influence of Taxation on Enterprise Donation
4.3.2 Influence of Taxation on Individual Donors
4.3.3 Influence of Taxation on the Income of NPOs as Recipients of Donations
4.3.4 The Implementation and Improvement of Tax Incentives for Public Welfare Donations
4.4 Internal and External Supervision Mechanisms
4.4.1 Governmental Supervision
4.4.2 Social Supervision
4.4.3 Self-Regulation of Charity Organizations
4.4.4 Establishing a Multi-dimensional Supervisory and Regulatory System for Philanthropy
4.5 Community Promotion Mechanism
4.5.1 Introduction to the Case
4.5.2 Dynamics and Dimensions of Community Promotion Mechanism
4.5.3 Features of Community Charity Donation
4.5.4 Brief Summary
4.6 Summary and Discussion
References
5 Modes of Charitable Fundraising and Innovation
5.1 Modern Modes of Charitable Fundraising
5.1.1 Joint Fundraising, Cooperative Fundraising, and Independent Fundraising
5.1.2 Charitable Foundation Fundraising and Project-Based Fundraising
5.1.3 Participatory and Non-participatory Fundraising
5.1.4 Decreed Fundraising and “Guanxi” Fundraising
5.2 Improvement of Fundraising Modes
5.2.1 Changes in the Fundraising Market
5.2.2 Enterprise-Oriented Fundraising
5.2.3 Individual-Oriented Fundraising
5.2.4 Fundraising Strategies
5.3 Innovation Mechanism for New Fundraising Modes
5.3.1 Diverse Ways of Managing Charitable Funds
5.3.2 Diversification of Donated Assets
5.3.3 Making Fundraising Information Known to the Public
5.3.4 Modernization of Managing Donor Records
5.3.5 Fundraising Workforce Specialization
5.4 Summary and Discussion
5.4.1 Shifting from the organization as the center to the donor as the center
5.4.2 Diversified Orientation of Fundraising Means
5.4.3 Undifferentiated fundraising shifting towards segmented fundraising
5.4.4 More attention paid to fundraising strategies
References
6 Modes of Providing Charitable Assistance and Innovations
6.1 A General Survey of the Modes of Providing Charitable Assistance
6.1.1 Agents for and Channels of Offering Charitable Assistance
6.1.2 Main Domains of Charitable Assistance
6.1.3 Charitable Assistance Programs
6.1.4 Analysis of the Flow of Charitable Funds
6.2 Improvement of Modes for Providing Charitable Assistance
6.2.1 Non-government Forces Strengthened as Part of the Main Body of Relief
6.2.2 Optimized Forms of Program Implementation
6.2.3 Diversified Forms of Providing Assistance
6.2.4 Early Development of Community Charity
6.3 Innovation Mechanism for Modes of Providing Charitable Assistance
6.3.1 Problems and Challenges Charitable Assistance is Currently Facing
6.3.2 Tasks and Direction of Charity Assistance Innovation
6.3.3 Charitable Assistance in Three Foreign Countries — Experience and Lessons
6.4 Summary and Discussion
References
7 Analysis of Developmental Trends in China’s Charitable Donation System
7.1 Development Trends in the General Pattern of Donation
7.1.1 A Rapid Growth in Philanthropy, with the Possibility of Much Greater Future Development
7.1.2 The Modern Donor Pattern in China is in a Developmental Stage
7.1.3 Areas Receiving Donations Are Becoming Diversified and Development-Oriented Donations Have Increased
7.2 Developmental Trends in Organization and Management
7.2.1 From “Strict Control” to “More Flexible”
7.2.2 From “Vertical and Horizontal Segmentation” to “Comprehensive Coordination,” Emphasizing Multi-Faceted Management
7.3 Developmental Trends in Monitoring and Transparency
7.3.1 Incipient Establishment of a System for Evaluating Charity Organizations
7.3.2 Gradual Establishment and Improvement of a Charity Transparency Mechanism
7.4 Developmental Trends in Charitable Fundraising
7.4.1 Diversification and Marketization in Modes of Raising Donations
7.4.2 Specialization and Professionalization of Fundraising Modes
7.5 Summary and Discussion
References
Correction to: Analysis of Developmental Trends in China’s Charitable Donation System
Correction to: Chapter 7 in: J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_7
Postscript
Bibliography
Index

Citation preview

Research Series on the Chinese Dream and China’s Development Path

Jianguo Gao   Editor

Mechanisms of Charitable Donations in China

Research Series on the Chinese Dream and China’s Development Path Series Editors Yang Li, Chinese Academy of Social Sciences, Beijing, China Peilin Li, Chinese Academy of Social Sciences, Beijing, China

Drawing on a large body of empirical studies done over the last two decades, this Series provides its readers with in-depth analyses of the past and present and forecasts for the future course of China’s development. It contains the latest research results made by members of the Chinese Academy of Social Sciences. This series is an invaluable companion to every researcher who is trying to gain a deeper understanding of the development model, path and experience unique to China. Thanks to the adoption of Socialism with Chinese characteristics, and the implementation of comprehensive reform and opening-up, China has made tremendous achievements in areas such as political reform, economic development, and social construction, and is making great strides towards the realization of the Chinese dream of national rejuvenation. In addition to presenting a detailed account of many of these achievements, the authors also discuss what lessons other countries can learn from China’s experience. Project Director Shouguang Xie, President, Social Sciences Academic Press Academic Advisors Fang Cai, Peiyong Gao, Lin Li, Qiang Li, Huaide Ma, Jiahua Pan, Changhong Pei, Ye Qi, Lei Wang, Ming Wang, Yuyan Zhang, Yongnian Zheng, Hong Zhou

More information about this series at https://link.springer.com/bookseries/13571

Jianguo Gao Editor

Mechanisms of Charitable Donations in China

Editor Jianguo Gao School of Philosophy and Social Development Shandong University Jinan, China Translated by Ping Xiang, Xiaonong Wang and Yi Wang

Sponsored by the Chinese Fund for the Humanities and Social Sciences. ISSN 2363-6866 ISSN 2363-6874 (electronic) Research Series on the Chinese Dream and China’s Development Path ISBN 978-981-16-6193-8 ISBN 978-981-16-6194-5 (eBook) https://doi.org/10.1007/978-981-16-6194-5 Jointly published with Social Sciences Academic Press The print edition is not for sale in China (Mainland). Customers from China (Mainland) please order the print book from: Social Sciences Academic Press. Translation from the Chinese language edition: 中国慈善捐赠机制研究 by Jianguo Gao, © Social Sciences Academic Press 2015. Published by Social Sciences Academic Press. All Rights Reserved. © Social Sciences Academic Press 2022, corrected publication 2022 This work is subject to copyright. All rights are reserved by the Publishers, whether the whole or part of the material is concerned, specifically the rights of reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publishers, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publishers nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publishers remain neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Series Preface

Since China’s reform and opening began in 1978, the country has come a long way on the path of socialism with Chinese characteristics, under the leadership of the Communist Party of China. Over 30 years of reform, efforts and sustained spectacular economic growth have turned China into the world’s second-largest economy and wrought many profound changes in the Chinese society. These historically significant developments have been garnering increasing attention from scholars, governments, and the general public alike around the world since the 1990s, when the newest wave of China studies began to gather steam. Some of the hottest topics have included the so-called China miracle, Chinese phenomenon, Chinese experience, Chinese path, and the Chinese model. Homegrown researchers have soon followed suit. Already hugely productive, this vibrant field is putting out a large number of books each year, with Social Sciences Academic Press alone having published hundreds of titles on a wide range of subjects. Because most of these books have been written and published in Chinese, however, readership has been limited outside China—even among many who study China—for whom English is still the lingua franca. This language barrier has been an impediment to efforts by academia, business communities, and policy-makers in other countries to form a thorough understanding of contemporary China, of what is distinct about China’s past and present may mean not only for her future but also for the future of the world. The need to remove such an impediment is both real and urgent, and the Research Series on the Chinese Dream and China’s Development Path is my answer to the call. This series features some of the most notable achievements from the last 20 years by scholars in China in a variety of research topics related to reform and opening. They include both theoretical explorations and empirical studies and cover economy, society, politics, law, culture, and ecology, the six areas in which reform and opening policies have had the deepest impact and farthest-reaching consequences for the country. Authors for the series have also tried to articulate their visions of the “Chinese Dream” and how the country can realize it in these fields and beyond. All of the editors and authors for the Research Series on the Chinese Dream and China’s Development Path are both longtime students of reform and opening and v

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Series Preface

recognized authorities in their respective academic fields. Their credentials and expertise lend credibility to these books, each of which having been subject to a rigorous peer-review process for inclusion in the series. As part of the Reform and Development Program under the State Administration of Press, Publication, Radio, Film, and Television of the People’s Republic of China, the series is published by Springer, a Germany-based academic publisher of international repute, and distributed overseas. I am confident that it will help fill a lacuna in studies of China in the era of reform and opening. Shouguang Xie

Preface

Charitable donations, as a type of social activity with a variety of manifestations, not only constitute the resource basis but also serve as a metric for the state of philanthropy in a society. Charitable donations can tell us a lot about the level of civilization development and of public engagement in public affairs. The “third sector” cannot exist without charitable donations, which are functionally distinct from, and irreplaceable by both market mechanism and public finance. In philanthropy, charitable donation is absolutely essential, insofar as it plays a critical role in maintaining social solidarity and mutual aid, expanding the coverage of social services, promoting the development of science, education, health care and medicine, culture and art, and protecting the environment, among others. Without charitable donations, there can be no philanthropy. China’s rapid economic growth and social development have continued apace since the beginning of the twenty-first century, bringing about many positive changes in the field of philanthropy. Here are some of the most important changes. First, the total amount of charitable donations, both from individuals and from corporations, has risen substantially. In 2000–2012, total social donation grew by 53.96% a year on average. Even if the two spikes, one in 2003–2004 and the other in 2008, in which donations grew by 115% and 260%, respectively, due to the SARS epidemic and Wenchuan earthquake, are left out, the annual growth rate over the remainder of this period would still be a robust 29.5%. In 2005, 2007, and 2009, China’s charitable donations amounted to RMB 5 billion, RMB 10 billion, and RMB 50 billion, respectively, and in 2013 that number reached RMB 56.64 billion. These remarkable increases are largely attributable to a greater willingness toward charitable giving among the public and rising disposable income. Over the same period, corporate donations have also grown at a fast clip especially in the wake of major natural disasters such as the 2008 Wenchuan earthquake and the 2013 Ya’an earthquake. Almost all large corporations across the country gave generously, with many giving more than RMB 10 million. Second, charitable foundations have not only developed rapidly, but also evolved and diversified in terms of organizational structure and operational model. In 2003, there were 954 foundations in China. That number grew 3.7 times over the next decade vii

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and reached 3549 by 2013. For a long time, most if not all charitable foundations in China were publicly funded, and most of those were national foundations. The economic rise of China and social developments in different areas have created external conditions for the rapid growth of non-public foundations. Between 2005 and 2013, the number of non-public foundations in the country increased from 254 to 2,132, an especially notable development in this area. That is equivalent to a 30.5% annual growth, much higher than the rate for public foundations over the same period, which was 9.93%. The proportion of non-public foundations rose from 26.05% of the total number of foundations to 60.2%. Both the number and the scale of foundations will likely continue to increase for some time to come. Such expansion is largely attributable to the government’s efforts to build institutions and to support non-governmental service providers. Third, a distinctly Chinese charitable giving operational and management system has taken shape. The establishment of the Division of Social Welfare and Charity Promotion in the Ministry of Civil Affairs is, for example, an important step toward replacing a highly compartmentalized and decentralized organizational structure with one characterized by functional consolidation and operational coordination; having gone through multiple rounds of discussion and revision, the Charity Law of the People’s Republic of China (Draft) is slated to become law soon.1 Charitable volunteer services have grown; some models of giving, such as through donation of stock equity and the use of charitable trust, have emerged; the ability to make charity-related evaluations has improved for both the government and nongovernment organizations; regulation and transparency of charitable donations have received increased attention; the charitable giving sector is becoming more diverse, standardized, specialized, and professionalized. Despite progress, many difficulties and challenges remain. Donation drives in government agencies, public institutions, enterprises, and among individuals are still largely an administrative routine, and the vast majority of the donation collected this way has gone to civil affairs departments at different levels of government and governmental foundations. In China, it is a standard practice for government agencies and public institutions to donate directly to either civil affairs departments or foundations under China Charity Federation and for enterprises to donate directly to government-run foundations. On the one hand, even long after the planned economy was phased out, government agencies continue to exercise powerful macroscopic control over such matters; on the other hand, the stringent eligibility requirements make it very difficult for small-scale charitable organizations to register. In the USA, there were 86,192 foundations in 2012 with US$ 715 billion in total assets. They gave out a total of US$ 52 billion.

1 The present study was completed in 2014. The Charity Law of the People’s Republic of China was passed at the fourth session of the Twelfth National People’s Congress of the People’s Republic of China on March 16, 2016, and went into effect on September 1, 2016.

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At present, the total number of foundations in China is only about one twentieth of that in the USA.2 In recent years, China has made a considerable legislative progress in charitable donation taxation and increased tax exemptions for enterprises and individuals. However, implementation measures need improvement, and enforcement remains lax. Major problems include the lack of a uniform threshold for tax-exempt income, the small number of qualified organizations due to stringent eligibility requirements, and onerous rules for filing tax refund applications, which become a disincentive for organizations to push for relaxation of the eligibility requirements. And as scandals involving charitable donations threaten to further damage the credibility and tarnish the image of the sector among the public, the need for proper assessment of charities and volunteer organizations has taken on greater urgency. The key to restoring trust is to increase transparency by putting in place the right set of rules and regulations. Over many years since the beginning of reform and opening-up in the early 1980s, charitable giving was primarily an administrative act undertaken by enterprises and public institutions. Donations by private individuals (and households) accounted for a much smaller proportion of the total. Charitable bequest was practically nonexistent. A number of factors may explain why, such as institutional underdevelopment, a small middle class, and the general lack of awareness. This stands in sharp contrast with the landscape of a more modern charity sector, where private donations make up the bulk, supplemented by those through bequest, and by, foundations and corporations. Moreover, the operations of charitable giving are still not a specialized area in its own rights governed by its own professional standards. And there are still only a very few ways to give. Donations by individuals have mostly been in response to internal donation drives organized by government agencies, enterprises, and public institutions. Instead of trying proactively to explore new and innovative ways to raise funds, most charitable organizations continue to rely on the traditional approach, in which they passively waited for money. To address these problems with charitable giving in China, we need to build better institutions, more robust operational mechanisms, and get as many groups involved as possible. I suggest the following policy measures: (1)

2

Management of charitable organizations should be further decentralized. There are several parts to this. First, charitable organizations should no longer be required to “double register” with both a parent institution and the civil affairs department. Application with the civil affairs department should suffice for registration purposes. Second, the eligibility requirements for registration, especially those with regard to the initial endowment, should be relaxed for charitable organizations. Third, charitable foundations should set up a thirdparty oversight system in order to strengthen their sense of self-regulation. The goal is for charitable foundations to be the primary entities in charge of managing charitable funds, the defining feature of charity in the modern era.

According to statistics offered by http://www.foundationcenter.org.cn (2014/12/17), up to December 17, 2014, there were 4,134 registered foundations in China.

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(2)

(3)

(4)

(5)

Preface

With regard to tax incentives, both the amount and the scope of eligible recipients should be increased. Relevant legislations and regulations should be improved and easier to enforce. Specific rules of implementation should be established, the authority to review eligibility of organizations should be shifted downward, and more charitable organizations should be allowed to qualify for tax exemption. The system of differential treatments for government-run NGOs and private charitable organizations should be eliminated. With regard to the regulatory supervision, a third-party evaluation system should be established and rules should be put in place to ensure openness and transparency. Both public oversight and industry self-regulation can be done through the Web sites of China Charity & Donation Information Center and that of China Foundation Center. The use of such online platform facilitates the routine, regular, and mandatory release of charitable donation statistics and annual inspection and assessment results. Passage of the charity law provided an opportunity for binding regulations to be made more specific so as to improve operability. In terms of management and technological applications, what the United States Internal Revenue Service (IRS) does offer one useful model. To deter fraud, the IRS requires charitable foundations to report their finances and activities every year (by filing Form 990 and Form 990-PF). All foundations and charitable organizations must allow auditing of their finances, including the amount of donations received, and disclose this information in their annual reports. Charitable organizations should make use of the web and software technology and build their own Web sites for releasing information and allow their Web site to be linkable from the Web site of the industry self-regulator. Compared with the haphazard way in which information is currently made available, such a streamlined and consolidated online disclosure system would make it easier for the public to monitor the charity sector in real time, thereby improving transparency. The level of specialization and professionalization of the sector should also be increased. There are several parts to this. First, we need to build more modern charity fund-raising organizations and institutions, offer special training, and hire professionals to work in these organizations. Second, fund-raising should be built into a profession with its own skill requirements, codes of conduct, ethical norms, and occupational standards, and people should be required to undergo training and obtain a professional license before they can work as fund-raisers. Third, a specialized training curriculum should be developed, and research institutions should be set up. Further studies are needed of inheritance tax, estate tax, and gift tax, all of which should become codified in tax legislation in the near future. As the experiences of Western countries have shown, these taxes can help mitigate income inequality, increase government revenue, optimize the tax structure, and give a huge boost to China’s charitable sector. As rapid growth and development of the Chinese economy and society continue, time is ripe for introducing these taxes. Doing so will no doubt usher in a new era for charitable giving in China.

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At the third plenary session of the 18th CPC Central Committee, the CPC senior leadership announced its commitment to innovate social governance, increase participation of non-governmental entities and individuals in charitable giving, and strengthen institutional building and legislation for this sector. On the current agenda for social reform, an important task is to do a thorough review of the sector, so we may better understand the problems it faces, and explore its future development path and trajectory. Theoretical studies of the charitable giving not only can help identify new funding sources, strengthen regulation of donations by corporations and individuals but also advance our understanding of NPO or the third sector. This book has seven chapters. Chapter one provides an overview, followed by six chapters that cover a broad range of topics that are systematically interconnected. These topics include who give and how; the role and key features of agents and intermediaries; cultural and social factors in charitable giving; fund-raising models and innovations; charitable assistance models and innovations; and development trends in operational mechanisms of the sector. In this study, I look at three specific types of mechanisms: organizational, institutional, and cultural. The organizational mechanism involves three elements, i.e., the donor, the recipient, and the beneficiary. The first element in turn involves donor type, motivation of the donors (trigger and motive), the channels and models (forms) of giving, and the level of donation and determining factors; the second element involves fund-raising channels and models, and the third element is mostly about governance. As such, the organizational mechanism is essentially a structurally cohesive and functionally continuous whole consisting of the raising, giving, and receiving, of funds and provision of and benefiting from assistance. The institutional mechanism and cultural mechanism of the charity sector are made up of such factors as a country’s laws and regulations, and a society’s culture and customs which determine who give and shape how they behave. Building on previous findings, this study makes a number of distinct contributions to this area of research. First, by integrating different research dimensions and theoretical perspectives, I provide an objective analysis and a systematic summary of donor behavior and donation mechanism, with special emphasis on changes over time. There have been few studies in China on charitable giving and even fewer on the evolution of its underlying mechanism. This study draws on a large body of documents and materials, with which I built an analytical framework for understanding the deep connections between the behaviors of charitable organizations and a country’s institutions and culture. I also examine the impact on the social and historical features of a transition period that have on the sector’s development and the different kinds of relationship that form in the process. Other important topics include the different types of donation, the contents of charity events and public functions, how they are organized, and how the charity sector in other countries have developed. All these have helped to both deepen and broaden our understanding of the basic features and dynamics of this sector.

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Second, I explored issues related to community-based charity promotion and the development trends in charity mechanism in China, which have seldom been touched in previous studies. By building a theoretical framework and operational strategy for community-based charity promotion, and examining ways to improve it, this study contributes toward the construction of China’s homegrown charity development system on both the theoretical and the practical levels. In order to uncover the general development principle for the sector, I traced how the Chinese government gradually loosened control of charitable organizations and tried to show that how quickly charitable giving mechanism evolves and depends importantly on both the speed of legislative development and the degree to which the government disengages from the sector. Third, the study combines both theory and application and devotes considerable space to policy evaluation and advocacy. By bringing together logical and empirical analyses, I was able to identify theoretical issues with particular policy and practical relevance. On the basis of these analyses, I offered a series of policy recommendations, especially regarding relaxing the criteria for tax exemption status, eliminating differential treatment of government-affiliated NGOs and non-governmental charitable organizations, and strengthening information disclosure and improving transparency. Theoretical and policy studies of charitable giving continue to face a number of contradictions and difficulties. Even though in theory, charity is essentially an undertaking where non-governmental charity organizations collect and hand out funds from non-government sources, in China, charity has for a long time primarily been run by the government. This means that, somewhat awkwardly, the basic premises of our theoretical investigation may themselves lack factual basis. Moreover, given how complicated the processes involved in charitable giving can be, the subject is best suited for those researchers who have worked in and gained some first-hand knowledge about the field. Finally, the absence of a systematic set of rules governing the collection and analysis of statistics on charitable giving makes it much harder to arrive at scientifically sound and theoretically rigorous conclusions about the matter. Despite rapid development, China’s charity sector still has a long way to go before being able to adequately meet the needs of the society and the economy. The state of the academic study of charity work necessarily reflects some of these practical difficulties. Nevertheless, insofar as theoretical inquiries are supposed to guide and inform policy-making and development planning, more studies are needed on charity legislation and on capacity building by charity organizations. Specific topics include the interactions between government’s fiscal public finance policies and the nongovernmental charities, the legal person status of charity intermediaries and agents, professionalization of the sector, and collection and disclosure of charity-related statistics. It is incumbent upon all those working in this sector to contribute toward its development. Jinan, China December 2014

Jianguo Gao

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jianguo Gao, Qin Li, Yanzhuo Deng, and Liyang Feng

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2 Donors and Their Modes of Donation . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jianguo Gao, Qin Li, Yanzhuo Deng, and Liyang Feng

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3 Donation Intermediaries and Their Behavioral Characteristics . . . . . Qin Li, Weiwei He, and Yanbin Cheng

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4 Cultural and Social Factors Bearing on Charitable Donation . . . . . . . 165 Jianguo Gao, Yanzhuo Deng, Xiao Wang, and Jianjun Dong 5 Modes of Charitable Fundraising and Innovation . . . . . . . . . . . . . . . . . 223 Jianguo Gao, Xueping Ren, and Qin Li 6 Modes of Providing Charitable Assistance and Innovations . . . . . . . . . 259 Jianguo Gao and Yunhua Wu 7 Analysis of Developmental Trends in China’s Charitable Donation System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 Gongjing Gao and Jianguo Gao Correction to: Analysis of Developmental Trends in China’s Charitable Donation System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gongjing Gao and Jianguo Gao

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Postscript . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 331 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 347

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About the Editor

Jianguo Gao is a professor of the Social Work Department in School of Philosophy and Social Development at Shandong University, China. He also serves as a standing director of Chinese Sociological Association (CSA), a standing director of Chinese Social Work Education Association (CSWEA), the director of China Association of Gerontology and Geriatrics, the director of China Social Policy Studies Specialized Commission, and a member of China Education Ministry Commission for Guiding the Teaching of Sociological Specialties. He studied in America as a fulbright senior visiting scholar and in Canada as a visiting scholar supported by Canada-China Scholars’ Exchange Program (CCSEP). In recent years, as the only or first author or editor, he has published a big number of monographs and course books (such as The Developments of Social Work in China: Review and Analysis of the Studies by Canadian Chinese Scholars (2013), Community Work (2013), Value and Ethics of Social Work (2012), Productive Participation of the Aged (2011), Social Welfare Studies (2009–2012), and On the Mechanism of Community Based Supply of Public Products in Rural China (2009) and papers (such as “On the Organizing Operation Mechanism of American Charitable Donation,” “Trends in Development of Charitable Donation Mechanism in China,” and “Construction and Security of Social Pension Rights in Rural China”).

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Chapter 1

Introduction Jianguo Gao, Qin Li, Yanzhuo Deng, and Liyang Feng

A society’s level of charitable development reflects its maturity, as well its capacity for self-organization, making this level an important indicator of cultural development. Charitable donations are the sine qua non for the undertaking of philanthropic activities. Studying mechanisms for charitable donations will contribute, in theoretical terms, to our knowledge of the internal laws underlying the development of philanthropy and, in practical terms, to our understanding of the current status quo and trends for philanthropy in China.

1.1 Research Background and Topic The years following China’s Ministry of Civil Affairs issuing the “Outline for Guiding the Development of Charity in China from 2006 to 2010” have seen rapider development of various types of charitable organizations. These organizations are playing a stronger role in disaster and poverty relief, medical and educational aid, and assisting the elderly and the disabled, among other activities. As pointed out in the “Outline for Guiding the Development of Charity in China from 2011 to 2015,” philanthropy constitutes an important part of both the work of socialism with Chinese characteristics and the social security system. The “Outline 2011–2015” further stipulates clarification of the principles of openness and transparency, the improvement of social supervision, the standardization of charitable donors and behavior, and innovation in forms of charitable donations and media. All of these bear on speeding up the establishment of a charity development pattern that is standardized, ordered, and highly functional. It also sets out that in China both the total volume of charitable J. Gao (B) · Q. Li · Y. Deng · L. Feng Shandong University, Jinan, China e-mail: [email protected] © Social Sciences Academic Press 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_1

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donations and the average per capita donation are comparatively low. Additionally, it is objectively true that the introduction of laws, regulations, and policies covering donations is lagging, philanthropic organizations’ own abilities are inconsistent with their assumed social responsibilities, and the development needs of charitable organizations are not met by charity professionals.1 In developed western countries, giving charitable donations has become a standard part of life, and in America, two-thirds of families make regular donations.2 In 2002, America’s non-profit sector accounted for 10% of the country’s GDP and the total volume of private donations surpassed 2% of GDP.3 2007 saw a new record of American charitable donations, reaching $306.39 billion. In spite of the overall volume slipping as a result of the financial crisis, there has been a steady upward trend in recent years. In 2012, total charitable donations reached $316.23 billion, accounting for 2% of GDP and representing 3.5% year-onyear growth over 2011.4 It is clear that, when compared with developed Western countries, China’s level of charitable donations is very low, with a total volume far below 1% of GDP.5 According to the “three national income distributions” theory, there are three levels of distribution. The first is distribution of labor income and consumption through an efficiency-oriented market mechanism. The second is redistribution through fairnessoriented government taxation. The third is based on volunteering or voluntary donations and emphasizes the value of caring and altruism. As a form of the third distribution of social resources, charitable donations cannot be replaced by the market mechanism or government regulations. They are conducive to optimizing the allocation of resources, regulating the polarization between the rich and the poor, and promoting societal harmony. Charitable donations are closely related with social structure and the systematic transformation of that structure. They relate to economic growth, tax policies, legal provisions, and the public’s concepts of philanthropy and habits of donation. They are a social behavior incorporating morality, law, and the economy. Change in the donation behaviors reflects changes in the donors’ values, mechanisms of social organization, processes of social selection, and state policies. Their nontransactional, non-administrative, autonomously-decided, pro-social, and sociallypurposeful natures distinguish them from ordinary social behavior, determining their unique means of activity, management and relationship with relevant parties. Both 1

Chinese Ministry of Civil Affairs: Outline for Guiding the Development of Charity from in China 2011 to 2015, July 15, 2011, http://www.mca.gov.cn (2014/10/11). 2 Hodgkinson et al. (1996). 3 Gittell and Edinaldo (2006: 721). 4 Giving USA 2012, http://www.givingusareports.org (2014/11/20). 5 According to “2012 Analysis Report on Charitable Donations in China” issued by China Charity Information Center under Chinese Ministry of Civil Affairs, in 2012, the total amount of donated goods and funds China received from home and abroad was RMB ¥ 81.7 billions, which accounted for 0.16% of the Chinese GDP of the same year, with a per capita donation of 60.4 yuan, representing a 3.31% decrease in terms of the total donation amount. Besides, in that year, the public welfare fund China raised from lottery was RMB ¥ 73.955 billion, and the voluntary service in the country was worth RMB ¥ 1.1 billion. In total, the three amounts reached RMB ¥156.755 billion, accounting for 0.3% of the 2012 GDP of China.

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an orientation towards individual demand and motivation, and the consideration for the social relationships involved in donations, are manifested in the Chinese people’s donation behaviors. At present, the latter factor has a more visible influence. Charitable donation is a comprehensive social phenomenon. In this critical period for the development of charity in China, it is necessary to thoroughly and systematically probe and summarize the charitable donation mechanism. This work should consider actual conditions in China and draw on the research output of scholars at home and abroad. Such research has multifaceted significance and value. On the level of theoretical construction, a study of the charitable donation mechanism will extend what has been achieved by studies conducted in the field. Many facets of charitable donation such as the reason, motivation, environment, policy, system, and cultural concepts can be understood more thoroughly by studying the donation mechanism. The results of this research can supplement, expand, and enrich the theoretical understanding of charity, non-profit organizations, and the theory of the third sector. In practical and policy terms, an exploration of the donation mechanism that aims for a new concept of how that mechanism is organized, managed, and developed in Chinese society will help break from passive donation modes and mechanisms adopted in the past. This in turn will provide decision making references for pushing ahead with the development of charitable resources and guiding the donation behaviors of enterprises and citizens towards institutionalization and standardization. At the same time they maintain a core focus on the charitable donation mechanism, the sections below will mainly discuss the following: the types, modes of behavior, and features of charity donors and intermediaries in China; the factors influencing the growth of charitable donation in China, such as the social environment, policies, laws, and regulations, as well as cultural aspects and community mechanisms; Chinese ways of donation and innovations in raising charitable donations and providing assistance; the realities of the charitable donation mechanism and growing trends related to it in China.

1.2 Main Concepts Defined The key concept of this study is the charitable donation mechanism. Other important concepts related to it include charity, charitable organization, donation and donor, acceptance of donation and recipient, benefit and beneficiary.

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1.2.1 Charity and Charitable Organization 1.2.1.1

Definition of Charity

Philanthropy, or charity, usually refers to the assistance of a member of a society on a voluntary basis. It can be understood in a broad or narrow sense. Generally, charity refers specifically to assistance carried out by individuals or social organizations.6 The donating party belongs to the third sector that is independent of both the government and enterprises. Its origins are non-governmental and non-profit. In a narrow sense, charity denotes the direct assistance given to those in need, so as to help alleviate their difficulty and distress. In the broad sense, charity refers to a wide range of donations and aid to both solve the root causes of poverty and social problems and also to generally improve the quality of human life. Thus, charity also provides support for research projects, health programs, educational, artistic, and cultural activities, and scholarships and fellowships, among other undertakings.7 The present study adopts the concept of charity in its broad sense.

1.2.1.2

Charitable Organization

In China, charitable organizations generally refer to non-profit organizations that focus on charitable activities confirming to the conditions for statutory establishment. The type of organization (foundation, social organization, or private non-enterprise) and charitable purpose are set out on the registration certificate. In the west, as the most representative segment of the non-profit sector, charitable organizations are clearly defined by relevant laws.8 In the United States, generally, the term “charitable organization” is defined by tax law. The modern tax law of the United States defines it as an “organization which is not necessary to pay taxes and those contributors to which can enjoy reduction and exemption from taxes for their contributions.”9 That means a charitable organization is a not-for-profit organization whose income is free from taxation and whose donors can have access to tax deductions and exemptions because of their donations. Section 501 (C) (3) of the American “Internal Revenue Code” stipulates six requirements for a charitable organization to qualify for tax exemption that must be met simultaneously. For exemption from federal income tax, an organization must be for the not-for-profit purpose, and organized and operated exclusively for one or more of the following purposes: religious, charitable, scientific, testing for public safety, literary, educational, fostering national or international amateur sports competition, and the prevention of cruelty to children and animals; 6

Pan (2007). Boris (2000:1). 8 In some countries, there are special charity laws which define the “charity organization”, while, in some others, such as the United States, there are not separate laws for charity and the “charity organization” definitions can be found in many relevant laws. See Li et al. (2006). 9 Adler (2007). 7

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it must be organized exclusively for those not-for-profit purposes; it must be mainly operated exclusively for those not-for-profit purpose; no part of the organization’s net earnings will inure to the benefit of private shareholders or individuals; it will not, as a substantial part of its activities, attempt to influence legislation (unless it elects to come under the provisions allowing certain lobbying expenditures); it will not participate to any extent in a political campaign for or against any candidate for public office.10 In fact, the two terms “not-for-profit” and “tax-exempt” are used as synonymous, for only when a charity organization defined by law is for the not-for-profit purpose can it be qualified for tax exemption, but an organization legally qualified for tax exemption is not necessarily a charity organization.11 A charity organization must be founded for the purpose of “charity’ as stipulated by law. Traditionally, charities in the United States have focused on poverty relief, education, evangelizing, and the public interests, distinguishing themselves from mutual aid organizations by highlighting the general pursuit of public welfare. The “Law of the People’s Republic of China on Donation for Public Welfare Undertakings” governs undertakings founded for non-profit purposes in China and provides for the following activities: disaster relief, helping the poor, assisting the disabled as well as other social groups and individuals in straitened circumstances; education, science, culture, public health, and sports; environmental protection, construction of public facilities; other social and public welfare undertakings promoting the development and progress of society. In the United States, there is no definite orientation of charitable organizations, and generally, a charitable organization is taken as a social organization for public welfare which is founded according to law for one or more of the non-profit purposes of the six mentioned above. Yi Pan, after surveying the relevant experiences of many countries, put forward the concept that a charity organization of a country belongs to the “third force”, independent of the market and state, and is characterized first by its purpose of providing social services rather than earning profits and secondly by its affiliation to the non-governmental sector, being part of the strength of civil society.12 In China, charitable resources mainly come from the non-governmental sector, but the government plays a major role in managing and operating philanthropy, including charitable organizations.

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Adler (2007). In the United States, the organizations qualified for tax-exemption are not only the charities. As a matter of fact, the not-for-profit organizations in the United States are divided into two main groups: one is charities and other not-for-profit and public welfare organizations, and the other, mutually aiding organizations. The latter refers generally to those which seek welfare for their members, such as social clubs, labor unions, specialized groups, and rural cooperatives, which are also qualified for tax-exemption as stipulated in relevant tax laws of the United States. 12 Pan (2008). 11

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1.2.2 Donation, Acceptance of Donation, and Benefit In a study of the charitable donation mechanism, it is necessary to clearly define such terms as donation and donor, acceptance of donation and recipient, and benefit and beneficiary.

1.2.2.1

Donation and Donor

Donation refers to the goods and funds given by individuals, groups, or institutions to charitable foundations or undertaking with no expectation of a return in the form of material or services. According to the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” natural persons, legal persons, and other organizations may make donations to public welfare associations and non-profit public welfare institutions that meet their desire to donate. It emphasizes donations to social groups concerned with public welfare and public welfare programs. Guangxi He put forth two levels of individuals making donations: charitable behavior in a broad sense and in a narrow sense. “In a broad sense, charitable behavior involves an individual’s direct beneficent behavior towards other individuals, while in a narrow sense it refers to the behavior mediated by special social organizations that is subject to socially relevant behavior.” “The definition in the narrow sense consists specifically of individual donations to charitable organizations (foundations) or public welfare programs. Mutual assistance between individuals unmediated by the specialized organizations and giving behaviors not direct at public welfare and producing of no significance for broad social relatedness, including those donations given through mediation to the victims of individual emergencies and the assistance given by a unit specially to some of its own members, do not conform to the narrow definition in the above.”13 The content of donations can be classified into different types: funding (money and financial securities), goods, time and service, human organs, and heritage, among others. The donated property should be legal property that the donor is entitled to dispose of. The donor refers to an individual, an enterprise, social association, or other organization, which voluntarily donates legal property. In terms of the donor’s purpose, the donation can be directed or non-directed. Additionally, it is necessary to point out that charitable donation, as a social contribution, aims mainly at giving charitable aid through non-governmental donations (through governmental or non-governmental charitable foundations), which is different from government behavior, that is, government dominated social assistance coming through public finance.

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He (2004: 6–7).

1 Introduction

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Acceptance of Donation and Recipient

Acceptance of donations refers to accepting funds and/or goods donated. Recipient refers to the target of the donation. As stipulated by “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” public welfare associations and non-profit public welfare institutions may accept donations according to the law. The public welfare associations mentioned in this law refer to legally established foundations, charity organizations and other associations that have the purpose of public welfare undertakings. Non-profit public welfare institutions refer to educational, scientific research, medical and health, public cultural, public sports and social welfare institutions that are established according to the law and do not aim to make a profit. The law also stipulates that when a natural disaster occurs or a foreign donor requests that the government and government departments above the county level be a recipient, those institutions can accept donations. They can transfer the donated property to public welfare associations and non-profit public welfare institutions. They may also distribute or arrange the donations for public welfare in accordance with the wishes of the donor, but they cannot benefit themselves. Therefore, according to the law of China, public welfare associations, non-profit public welfare institutions, and the people’s governments at or above the county level and their departments are the legal recipients of donations. In this present study, recipient refers mainly to non-governmental charity service agencies or organizations and their public welfare programs.

1.2.2.3

Benefit and Beneficiary

The benefit of charitable donation refers to the social benefit realized by the donation and the direct purpose fulfilled by it. The beneficiary of charitable donation refers to the direct or indirect (i.e. through a service agency) object of the assistance. In non-directed charitable donations, the beneficiary of the donated funds depends on the independent operation of a charity, while for directed charitable donations the beneficiary is decided by the recipient in accordance with the donor’s intentions. As charitable assistance represents a process in which the charity agency helps the beneficiary rise from difficulty, the benefit of charitable assistance usually refers to the distribution of donated resources for the purpose of charity to groups of people who need them. Through this process, conditions are improved and the objects of assistance become beneficiaries, thus ultimately realizing the purpose of charitable donation.

1.2.3 Charitable Donation Mechanism Generally speaking, a mechanism refers to the internal elements of the system, its internal modes of movement, and the form of interaction of subsystems. It is a set

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of structured rules that can be artificial or natural. Its role is to motivate and regulate, in order to ensure that the host system is always within a critical range of operation. The merits and demerits of a mechanism can be measured by considering the role it plays in influencing the host system, that is, both by seeing whether it produces and contributes to positive effects and also by whether it avoids and reduces negative effects. The charitable donation mechanism includes mechanisms for triggering specific donation behaviors, driving interests, organizing and mobilizing, building social trust, media-guiding, fundraising, managing, supervising, incentivizing, among other actions. In this study, these mechanisms are divided into three subtypes from a starting point of sociological investigation: organizational, institutional, and cultural. Each one of the mechanisms mentioned above falls under one of these three. From an operational viewpoint, these three mechanism subtypes can be understood as representing the micro, meso, and macro levels of the charitable donation mechanism. The organizational mechanism is concerned with the types of charitable donations, the dynamics (triggering and motivating) underlying charitable donation behaviors, the channels and modes (forms) of donations (including raising and giving donations), donation levels and factors that influence those levels, channels of fundraising, and governing mechanisms, among others factors. The institutional mechanism involves mainly the laws and regulations concerning charitable donations and behavior, as well as the actual effects of donations. The cultural mechanism involves mainly the deep social, cultural, and habitual factors which affect charitable donation behavior and consciousness.

1.3 Literature Review Recent years have seen research output relating to charitable outcomes on issues concerning politics, economy, law, and history, among others.14 This trend indicates that charity is a significant research field for today’s academic community. As charitable donation is one of the important components of charity, there is a rich and relevant domestic and foreign literature studying charitable donation. This literature provides a data foundation and research starting point for this study. This section will review the relevant studies on the general situation for charitable donation, the charitable donation mechanism in China, and the charitable donation mechanisms of other countries.

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Tao (2008), Li (2008), Zhou and Zeng (2006), Zeng (2008, 2009).

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1.3.1 Studies of the General Situation for Charitable Donation Studies of the general situation for charitable donation concentrate on the following topics: trends in the charitable donation development, donation subjects and intermediary organizations, laws and regulations for charitable donation, and the culture of charitable donation.

1.3.1.1

Trends in Charitable Donation Development

When compared with developed countries, the rise of charitable donations in China was relatively late, not occurring until the 1990s. The following decade saw some improvements in the scale, form and structure of social donations, but there were still many problems such as the small scale of donations, misalignment of donors, lack of clear definition of charity, backwardness of the management system, and low public participation, among other shortcomings.15 In recent years, the first annual research report on charitable donation introduced in China, the “Blue Book on Charitable Donation Development in China” compiled by the China Philanthropy Times, has shown the status quo and trends in the development of charitable donation by analyzing data on charitable donations made in different fields and for different disasters.16 Since 2007, the Chinese Ministry of Civil Affairs and China Charity Information Center have annually released a series of analytical reports on the state of charitable donations in China.17 These quasi-official reports are made known to the general public, and are a source of information on distribution of donation resources in various fields and predictions on future charitable donation trends. They also inform us of new developments in China’s charitable donation policies. For example, according to one report, one of the latest concerns of China’s charity community is joint aid and fund-raising, while strengthening awareness of charity transparency and supervision will be the central task of the charity administrative departments in the future. Since 2009, China Charity Information Center has issued an annual report on the charity transparency in China.18 This is a nationwide study evaluating the disclosure of information by various charitable organizations. From this we can know how 15

Fang (2007), Sun and Chen (2007), Zhao (2008). Liu (2004, 2007, 2008, 2009, 2010, 2011, 2012, 2013). 17 Chinese Ministry of Civil Affairs Charity Coordination Office and China Charity Information Center, “2007 Analysis Report on Charitable Donations in China”; Chinese Ministry of Civil Affairs Social Welfare and Charity Promotion Department and China Charity Information Center, “2008 Report of Charitable Donations in China”, and “First Half of 2009 Analysis Report of the Situation of Charitable Donations in China”; China Charity Information Center, “2009 Report of the Charitable Donations in China”, “2010 Report of the Charitable Donations in China”, “2011 Report of the Charitable Donations in China”, and “2012 Report of the Charitable Donations in China”. 18 China Charity Information Center, “Testing Report on Information Disclosure by National Charity Organizations of China”, “2010 Report of Charity Transparency in China”, “2012 Report of Charity Transparency in China”, “2013 Report of Charity Transparency in China”. 16

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open and transparent the information offered by various charitable organizations in China is. Comprehensive or special investigative reports issued in different regions of China are also of reference value when comprehending the state of charitable donation.19

1.3.1.2

Charitable Donation Subjects and Intermediary Organizations

The main actors involved in the process of charitable donation are government departments, individuals and families, communities, religious groups, enterprises, and donation collection organizations. Studies regarding the role of government departments in charity usually concentrate on their advocacy and integrative roles, as well as their objective of turning philanthropy into a crucial part of social security.20 An investigation of the funding sources of the Shanghai Charity Foundation showed that donations from government departments and agencies accounted for 14.5% of total social donations, with enterprises being the leading force in highvolume donations.21 Even though individual donations are more stable than enterprise donations, the former is not yet the main source of funds for charity in China. According to a survey on foundations in three provinces conducted by the Tsinghua University NGO Institute, the proportion of corporate donations rapidly increased in recent years, while individual small donations rapidly declined.22 Research on individual donations has been conducted in depth through mathematical and quantitative analysis of behavioral patterns and intrinsic motivations, among other factors.23 A survey of urban residents in Beijing, Nanjing, Shenzhen, Wuhan, and Xi’an found that philanthropy, altruism, tax relief, the influence of charitable organizations, social trust, and other factors have a significant impact on individual donations.24 In recent years, research on company or enterprise donations has been increasing,25 focusing on internal mechanisms, corporate social responsibility,26 and donation methods and strategies.27 There are many ways that enterprises participate in charitable activities, which include: direct donation affiliate marketing; public 19

Shanghai Academy of Social Sciences Sociology Institute, “Investigation Report of Charity and Public Welfare Activities of Shanghai Enterprises in 2008”; Shanghai Charity Foundations and Fudan University School of Social Development and Public Policy, “Citizens and Charity: 2008 Large Scale Social Investigation Report”, Chen and Mo (2007). 20 Xu (2005: 186). 21 Li (2006: 78–80). 22 Deng (2007: 133). 23 Liu (2004), Yang et al. (2007), Chen and Chen (2007), Hong and Zhang (2008), Gong (2009), Chen and Yao (2012). 24 Su and Shi (2014:111). 25 Luo and Xiao (2006), Tian and Ye (2009). 26 Yang and Ge (2003: 101), Wang and Huang (2005), Shan (2007), Zhao and Li (2008), Jiang (2010), Li and Xiao (2011). 27 Chen (2007), Chen (2008), Tian and Chen (2007), Tian and Cai (2009), Song et al. (2013).

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welfare campaigns; social marketing; and community volunteer activities.28 Qinyu Cai and Jiahui Zhang put forth a tripartite classification of donation channels accessible to enterprises: donations oriented toward a recipient, donations to a charitable organization (currently the main channel for enterprise charitable donations), and establishment of charitable foundations.29 A number of empirical studies have found that: the size of the company is significantly positively correlated with donation expenditure; state-owned companies tend to be more charitable than non-state-owned companies; the average years of education of the board members is positively correlated with company donations; an enterprise tends to choose the quantity and type of donation from economic motivations and thus it is advisable to guide and manage the donation behaviors of enterprises by means of market forces.30 Tuan Yang divides charitable organizations into three classes: organizations in grassroots communities, regional federations and intermediary organizations such as the China Charity Federation, and service-providers.31 Charity foundations in China fall under the second type. In recent years, as these foundations have grown rapidly in China, there have been more and deeper studies of their type, nature, function, roles, features, and assessment.32 The majority of scholars in the field affirm that the government-run NGO is the main type of charitable organization in China and that to a large extent these organizations have grown from inside the Chinese government, rather than purely from outside the current system.33 However, as China’s socio-economic structure is changing, charity foundations with a strong official flavor have begun to strive for social and market-oriented transformation.34 Most current research on charitable foundations starts with empirical research into a project with foundation involvement that explores the operating successes and failures of the project. Educational institutions serve as an important vector of social donations, and, in recent years, as foundations for university education in China have grown rapidly, donations for higher education have attracted much academic attention.35 Studies of how foundations for university education raise funds focus on the fields of pedagogy, management, and sociology. They are interested in themes relating to fundraising channels, operating mechanisms, incentive mechanisms, and fundraising strategies. Most of these studies are of the opinion that the main sources of social donations available to the foundations for university education include alumni, individuals, enterprises, and private foundations, of which donations by alumni are the biggest source.36 The main fundraising mechanism of the university education foundation 28

Xu and Ren (2007). Cai and Zhang (2008). 30 Xu (2008), Shan et al. (2008), Chen and Gao (2013). 31 Yang (1998). 32 Orosz (2000), Zi (2003), Chen (2009), Braverman et al. (2004), Deng (2001, 2007). 33 Tian (2004: 89–92). 34 Xu (2010), Zhao (2013). 35 Zhu (2010), Wang and Wan (2012), Zhang and Zhou (2012), Zhang (2013). 36 Dai et al. (2010). 29

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is the interaction between stakeholders, including university education foundations sharing social responsibilities with enterprises, maintaining mutually trusting relationships with donors, and a spirit of mutual assistance and trust between donors and volunteers.37 The government should strengthen supervision of the foundations, set up an information disclosure system for them as soon as possible, and improve the system for tax reductions and exemptions. Improving the quality of foundation personnel, cultivating specialized fund-raising personnel, attracting community leaders and well-known alumni to join foundations, changing the concept of fundraising, and cultivating credibility are important strategies to improve the fundraising ability of foundations for university education.38

1.3.1.3

Laws, Regulations, and Policies on Charitable Donation

Most of the laws concerned with charitable donation focus on standardizing donation behavior, management of donated fund and goods, the founding, operating, and information disclosure of charitable organizations, and the tax reductions and exemptions for donations.39 Relevant studies based on the existing laws and regulations concerning charitable donation and judicial practice usually analyze articles of the laws and regulations aiming at standardizing the nature, operating mechanism, tax system, administrative and social supervision, and related technical legislative issues for charity, while putting forth suggestions for improvement.40 On the whole, there is much room for improvement in current Chinese laws and regulations concerning charity. They have a low rank in the legal system and little binding force. Much work remains to be done to construct a complete and effective system of laws in this field.41 Over the last decade, guides for proposing charity research projects funded by National Social Sciences Foundation have laid emphasis on the charitable donation development mechanism and policies. Research topics of approved projects cover the following: encouraging charitable development, social policy for China’s charitable development, the charity legal system, standardizing and safeguarding the legal system for private charity development, inheritance tax and gift tax issues, tax issues for public welfare donations, the growth and development of charity in China, the use and allocation of catastrophe donation property, the current situation and future development and status of charity in China, social recognition of philanthropy, China’s system of charity regulation, linking modes and path of advancement for philanthropy and social assistance, and on charitable donations and their determinants, 37

Chen and Fu (2010). Liu and Wang (2005). 39 China Legal Publishing House, ed., Gift Contract Texts and Relevant Legal Stipulations, China Legal Publishing House, 2003; NPO Information Consultation Center, ed., “Collection of Preferential Tax Policies of China on Charitable Donations (1994–2004)”, Social Entrepreneurs, http:// www.12361.org.cn/fg4.htm (2006/03/03); Gong and Chen (2008), Yang (2010). 40 Dong and Bai (2005), Li (2008), Liu (2009), Jin (2008), Shi and Zhu (2010). 41 Li and Yang (2007), Chen (2000), Yin (2009). 38

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among other topics. These topics touch on many disciplines, including sociology, jurisprudence, management, and applied economics. This enriches and deepens the scholarly research concerned with charitable donations and philanthropy in China.

1.3.1.4

Charitable Donation Culture

Studies on charity culture include subjects such as traditional Chinese charity culture, the connotations and ethical meanings of charity culture, charity culture and philanthropy, comparisons between Chinese and Western charity cultures, and the relationship between charity culture and a harmonious society among others. Some of these studies specifically discuss charitable donation culture.42 Qiuguang Zhou and Zhongmin Sun point out that the traditional Chinese concept of charity is composed of an ancient ethos having “benevolence” as the core and a modern ethos that highlights “laying equal importance on both instruction and cultivation.” Nonetheless, it has deficiencies, for example, the concept of “harming others to benefit oneself” widespread in the commodity economy is detrimental to enhancing charity consciousness.43 Chinese charity culture is far from developed, which can be seen from misunderstandings of charitable concepts and defective donation mechanisms.44 Scholars have also noted that volunteerism is the ideological foundation of charitable donation culture and the driving force for the development of that culture. It also provides a strong human guarantee for the cultural progress of charitable donations.45 The study of charity consciousness is a crucial part of the study of charitable donation culture. Fangfang Yang defines charity consciousness as “the knowledge, judgment, understanding, and perceptive ability a person has developed and acquired in practice and the initiative of participation that it has brought about.”46 In Xialing Xie’s opinion, the core and foundation of the charity culture lie in every person and every company or enterprise having a common sense of “social responsibility.” In traditional Chinese culture, there are four bases for charitable culture: Confucianism, Mohism, Buddhism and Christianity, of which Confucianism is the main reference for the creation of China’s contemporary charity culture.47

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Yin and Zhang (2007), Cheng (2005), Zhang (2007), Guo (2009), Qiu and Zhou (2013). Zhou and Sun (2008: 3). 44 Chen and Tang (2008). 45 Yin and Zhang (2007). 46 Yang (2004). 47 Xie (2006: 94). 43

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1.3.2 Studies of Charitable Donation Mechanism The charitable donation mechanism is one of the main topics in research on charity and charitable donations. There are different perspectives on the classification and study of the charitable donation mechanism. Research topics which have attracted attention include the research objective for studies of charitable donations, as well as the socio-cultural mechanism, policy and system mechanisms, organizing and operating mechanisms, and the incentive mechanism for charitable donations.

1.3.2.1

The Object of Research for Charitable Donation Mechanism Studies

It is generally held that the charitable donation mechanism refers to “the process and the way means of interaction between various links in the process of charitable donation of all links interacting with one another in making donation, which involves some sub-mechanisms such as the mechanism of factors that include mobilization, stimulation, and supervision.48 ” The “social public welfare mechanism”, is a general term for a series of bodies and systems related to public welfare donation activities. It is a fully formed system mutually operating between a social credit system, as well as laws and regulations, among other sub-systems. As an umbrella term referring to a series of entities and systems for social public welfare donation activities, it points to a complete system where a credit subsystem for social public welfare donation, a set of laws, regulations, and rules, and other subsystems interact. It includes components such as an external and internal mechanism and a direct and indirect mechanism, among others.49

1.3.2.2

Socio-Cultural Mechanism

Human charitable consciousness fundamentally determines charitable behavior, and as such is the deepest factor bearing on the development of charity. As a significant part of charity culture, donation culture functions as an important force driving the sound development of charity. According to Changkui Shi, charity culture is part of the dynamic mechanism underlying Chinese charity, a mechanism made up of motive power, supporting power, and their respective allocation. Chinese charity is not lacking in motive power, but it needs to be activated and transformed.50 Zhaoyang Li points out that, due to modern Chinese charity emerging late, the lack of traditional charity culture and the concept of respect for labor, China has not built up its charity culture system, which calls for efforts to carry out such work.51 Xia Guo 48

Cai et al. (2009: 32). Huang and Yao (2003). 50 Shi (2008: 29), Guo (2009). 51 Li (2012). 49

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and Aimin Chi posit that, under the precondition of correctly orienting donation culture, donations can be established by both actively creating a suitable vector for donation culture and organically integrating various cultural resources for charitable donations.52 According to Xibing Zhu, the volunteer spirit serves as an important spiritual force for charity culture. Drawing on the essence of traditional Chinese charity culture and on its own advantages, it has instilled new meaning into contemporary charity culture. The integration and transcendence of volunteerism and traditional charity culture is the main content of the spiritual motivation mechanism for the development of philanthropy in China.53

1.3.2.3

Policy and System Mechanisms

The policy and system mechanisms of charitable donation mainly concern the relevant management and supervision mechanisms, as well as tax policy, which makes up the “external mechanism” of charitable donation. The government uses a two-tiered system for the management of charitable non-governmental organizations, with the management and supervisory functions performed by registration management agencies and the competent units separately. The defect of this system lies in its limiting development and dispersing responsibility, which is often in practice reduced to a type of political control and shared duty.54 . In recent years, the political environment for the development of charitable donation has been improved to an extent and social administration reform has created favorable conditions for innovation of the social donation model.55 Lihua Tian and Xiaodong Chen point out that in China’s current tax system, turnover and income taxes are the two main types of taxation, with the value-added tax and corporate income tax exerting the greatest influence on the charitable donations of enterprises.56 A survey found that companies do not need tax exemptions to make donations. Of the companies which donated, only 13% actually used their donation to offset taxes. The main reasons for this were: low donation value; complex deduction formalities; and difficulty in obtaining deductions for in-kind donations, among others. As the tax deduction can only be finalized after making a donation, deciding whether to apply for it is subject to transaction costs.57 As Daoshu Ge points out, though an overwhelming majority of civil servants join in various donation activities held by their work units or the communities they live in, owing to the rather complex procedure needed for realizing tax deductions or exemptions for donations from enterprises or individuals, and the long time that the process takes, few donors

52

Guo and Chi (2009). Zhu (2009). 54 Wang (2007: 143) 55 Wang (2014). 56 Tian and Chen (2007: 58). 57 Yang and Ge (2003: 54). 53

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apply to tax bureaus for deductions or exemptions.58 According to relevant survey results, the impact of tax policies on donations by individuals is not clear, and though tax policies have played some positive role in promoting enterprise donations, they need to be improved and intensified.59 Tax policy represents an important means for the government to push charitable donation, and the new “Corporate Income Tax Law,” as well as the policy of deducting all tax on donations made during periods of emergency and severe natural disasters60 will be conducive to increasing donations from enterprises and individuals. However there are some general defects with the stipulations in the current tax law with regarding the tax system for donations. Tax incentive policies are rather dispersed, and the measures adopted by different government departments are not completely congruent.61 These factors have hindered the sound development of public welfare charitable donations, which calls for further efforts at adjustment and improvement.62

1.3.2.4

Organizing and Operating Mechanisms

Studies in this area of research are concerned with two points: One is the mechanism of mobilizing donors, the other is the mechanism for charitable organizations’ operations. Scholars have applied the theory of corporatism to explain the institutional background of the rise of the charity and NPOs in China. They have conducted empirical studies with charitable organizations that have a strong official color as their objects of research. Liping Sun, who has studied the mechanism for foundations raising donations, is of the opinion that Project Hope adopts a “quasi-organizational mobilization” for the social operation of in-system resources.63 Zhiren Zhou and Qingyun Chen, who have studied the mechanism of supervision, hold that both the self-discipline mechanism inside organizations and the external discipline mechanism jointly supervise the operation of organizations.64 Li Su, et al., have probed the legal environment 58

Ge (2007: 120). Guo (2009). 60 Chinese Ministry of Finance and State Administration of Taxation, “Circular on the Issue of Tax Deduction on Donations Made by Tax Payers for the Cause of Preventing and Treating SARS” (F&T(2003) No. 106), issued on April 29, 2003; Chinese Ministry of Finance, General Administration of Customs, and State Administration of Taxation, “Circular on Issues of Tax Policies for Supporting Restoration and Reconstruction in Wenchuan after Earthquake” (F&T(2008) No. 104), issued on July 30, 2008 and executed until December 31, 2008; “Circular on Issues of Tax Policies for Supporting Restoration and Reconstruction in Yushu after Earthquake” (F&T(2010) No. 59), issued on July 23, 2010 and executed until December 31, 2012; “Circular on Issues of Tax Policies for Supporting Restoration and Reconstruction in Zhouqu after Earthquake” (F&T(2010) No. 107), issued on December 29, 2010 and executed until December 31, 2012. 61 Qu and Zhang (2011: 34). 62 Shi (2009), Xie (2012), Shi and Chen (2012). 63 Sun (2000). 64 Zhou and Chen (2000). 59

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of the third sector, compared it on an international basis, and assessed the performance of the Hope Project.65 “The duality of being governmental and non-governmental” is the basic feature of the actual operations of most charity organizations and they are related institutionally with the state system, which indicates the attachment of the society to the state.66 Currently, the mechanism for mobilizing charitable donation in China is referred to by some scholars as “semi-institutionalized” mobilization. Among administrative institutions, there exists the phenomenon of forced donation; individuals make donations mainly through their work units or neighborhood committees of their communities where they live, and few entrust their donations directly to charity intermediary organizations; rural community residents’ donations are affected by rural grass-roots political organizations, in which village cadres play an important role.67 At the same time, the relatively independent non-governmental charity organizations are forced to stimulate the internal needs of the donors and allocate resources efficiently to win trust and amass resources, yet due to official charities’ monopoly on the charitable resources this path is anything but smooth and most of these organizations face existential crises.68 The operating mechanism of charity organizations falls under the internal mechanism of charitable donation involving the management mechanism of charitable donation organizations, the professionalized and specialized training of their personnel, and the management and investment of charitable funds.69 The operations of Chinese charity foundations tend to contain many aspects of the planned economy. According to Xin Ma, of the 1000-odd foundations in China, most are public, sponsored by organizations or individuals who are loosely related with the government or its departments and rely on administrative power to obtain subsidies. At the same time, they use the funds at their disposal as required by government departments.70 Baofu Xie points out that the highly influential public welfare programs operated by foundations are usually pushed to completion by the government.71 To study the mechanism of raising donations is, from the perspective of the initiative on the part of charity organizations, to probe the influence of fund-raising strategies and ways on the charitable donation mechanism. The scholars in this domain, taking into account the different features characterizing the charity behaviors of different groups of people, have studied the fund-raising ways and means as well as the innovation mechanism in this regard, such as the fund-raising models of publicraising foundations, the project-oriented mechanism of raising charitable donation, the forms and mechanism of raising donations for emergent reasons and of regularly raising small-sum donations, the three types of cooperative models, i.e. the dominator type, the participant type, and the proxy type, which are adopted in operating 65

Su et al. (2000). Xu (2001). 67 He (2007), Xu and Zhang (2004), Li (2007). 68 Zhu and Long (2012). 69 Wang (2007: 33). 70 Ma (2004: 40). 71 Xie (2003: 64). 66

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the specially funds established by celebrities and public-raising foundations through cooperation, the fund-raising way of direct mails through databases,72 characteristic activities of raising charitable donations aiming at the different features of different regions and groups of people, for example, the “One-Day Charity”, charity performances, and charity auctions in urban areas and “Giving a Bag of Rice” and “Giving a Bag of Flour” in the rural areas.73

1.3.2.5

Incentive Mechanism

The incentive mechanism of the charitable donation refers to institutional measures and other social factors motivating and promoting the public to make charitable donations. Given the fact that the charitable donation in China is still in an early stage and faces many limitations, people all walks of life pay much attention to and advocate the introduction of various policies and measures to stimulate charitable donation.74 These involve factors of cultural awareness,75 tax incentives76 , and promotion in communities77 , among others. Yuhua Guo, et al., after analyzing the incentive mechanisms within an organization, is of the opinion that the incentive measures adopted by China Youth Development Foundation created an institutional community, and in addition the motivation of governmental power and material, it has taken an incentive mechanism to foster motivation for career and achievement.78 A concept close to the incentive mechanism is the return mechanism underlying social donation, which ensures a certain reward for the individuals or enterprises engaged in social donation.79 Some economic studies tend to regard the donation behaviors as the result of rational choice on the part of individuals and, under the presupposed condition of “homo economicus” and “utility maximization”, see charitable donation as a type of the consumption behavior, and thus they apply certain economic models to infer the incentive factors of charitable behaviors.

1.3.3 Charitable Donation Outside China Most studies of charitable donations outside China are oriented toward western countries that have accumulated rich experience. They are usually concerned with the following aspects: the latest trends in charitable donation, the subjects, domains, 72

Liu (2013), Zhao (2009), Li (2010), Xu (2004), Zhang (2013), Gao (2012), Lu (2014). Chen (2009), Liu et al. (2010), Zhang and Liu (2010). 74 Liu (2007), Xiang and Yang (2008). 75 Luo and Li (2009), Zhu (2011), Chen and Shao (2011). 76 Wang (2009), Ding (2008), Li and Liang (2007), He (2006), Luo (2008), Wang (2013). 77 Li (2007). 78 Guo et al. (2000). 79 Xia (2006). 73

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and behavioral patterns of donation, socio-cultural and institutional mechanisms, common ground and differences between charitable donations in different countries, among others. The United States is the Western country with the largest-scale charitable donations. As a result, in recent years authoritative annual statistics on the domestic charitable donation in the US, as well as summaries of relevant annual research are quickly translated into Chinese for media consumption80 This serves as important reference for the Chinese charitable donation.81 At the same time, most of the research on western philanthropy involves the status and mechanism of charitable donation.82 . The main donors in western countries are individuals, enterprises and foundations and areas of charitable donation mainly include education and medicine.83 Educational donations have become one of the main sources of funding for U.S. higher education institutions, while the management of educational donations has entered the stage of marketization and institutionalization.84 Some studies construct a new paradigm based on the latest western literature that analyzes the relationship between donation and performance and explains the mechanism for corporate donation performance in more complete fashion.85 It is generally held that western charity has its origins in Christian culture and that the Bible contains the basic Christian concepts and norms of charitable donation.86 There has been much research introducing western charity organizations, particularly foundations and their legal system, tax incentive system, operations classification and management, and credibility building, and that have proposed five aspects of the operating mechanism for these organizations. Those aspects are: legal guarantee, governmental supervision, social supervision, internal control, and service system.87 Some studies are appended with related tax tables, thus providing rich data on charitable practices.88 Studies conducted from the viewpoints of public choice economics, public welfare trust, and public management have deepened our scientific understanding of charitable donation behaviors.89 As the tax system, donations

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Spector (2008), Han (2007), Caijing Magazine (2011), Dong (2014). Zhang (2013), Gao (2010), An (2014), Wang et al. (2012), Li (2014), Ruan (2012). 82 Li (2006), Yao and Collins (2003), Zhang and Huang (2013), Gao (2013), Huo (2013) 83 Xie and Yang (2009), Zhu and Song (2008), Xu (2008), Kotler and Lee (2004), Li (2008). 84 Lu and Chen (2006), Lu et al. (2006), Meng and Xu (2006), Meng (2007), Chang (2010), Jia and Ren (2012). 85 Zhong (2007). 86 Xu (2006), Geng (2011). 87 Fan and Guo (2008), Chen and Tan (2007), Chen (2012), Pan and Yin (2014), Wang (2009). 88 Adler et al. (2007), Huang (2013). 81

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by enterprises, and educational donations are important for charitable donations in China, these aspects have attracted considerable scholarly attention for comparative studies.90 The aforementioned achievements represent the clear conclusions of studies over the past decade on the nature, channels, and functions of charitable donation, as well as the basis for new exploration, reflecting scholarly efforts to research the Chinese charitable donation. Owing to the diversity and complexity of charitable donation neither general literature research nor case studies can fully elucidate the situation in the field. In particular, integrated studies on the Chinese charitable donation mechanism are rare, and yet rare are attempts to probe the transformation of the charitable donation mechanism. The significant theoretical and practical experience of other countries calls for deeper research. Therefore, on the basis of reviewing the relevant literature and drawing on the achievements made by other scholars at home and abroad, the present study will continue to probe this area, and, by combing the socio-historical background of the development of charitable donation in transformational period for the Chinese society with various internal and external relationships involved in the donation process, observe and analyze the typological features, the activity content, the organizational forms, and the operating mechanism of charitable donation in China. It aims for new findings, new understandings, and new conclusions.

1.4 Theoretical Basis and Research Approach In the light of the theoretical basis of charitable donation and considering the practical requirement for carrying out the research, a general-purpose structural framework is set up here for analyzing the charitable donation mechanism. Literature research and field study are the two main methods adopted in the study.

1.4.1 Theoretical Basis for Studying Charitable Donation There are two major types of theories which constitute the basis for studying charitable donation, i.e. moral theories and empirical theories. Important concepts and viewpoints of moral theories such as humanitarianism, altruism, rationalism, and religious values will be presented in some sections of Chapter Four. Some views of empirical theories that can be applied to explaining charitable donation behavior will be introduced below. 89

Tullock (1997), Zhao (2008), Drucker (2007), Xie (2011). Jiang (2007), Zheng (2008), Zhang (2005), Zhong (2008), You (2007), Yao (2006), Chen et al. (2005), Wang and Tang (2006), Yuan and Gao (2009), You (2012), Jin et al. (2013), Guo and Liu (2014), Fu and Guan (2014).

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Social Exchange Theory

According to social exchange theory, human behavior is subject to the social exchanges which can bring about potential award or reward, and all human social activity occurs on the basis of the exchange relationship, with social relations also taking the form of exchange. The founder of the theory is George C. Homans and other important representative theorists of it include Peter M. Blau and Richard M. Emerson. According to Blau, social exchange is the relationship between individuals and between groups, the power division and group partnership, the conflict and cooperation between confronting forces, and serves as the basis for the indirect connection and close attachment between members of a community. The reason why individuals mutually associate is that they can get something they need by exchanging in their mutual association.91 In Blau’s opinion, social exchange can be attributed to two social rewards: internal and extern reward. The internal reward refers to the pleasure, social identification, feeling, interaction, etc. which are directly obtained from the process of social exchange, and the external reward, to the materials, commodities, assistance, obedience, etc. outside the relationship of social association. On the basis of such understanding, he divides social exchange into three types. (1) Social exchanges for internal rewards. The actors engaged in such exchanges take the process of association itself as their aim; (2) Social exchanges for external rewards. The actors engaged in such exchanges take the process of association as a means by which to realize their further objectives. The external reward provides objective and independent standard for one to choose his partner reasonably. (3) Social exchanges for mixed rewards, which involve both external and internal rewards.92 Charity represents a human behavior of reciprocal and interactive exchange, and an autonomous exchange in a market economy. The donor seeks to obtain spiritual or mental satisfaction by making charitable donation, or does it by a certain belief, either of which, in essence, aims at accomplishing an exchange. According to the social exchange theory, the charity organization provides the environment or condition for the donation, and satisfies the donor’s need of donation, thus realizing the aim of charity at social service. Blau’s division of social exchanges into three types reveals the different types of the need of charitable donation behaviors, and meanwhile represents the three objectives which charity organizations strive to realize by their donation raising activities, that is, meeting the donors’ need to donate, offering spiritual consolation, or returns in other forms to enhance the donation efficiency.

1.4.1.2

Resource Dependence Theory

Resource dependence theory relates to the efforts made by an organization to find or establish a method to have a stable grasp on key resources, as to reducing its dependence on external resources. In The External Control of Organizations: A Resource 91 92

Blau (1985). Blau (1985).

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Dependence Perspective93 , Pfeffer and Salancik give an detailed and systematic exposition of resource dependence theory. The theory emphasizes the interactive relationship between the organization and the external living environment, arguing that the organization needs to obtain resources from the surrounding environment while interdependently interacting. The organization should adjust its degree of dependence on the external environment and should not simply obey that environment, but rather make its own choices. In order to obtain more resources and protect its interests, the organization should try its best to control or avoid the impact of changes to resources and the environment, while also recognizing the uncertainty of the environment and the limited supply of resources. Besides, the resource dependence theory advocates the initiative of an organization, pays much attention to its strategic behavioral ways, and takes its understanding of its resource environment as a process of behavior. Different from other theories of environmental determinism, it holds that an organization is able to respond to the pressure from the external resources, and thus develop its strategy for adapting to the pressure, and that, by means of initiative efforts to make its internal restructuring or political automatic behavior, an organization is able to adopt proper strategies for changing, choosing, and adapting to the environment, thus achieving its aim at realizing its own interests. The resource dependence theory constructs the dependence relationship between an organization and its environment and argues that the environment of an organization not only exists and can be produced by the organization or its management through its automatic choosing, understanding, participating, and designing, which results from the interaction between the organization and its environment. When studying the charitable donation mechanism, charitable organizations are not independent individual actors, but part of an interactive whole with many variables that include social charitable resources, targets of charitable services and charitable fundraising methods. What kind of fundraising method the charitable organization takes to some extent determines the charitable resources, which is the extent of the donor’s contributions? At the same time, it has an impact on charitable services. In the light of resource dependence theory, a charitable organization needs to make choices in response to the changes in the environment, so as to ensure its purpose of serving society. When the charity organization attempts to construct sound charitable donation and donation-raising mechanisms, it is attempting to construct its strategy for adapting to the external living environment. It is the result of the voluntary choice of charitable organizations to adapt to the changes in the charitable environment, manifesting the core value of organizational strategy selection and adaptation to environment reflected in the resource dependency theory.

1.4.1.3

“State-Society” Theory

Under the conditions of modern society, citizens carry out economic, social and political activities on a voluntary basis in accordance with relevant laws, regulations 93

Pfeffer et al. (1978).

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and rules of conduct, so as to achieve coordination and interaction between themselves and the state. The meaning of the main concept of the civil society theory is two-fold: civil society is independent of the political state, and citizens participate in the governance of social affairs.94 It provides theoretical support for the legality and necessity of the existence of the third sector. The application of the civil society theory to study of the third sector embodies the integration of theory and practice. How a charitable organization gains its truly independent status constitutes an urgent problem in search of resolution.95 Its most marked features are being nongovernmental and non-profit. Citizens’ participation in charitable activities is a basic condition for civil society to mature. Civil society theory can be used to explain the necessity of charitable donations and assistance, which represent an important way by which social forces carry out self-governance in civil society. Charitable donations reflect that citizens as the subjects of society have the right and freedom to provide assistance to those in need. As a key link in realizing the aim of making charitable donations, the charitable assistance serves as an important means by which social forces such as donors and charitable organizations autonomously take part in social governance. Constructing a well-functioning charitable donation and assistance mechanism and mobilizing wide-ranging non-governmental forces to redistribute social resources are significant indicators of citizen participation in the social governance and engagement in social interaction. Therefore, charitable donation and assistance embodies the practical implications of civil society theory.

1.4.1.4

Market Failure and Government Failure Theory

The drawback inherent in the market mechanism itself and limitations of the external environment make it impossible for the market mechanism to by itself realize efficient distribution of commodities and labor and to produce and allocate non-competitive and non-exclusive public goods, thus resulting in market failure. In providing on a unified basis public goods and services, when the government can not meet the different requirements of all the people, the government failure will occur, that is, the government functions ineffectively intervening the economy, unable to overcome market failure successfully, yet still hindering and limiting the market, with the result that the optimal allocation of the social resources can not be realized. The occurrence of market failure and government failure is an important reason for the existence of the third sector, which is referred to by Lester M. Salamon as the system of “Third Party Government.”96 This argument goes as far as arguing that the non-profit sector came into being for the very purpose of solving the problems of market failure and government failure.97 As an important component of the non-profit sector, charitable organizations display flexibility and diversity in their 94

Jiang (2006). Jin (2013). 96 Salamon et al. (1981). 97 Salamon (1995). 95

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smoothly functioning charitable donation mechanism and social assistance system and thus have established a complementary and interpenetrative relationship with the government in providing public goods and services. By providing relief and assistance to the weak, they bring about the third distribution of the social resources, making up for the shortcomings of the first distribution of the market and the second distribution of the government, thus promoting social equity. Thus, the development of the charitable donation mechanism represents the concrete practice and manifestation of the third sector in playing a significant role in realizing a more equitable distribution of social resources by compensating for the drawbacks of the market and the government.

1.4.2 Analytical Framework In this study, the charitable donation mechanism is divided into such basic types as the organizing, institutional, and cultural mechanisms. The organizing mechanism involves three types of basic subjects: the donor, recipient of donations, and beneficiary. With regards to donors, the main concerns include the type of donor, the dynamics of donation behaviors (initiation and motivation), donation channels and forms of donation, donation levels and influencing factors, among others. On the recipient side, there are means of raising donations and channels of fundraising, modes of giving donations or assistance, and innovations in these areas, among others. Concerning the beneficiary is mainly the governance mechanism of the donation organizing mechanism. On the whole, raising donations, giving donations, receiving donations, funding services, and obtaining benefits make up the continuum of the donation mechanism, thus constituting the basic contents of the organizing mechanism of charitable donation. The laws and regulations, and socio-culture and habits are the factors related to the institutional mechanism and cultural mechanism when studying the charitable donation mechanism. There is a deep interaction between charitable donation behaviors, systems and culture. This network of interaction forms the general analytical framework of this research. (see Fig. 1.1).

1.4.3 Research Methods The present study adopts an approach integrating literature research, survey research, and fieldwork. By reviewing relevant literature and analyzing statistical data, the variables which likely influence donation behavior are summarized and determined. There is description and analysis of the current situation, features, and trends of the charitable donation mechanism, as well as comparison between different donation subjects’ behaviors. Differing internal mechanisms underlying charitable donation are revealed and explained. More attention is paid to the experiences of some individual cases in the field of charitable donation, specifically, three cases: SD

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Fig. 1.1 Framework for analyzing the charitable donation mechanism

Charity Federation, SD University Education Foundation, and XZ Village, a famous charity community. These three cases are investigated through interviews and fieldobservations. Additionally, a number of residents who took part in a local donation-raising activity “One-Day Charity” in a public square were given survey questionnaires, (900 were distributed and 797 returned as valid samples, with a return rate 88.6%), producing rich first-hand data. On the basis of analyzing such data, the actual experience of the charitable donation mechanism and the obstacles in its development are summed up and discussed. In doing so, it tests the applicability of the field research in explaining donation behavior, so as to achieve the purpose of finding factors and relationships operating in the process of charitable donation, explaining its operation mechanism and strategies to enhance the performance of charitable donation.

1.5 Main Content and Conclusions The present studies emphasizes the following areas: donors, mediating agencies and their behavioral characteristics, factors which affect the donors’ behaviors such as culture, taxation, internal and external supervision, and social encouragement; ways of raising charitable donations and providing assistance as well as trends in charitable donation mechanism development.

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1.5.1 The Donor’s Behavioral Characteristics This study acknowledges the social roles played by the three types of donors— enterprise, individual, and government. In China, enterprise donations constitute the main source of funds for philanthropy. National enterprises account for a major portion of the total share of social donations, while large state-owned enterprises occupy the leading position in high-value donations and private enterprises have gradually grown to be the backbone of charity in China. Government agencies, in spite of the low value of their charitable donations, still play important leadership and guidance roles for the field. Individual donations are not the main source of the charitable funds, but there have been some positive changes and the volume and proportion of individual donations are growing steadily. The behavioral features shared by these three types of donors are: their mobilizing mechanisms are both administrative and unit-based and their donation channels are concentrated. Individual and enterprise donations both come in diverse forms, including cash, material aid, voluntary service, share equity, and the welfare lottery. These are directed to various domains including disaster relief, poverty relief and education, among others. This situation is determined by the basic national conditions of China. Since 2008, natural disasters such as earthquakes, snowstorms and typhoons have been frequent and poverty alleviation and development projects have been progressively pushed forward, attracting more charitable resources. In the past, the donations from enterprises were brought about mainly by external factors, such as the mobilizing efforts by the government, appeals by officially-run charity organizations, and public welfare marketing demands, but in recent years there been a shift from external to internal motivation. Enterprises have begun to organize and carry out their charity programs on the level of corporate strategy. The government has faded out of the charitable donation market and, handing over the operation of charities gradually to the society, has paid more attention to its guidance role. This trend embodies the principle of the governmental promotion and the non-governmental implementation. Levels of private donations are low in China when compared to Western countries, mainly as a result of factors including limited donation channels and a deficient tax incentive mechanism. However, as the influence of charity culture is deepening in China, charity organizations have placed more emphasis on private donation resources, positive energy is accumulating and having an impact, and charity consciousness is strengthening. Private donations in China have turned for the better and been developing in a promising direction.

1.5.2 Intermediary Charitable Organizations and Their Characteristics In recent years, a complex picture of various types of intermediary charitable organizations, each with their own characteristics, has emerged. The charity federation

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system has established a large organizational and relief-giving hierarchy from top to bottom and is seeking to transform from an administrative operational model to a social and market controlled model. Foundations have grown rapidly in various forms. Public foundations have generally stood for a long time and are large scale, with their main income sources being social donations and government subsidies and thus have advantages whether in their income or total funds. Non-public foundations have risen quickly and since 2011 they have surpassed the public foundations in the volume and speed of their growth. Additionally, their forms are diverse and their operations are flexible. The main sources of their income are social donations and the preservation and appreciation of existing funds. Thanks to the transformation of China’s socio-economic structure and the innovation in its social system, the organizing operations of the China’s charity foundations are constantly enriched and maturing, manifesting various special modes. For the fundraising mechanism, there are: (1) raising high value donations on the basis of multiparty cooperation and the fund system, (2) domination by the administrative means working in combination with market forces; (3) limited operating income and increases in fund value. With regard to the transfer payment orientation mechanism, they demonstrate (1) the shift in the giving mechanism from administrative dominance to orientation based on social need, (2) the normalized mechanism of prioritizing education and the emergency mechanism that has providing disaster relief as the principal task, (3) the charitable orientation mechanism of taking projects as donation vectors. Due to inertia born of the attachment of charitable foundations to the government resources and the encroachment of the government on the authority of charitable foundations, the demarcation between the charitable foundation and the government is still not clear and explicit. There has been some retrogression that is directly reflected in the operations of charitable foundations. This is shown by the intersection between the operations of the administrative mechanism, the market control mechanism, and the social controlled mechanism. One of these three mechanisms works or the three have worked together in the development of different foundations or in the different historical stages of the same foundation. The case study of SD Charity Federation, finds that its actual operating mechanism does not accord with the form of a non-profit organization. In the early development stage of a charitable organization, it is closely related with the government. The government has both the demand for social resources and social control. Therefore, as much as is possible, institutional arrangements will control the internal operation of charities. Given a specific political system and social structure, the top-down administrative pattern can undoubtedly enhance effectively the efficiency of activities and thus it becomes a rational choice for an officially run charity organization within the conflicting constraints of the system. Currently, the semi-administrative operating mechanism can be regarded as an adaptive response of a charity organization in its early growth stage to the contemporary system, but not the ultimate form of the relationship that will be built. The dynamic game between the two forces has promoted the development and transformation of the operation mechanism of charitable organizations. The efforts to improve the mechanism of operating intermediary

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charitable organizations should be mainly oriented at (1) reforming the management system and lowering the access standard so as to promote the coordinated and comprehensive development of various types of foundations, (2) implementing deadministratization so as to empower the charity foundations with more autonomy, and (3) exploiting charitable resources and increasing the income of charitable funds. The case study of the SD University Education Foundation fund-raising mechanism proves that individuals, enterprises, and private foundations constitute the main source of funding for the university education foundation. Trust, a social network, and mutually beneficial norms are the core factors which affect the fund-raising results of university education foundations. Trust constitutes the basis, the social network serves as the platform, and the norms provide a guarantee. The fundraising mechanism of a university education foundation is in essence a set of resources incorporating the donating side made up of alumni and non-alumni, enterprises, cooperating units, among others., the fundraising side made up of the university and its secondary schools and departments, the university leadership, the fundraising team, etc., and the objects of donation, which are linked as a whole via factors such as trust, mutually beneficial norms, and a social network, involving organizationindividual and organization-organization relationships. Efforts to improve university education foundation fundraising should be mainly oriented at (1) strengthening self-construction, fostering social trust and particularly credibility, (2) cementing the relationship between the foundation and society and expanding the fund-raising network, and (3) elevating the foundation’s internal management and bettering the mutually beneficial norms with the donating side.

1.5.3 Cultural and Social Factors Affecting Charitable Donation Socio-Cultural Mechanism This study analyzes the two aspects of the socio-cultural mechanism of charitable donation: the influence of traditional culture on charitable donation and the influence of contemporary social consciousness on charitable donation. It concludes that the influence on the charitable donation behavior of the Chinese public, setting aside traditional Chinese cultural values, comes more from charitable consciousness dominant in contemporary Chinese society. The level of the charitable donation consciousness of the citizens is on the lower side mainly because of the lack of strong charitable donation motivation on the part of individuals lacking understanding of charity, insufficient publicity by charity organizations, and a defective operating mechanism. The cultivation of the citizens’ charitable donation consciousness should be based on their full understanding of and faith in charity. Therefore, charity organizations must take initiative to intensify their efforts to build their reputation and credibility, and enhance their transparency in offering information. Meanwhile, the government should make more effort to improve relevant legislation and push the introduction of laws, regulations, and policies concerning with charity, so

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as to ensure that every link in the process of charitable donation is ruled by law, efficient and standardized, and citizen participation in charity is safeguarded. Taxation Mechanism Tax policy is an important means by which the government promotes charitable donation. In recent years, there has been considerable progress in introduction of tax laws concerning with charitable donation, with more and more preferential tax-exemption policies offered to enterprises and individuals. In reality, the influence of different taxes on different charity donors varies. As the turn-over tax and income tax are the two main types of tax in China, the value-added tax and the corporate income tax are important to the charitable donation behavior of enterprises. On the whole, the incentive mechanism of the tax policies has been inadequate and yet to be improved. It is difficult for enterprises engaged in charitable donation to obtain the required evidence for tax reductions and exemptions; the procedure of applying for tax return is complicated; and there is no mechanism to produce a “forcing” effect. Therefore, there is a need to further improve the laws and regulations on tax incentives for charitable donations, implement preferential tax policies and put in place specific measures and rules on tax relief for charitable donations. Additionally, the scope of the charity organizations entitled to tax exemption and to deduction of tax on public welfare donations should be expanded, the gap in treatment brought about by differing preferential tax policies for officially run NGOs and the nongovernmental charity organizations should be narrowed and even eliminated, the limitation of total tax deductions to only specially designated public foundations or domains should be lifted, and more non-governmental charity organizations should be endowed with tax-exempt status for their donation income. Supervision Mechanism The supervision over charity organizations involves mainly government supervision, social supervision, and charitable organization selfdiscipline, among others. In China, government supervision has outweighed social supervision and self-discipline, while a third party mechanism is lacking. Therefore, to perfect the supervision mechanism of charitable donations, we need to continue to improve the construction of laws and regulations on philanthropy, formulate comprehensive laws and clarify specific measures for the supervision and management of philanthropy; to strengthen the linkup of various regulatory links and enhance the cooperation between supervisory bodies; to set up a multiparty system of supervising charity organizations involving the government, the general public, and the media and to introduce the charitable organization self-discipline statutes; to draw on the experience of developed countries in information disclosure and building up a fair and transparent information disclosure mechanism. Community Encouragement Factor Through case studies in the field, this study finds that there exist community participation mechanisms, incentive mechanisms, restraint mechanisms and advocacy mechanisms that are conducive to the development of philanthropy and that play an important role in donation activities. In this regard, advocacy by community leadership and the humanitarian tradition of communities tend to occupy important positions. Charitable donation activities in rural communities do not depend on specialized charity organizations and foundations, as in many urban communities, but rather are brought about mainly by the rural

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organizations of political power at the grassroots level. In those charitable activities, the community leadership plays a core role and serves as the model.

1.5.4 Modes of Raising Charitable Donations and Giving Assistance With the growth of charity and the progress of society, many changes have taken place in the donation-raising market. These have been the key to promoting the development of charity, elevating charity organizations’ level of serving the society, improving the fund-raising, and helping access to more charitable resources. Drawing on modern marketing concepts, separating donor markets, launching targeted fundraisers and implementing effective donations-based crowdfunding help to raise the fundraising efficiency of charitable organizations. To innovate the donationraising mechanism and achieve better results in soliciting charitable contributions, improvements should be made in a number of areas, including charitable fund management, types of fundraising, disclosure of fundraising information, donor management and professional fundraising teams. At this stage, charitable aid is mainly carried out through the projects. Due to the irrational operating modes of charities and their government orientation, charitable relief is limited to traditional means and lacks both flexibility and diversity. In recent years, the non-governmental nature of charitable aid has been gradually strengthened, and new projects such as venture philanthropy have taken place. These have provided important conditions for the establishment and improvement of innovative mechanisms for charitable aid. The optimization and innovation of the charity relief modes requires change of conceptions, concerning charitable aid, an increase in the proportion of funds spent on the development-oriented assistance that aim to promote the growth in capability of the recipients, and effort to construct a more information-based charity for fairer and more reasonable allocation of charitable resources. At the same time, it is necessary to constantly adjust and optimize the structure and scope of charitable projects so that they can be adapted to the ever-changing needs of the community.

1.5.5 Trends in the Development of the Chinese Charitable Donation Mechanism In recent years, there have been a series of positive trends regarding the pattern of donation, donation organization and management system, supervision and transparency mechanisms and fundraising and donation mechanisms of charitable donations in China. For the pattern of donation, China has witnessed rapid growth in donation volume and the donation network continues to improve. Though, on the whole, out of keeping with its socio-economic development, China’s charities are

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gradually narrowing gap with those of the developed countries. The modern pattern of charity donors in China is still in the developmental stage. Private and corporate donations have continued to grow rapidly, breaking the traditional pattern dominated by foundations, while private foundations have begun to rise, resulting in the increasing pluralism in the charitable donation domain, with more donations in the field of development. For the system of organizing and managing donations, China has gradually turned from the “on the tight side” control to “relaxed” management, from “departmentalism” to “comprehensive coordination,” and meanwhile begun to emphasize different government departments implementing integrated and coordinated governance of charitable donation organizations within relevant domains. For the mechanism of supervision and transparency, China will initially construct a charitable donation organization appraisal mechanism engaging the government as the principal with participation of non-governmental appraisal forces; more emphasis will be laid on whole-process supervision, a common information platform will be built, and non-governmental forces will be encouraged to take part in supervision. Independent non-governmental appraisal of charitable donation organizations will grow substantially and the competitive appraisal market will begin to develop. China’s mechanism for fundraising and donations has been developing gradually towards being more diversified, market-controlled, specialized and professionalized. Modern modes of raising public interest funds in the form of securities such as stock equity donations will grow quickly and the charity trusts will start to develop. These new developments depend, on the one hand, on the government’s indirect regulation, supervision and promotion by means of the tax law, charity law, and other laws and regulations, and on the other, on the government’s retreat from direct charitable donation activities, relaxation of its control, and efforts to construct a relatively relaxed environment favorable to the development of non-governmental charity organizations.

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Chapter 2

Donors and Their Modes of Donation Jianguo Gao, Qin Li, Yanzhuo Deng, and Liyang Feng

Donors are individuals or institutions which support charity organizations and their public welfare programs through capital or material assistance. According to Article Nine of the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” as explained by Chapter Two of Interpretation of Law of the People’s Republic of China on Donation for Public Welfare Undertakings, donors include natural persons, legal persons and other organizations. Domestic donors are mainly natural persons, legal persons and other organizations, while outside organizations are, mainly international organizations, foreign non-governmental organizations, overseas Chinese and compatriots in Hong Kong, Macao, and Taiwan.1 In China, donors are mainly governmental agencies, enterprises, individuals, and other social organizations. This chapter is principally concerned with the three types of donors, namely, governmental agencies, enterprises, and individuals. It describes the types of donors, the status quo for donations in China, and characterizes the behavioral modes of different types of donors.

2.1 Government Agencies Governmental agencies acting as donors have corresponding rights and obligations. As stipulated by Article 2 of Chapter 1 in the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings”, “On the condition that natural persons, legal persons, and other organizations voluntarily donate property to legally 1 Commission of Legislative Affairs of the Standing Committee of the National People’s Congress (2000: 46).

J. Gao (B) · Q. Li · Y. Deng · L. Feng Shandong University, Jinan, China e-mail: [email protected] © Social Sciences Academic Press 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_2

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established public welfare associations and not-for-profit public welfare institutions without any compensation, and the donated property is used for public welfare undertakings, this Law shall be applied.”2

2.1.1 Current Situation for Donations by Government Agencies Governmental and institutional agencies that are legal persons qualified to make charitable donations, as well as all natural persons working in governmental agencies, including those in leading positions, belong to this category of donor. Therefore, government sector donations are mainly composed of both: fiscal transfer payments and collective donations by government staff.

2.1.1.1

Government Fiscal Transfer Payments

The unique way by which the governmental agencies and public institutions of China participate in charity is using the financial power at their disposal and giving materials to charities in the way of financial transfer payment. This means of donation is characterized mainly by rapid mobilization and large sum. This can be seen from 2011 donation statistics disaggregated by donor type, provided by China Charity and Donation Information Center (see Tables 2.1 and 2.2). Table 2.1 Donations by all types of donors of China in 2011 Types of donors

Governments

Within territory

Without territory

Total

Donation sum (million yuan)

Donation sum (million yuan)

Donation sum (million yuan)

1234.79

77.95

1312.74

Percentage (%)

4.18

Institutions

157.77

0.10

157.87

Enterprises

16,219.39

1850.64

18,070.03

57.48

9284.58

655.15

9939.73

31.62

People’s organizations

430.77

1.70

432.47

1.38

Social organizations

668.15

853.40

1521.55

4.84

27,995.45

3438.94

31,434.39

100

Natural persons

Total

0.50

Source Meng et al. (2012: 97).

2

Commission of Legislative Affairs of the Standing Committee of the National People’s Congress, comp. Interpretation of Law of the People’s Republic of China on Donation for Public Welfare Undertakings.

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Table 2.2 Donations for the Lushan, Sichuan, earthquake by governments of provinces and municipalities of China in 2013 Date of donation

Donor

Donee

Donation sum (million yuan)

April 20

Yunan Provincial CPC Committee and Government

Disaster area in Sichuan

10

April 20

Hainan Provincial CPC Committee and Government

Disaster area in Sichuan

6

April 20

Beijing Municipal CPC Committee and Government

Disaster area in Sichuan

5

April 20

Tianjin Municipal CPC Committee and Government

Disaster area in Sichuan

5

April 20

Fujian Provincial CPC Committee and Government

Disaster area in Sichuan

5

April 20

Jiangsu Provincial CPC Committee and Government

Disaster area in Sichuan

5

April 20

Shanghai Municipal CPC Committee and Government

Disaster area in Sichuan

5

April 20

Shenzhen Municipal CPC Committee and Government

Disaster area in Sichuan

5

April 20

Hubei Provincial CPC Committee and Government

Disaster area in Sichuan

5

April 20

Jiangxi Provincial CPC Committee and Government

Disaster area in Sichuan

5

April 20

Qingdao Municipal CPC Committee and Government

Disaster area in Sichuan

5

April 20

Guangzhou Municipal CPC Committee and Government

Disaster area in Sichuan

5

April 20

Heilongjiang Provincial CPC Committee and Government

Disaster area in Sichuan

6

Source Summary sheet of donations in money and material for the Lushan, Sichuan, earthquake http://society.people.com.cn/n/2013/0420/c86800-21212116.html (2014/11/10)

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Currently, there are academic debates on such donation modes and their essence. Some scholars are of the opinion that the governmental donation in that name is actually a spending of taxpayers’ money. According to Yiliang Li, donations made by state organs, public institutions, and state-run enterprises in essence are giving public funds, and are by their nature completely different from private donations for the latter means giving purely privately owned wealth, while the former, the national wealth, which is not listed into the national budget or extra-budgetary expenses. It must be noted that the way of solving social problems by using public funded donations is too costly, with its loss outweighing its gain. The process of operating the public funded donations is tinted with a streak of the ideas and behaviors on the part of the leaders of some units for pursuing achievements in their official career, thus causing donation to be a tool serving some special interests. Besides, the efficiency of using public funded donations is low, and productive of a big number of “unit-owned exchequers”.3 Administrative institutions in some places can decide themselves on giving donations without receiving approving from higher level government and fiscal departments, while administrative institutions in other places have to be examined and approved by higher level governments and fiscal departments before making donations. For example, Article 5 of “Guangzhou City Methods of Disposing StateOwned Assets of Municipal Administrative Institutions” stipulates that “the fixed assets which have been declared unserviceable (eliminated) yet still have some use value, can be disposed of by entrusting competent auction agencies to auction them publicly, or by being sent to the municipal work station receiving donations.”, and as stipulated by its Article 9, “the application for the outward donation of assets by the municipal administrative institutions should, subject to verification by the department in charge, be examined and approved by the municipal fiscal department. When the asset unit value is above 5 million yuan, the application should be verified by the municipal financial department and examined and approved by the municipal government.”4

2.1.1.2

Collective Donation by Individual Members

Collective donation by individual members refers to a donation made first by members of the staff of a government organ, then gathered by the organ, and transferred to a higher level department. This means is the most common method adopted by government agencies. The governmental/non-governmental duality is regarded as the basic feature characterizing the actual operations of an overwhelming majority of the Chinese charitable organizations, in that they are systematically linked with

3

Li (2004: 48). Guangzhou City Bureau of Finance, “Circular on Issuing ‘Guangzhou City Methods of Disposing State-Owned Assets of Municipal Administrative Institutions’” (GFA (2007) No. 104), September 27, 2012, executed until September 26, 2017.

4

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43

state institutions, reflecting more the dependence of society on the state.5 Therefore, the current mobilization mechanism of the domestic charity donation is identified as featuring semi-institutionalized mobilization.6 Furthermore, the mode of mobilizing the administrative institutions is actually phenomena generator of forced donation. Starting in 2005, every November the departments of the central government departments, units, and the PLA have engaged in “Delivering Warmth and Showing Loving Heart” activities aiming at making social donations to disaster victims. Local governmental agencies and public institutions in various provinces, cities, and counties, have also held similar activities. A survey carried out regarding the sources of funding for the Shanghai Charity Foundation found that, in recent years, government organizations have become a strong force in organizing donations, of which participatory donations account for 14.5%. These governmental organizations are mainly the departments of the local governments at various levels, such as the education bureaus and public security bureaus of districts or counties, sub-districts and township governments, as well as a number of departmental CPC committees. Government departments that are capable of donating funds in the name of their organization to charitable organizations, which is also a new phenomenon occurring in the transitional period that calls for serious attention.7 According to relevant research findings, donations by governmental departments differ by region, with clear differences between regions with different levels of economic development and numbers of workers. As indicated in Table 2.3, in April, 2007, the amounts of donations by the governmental departments of Jiangsu Province and Zhejiang Province reached 112,562,000 yuan and 52,000 yuan respectively, while the corresponding figures for the Tibet Autonomous Region and Qinghai Province were 13,000 yuan and 10,000 yuan respectively.

2.1.2 Features of Government Donations Government agencies hold donation activities according to orders given by their superiors, showing their administrative nature. They are quasi-mandatory and the channels of giving are concentrated.

2.1.2.1

Channels of Donation Transmission

The donation channels available to the governmental agencies are concentrated on civil affairs departments and government-run charity agencies. Civil affairs departments are selected because that agency is the government agency in charge of charity and as other departments belong to the same bureaucratic system, not only is it easy for 5

Xu (2001). Cai et al. (2009: 32). 7 Li (2006: 79–80). 6

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Table 2.3 Particulars of donations by governmental departments of provinces, autonomous regions, and municipalities of China in April, 2007 Monetary unit: Thousand yuan Unit name

Sum

Unit name

Sum

Unit name

Sum

Central government

8074.9

Jilin Province

101

Guangxi Autonomous 188.3 Region

PLA system

346.9

Heilongjiang Province

1094

Shanxi Province

2021

Beijing Municipality

2117

Shandong Province

19,409

Sichuan Province

33,878.3

Tianjin Municipality

370

Anhui Province

2269

Guizhou Province

2546

Shanghai Municipality

7380

Hainan Province

5

Yunnan Province

708

Jiangsu Province

112,562

Fujian Province

87

Gansu Province

990

Chongqing Municipality

8597

Jiangxi Province

500

Shaanxi Province

1779

Hebei Province

4698

Henan Province

4064

Ningxia Autonomous 5973 Region

Zhejiang Province

52,909

Hubei Province

7152

Qinghai Province

10

Inner Mongolia Autonomous Region

2039

Hunan Province

11,974

Xinjiang Autonomous Region

2295

Liaoning Province

7040

Guangdong Province

28,963

Tibet Autonomous Region

13

Source http://www.charity.gov.cn/ (2008/11/10)

them to contact one another, but also the government agency transmitting donations to the department in charge of them will produce a double effect: from the donations themselves and from the achievement in governmental performance. Governmentrun charity agencies include charity federations in various regions such as the China Charity Federation, as well as charity federations or associations in provinces and municipalities. Though these agencies are nominally non-governmental non-profits, they are actually founded by and closely related to the government. So transmitting donations to them is functionally similar to transmission to civil affairs departments. Such an effect is hardly accessible when donations are transmitted to other lesser charity agencies and non-governmental organizations, for they have much less influence, and what is more, as they themselves are subject to the government, it is almost impossible for them to call on government departments for donations. Currently, there are only a small number of governments which can control nongovernmental donations, and the Chinese government is one of them. According to Deng Guosheng, director of NGO Research Center, Tsinghua University, “The money received directly by the government from donation is, no doubt, to be used

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by it. National public foundations such as The Red Cross Society of China are basically able to decide on how to spend the money available to them, while other nongovernmental organizations are hardly able to do so.”8 In 2008 when the Wenchuan earthquake hit, China saw the new donation form of “special CPC membership dues”. This required that all CPC members at various levels pay special CPC member dues according to the principle of “free will” as donations to the disaster area. The recipients were not the local civil affairs departments or charity organizations but the organization departments of local CPC committees. Thus, the organization departments of CPC committees in various areas functioned as the recipients of the special CPC membership dues, which amounted to 9.73 billion yuan in the year of 2008.9 Such donations collected within the CPC organizations, though rare in China, epitomize the highly organizational nature of the social donation mechanism of China.

2.1.2.2

Mobilization Mechanism

The mobilization and donation modes of government agencies and public institutions are characterized by the following features. First, organization and mobilization in the style of giving administrative orders. Government agencies have tended to combine mobilization for charitable donations with their routine work through holding special sessions or adding an item on raising donations into meeting agenda. These usually take the form of leaders assigning tasks and delivering instructions to mobilize or call on staff for donations. In several areas, the practice of considering whether the subordinate departments and units fulfill the assigned donation tasks when assessing their performance has been observed. This results in the phenomenon of higher levels assigning tasks to lower levels. Such donation mobilization is, inevitably, under suspicion of forced requisition. There are various examples. In June, 2007, when a city carried out the “Charity Month” activity, its CPC committee and government used the administrative means to raise donations, and assessed the achievements of the various lower level units through “performance appraisal”. This practice aroused censure from the general public and attracted criticism from the media for its patriarchal style. As reported by Beijing News, Zhang as a water and electricity worker of the Property Management Service Center, working in the municipal finance bureau building, and with a monthly income of 1500 yuan, was required to donate 500 yuan.10 In November, 2006, by claiming the need to raise 65 million yuan for the purpose of maintaining the former residence of Yuan Shikai, the government of a city in Henan Province explicitly required the leaders and staff of all the city’s government agencies to donate specific sums of money, ranging from 100 to 1000 yuan, depending on their civil service rank. Previously, a news story reported that a county of Shanxi Province, collected one month of salaries from all individuals paid by government to carry out a project of linking villages with asphalt 8

Yang et al. (2010). Meng et al. (2012: 126). 10 Li and Fu (2007). 9

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roads.11 In some departments, 100 yuan was taken from the salary of every civil servant prior to Spring Festival and used as relief funds for impoverished families. For grassroots civil servants and ordinary employees, whose economic circumstances are not easy, administrative orders requiring fixed donations are almost cruel. Such cases where donations based on free will become forced donations deviate from the original intention of charity. The aforementioned practices obviously go against the clear stipulation in the “Circular on Strengthening the Management of Donations for Disaster Relief” that “The work of raising donations for disaster relief in any system must be done according to the principle of free will, and that administrative orders and imposed requisitions to raise donations are not allowed”. Second, the activity of donation takes place over a short period of time in a concentrated place, with breakthroughs rather than daily efforts. Donation activities organized by government agencies are usually held during a specially designated period of time, such as “Charity Month”, “One Day Donation”, and at times before Spring Festival. All the government agencies at different levels will march to the same beat. The reason for this phenomenon lies in that, on the one hand, aside from special donation activities, there are few regular donation channels available to governmental agencies (a common problem in China’s charities). On the other hand, the concentration of donations in special activities make it easy for government leaders and staff to play an exemplary and leading role in donation efforts. For example, some local governments choose the month of November or December every year as the period for the work units of different government agencies donating together. This reflects well on the government’s care for the impoverished prior to the arrival of the holiday season. Third, the prevalence of agency leaders set the example for others with their donations. Differing sums are expected of civil servants of different ranks, with the sums usually progressively decreasing from the donation made by the top leader. The donation behaviors of the staff general fall under the influence of the imitative or group psychology. Fourth, more emphasis has been placed on the chain reaction effect and image of achievement from the government performing donation activities. Generally speaking, when local governments carry out donation activities, they publicize widely them through TV, broadcast, print, and other media. In particular, the scenes of leaders of local governments and departments making donations are made known to the public by being put on primetime TV or front-page newspaper headlines, so as to amplify their exemplary effect and stimulate a chain reaction. With the development of philanthropy and the advance of charity culture in China, the donation transmission channels adopted by government agencies and the administrative donation mobilization mechanism are arousing more and more controversy. Both the general public and the government have become increasingly aware of the non-governmental nature of charity. Government departments have also moved gradually toward promoting and encouraging donations. At various levels they have conveyed signals emphasizing the importance of philanthropy, created an atmosphere 11

He (2007b: 29).

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47

favorable for making charitable donations, and aroused enthusiasm for charitable donations from all walks of life, as is evidenced by the introduction of relevant administrative laws and regulations, holding charity conferences, and commending achievements in charitable donation. For enterprises, government mobilization is a direct force driving them to donate. According to a survey of the 18 enterprises which have won the “Chinese Charity Award”, 15, 83.3% of the total, claim that their main impetus for charity donation was “responding to the call of the government” and “the needs of enterprise development strategy.” As the Chinese Ministry of Civil Affairs has intensified its macro guidance of the charities, as well as its coordination and management function in that area, the role of the government in promoting philanthropy will become more prominent in China.12

2.2 Enterprises Donations by enterprises aim to provide needed funds, labor services, or material aid for social groups, certain regions, or incidences of disaster. They represent an important manifestation of enterprise social responsibility. The definition of enterprise donation in the “Circular on Strengthening the Financial Management of External Donations by Enterprises” issued by PRC Ministry of Finance reads “External donation by an enterprise refers to the enterprise’s autonomous and uncompensated donation of legal property on which it has the right to dispose to a recipient for public welfare uses not directly related to productive operations.”13 Hanlong Lu is of the opinion that modern enterprises are not pure economic animals, but rather registered legal persons who exist in society. The interactive mechanism of economic markets, and of administrative redistribution, as well as of social reciprocity merges into many pictures of Chinese enterprises donating for social public welfare undertakings.14

2.2.1 Current Situation of Enterprise Donations Donations by enterprises are an important source of philanthropic funds. In China, the main source of funds for philanthropy is enterprise donations, especially those from state-owned enterprises. This situation is different from the United States, where private donations are the main source of charitable funds.

12

Social Welfare and Charity Promotion Bureau of PRC Ministry of Civil Affairs and China Charity & Donation Information Center, “Analysis Report on the Nationwide Charitable Donations of the First Half Year of 2009”, Feburary, 2012. 13 PRC Ministry of Finance, “Circular on Strengthening the Financial Management of External Donations by Enterprises”, (FE (2003) No. 95), March 14, 2003. 14 Ma and Yang (2002: 42).

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2.2.1.1

Enterprises as the Main Force Making Social Donations

Enterprises have engaged in philanthropy, taking a leading position in making social donations. According to the “2011 Report on Charitable Donations in China”, in the year 2011 the various types of enterprises gave social donations of 18.07 billion yuan, accounting for 57.48% of the 31.4 billion yuan in total social donations. Enterprises, both domestic and external, occupied the leading position in donation volume (for details, see Table 2.1).

2.2.1.2 (1)

Manifestations and Target Areas

Diversified Manifestations

In late twentieth century, the principal form of donation from enterprises was funding, and the secondary form was in-kind product donations. Giving funds was the simplest and most direct; as such it was adopted by an overwhelming majority of enterprises that made donations. Products donated by an enterprise include both its own products and others that it does not directly produce. In recent years, there has been a striking change in the principal form of enterprise donations, one that is closely related to frequency of natural disasters and major risks in China. The change is embodied in the following aspects: One new form with huge growth potential are insurance donations; another that has become an emerging source of donation is donation of services.15 Additionally, since 2013, the rapid development of stock equity donations has been a new bright spot for large volume donations. For small donations, the marked expansion in online donation has made an important contribution to disaster and poverty relief.16 As found in a 2005 special investigation of a number of domestic enterprises and multinational companies by the magazine China Entrepreneur, the donations of the domestic enterprises are mainly in cash, while less than 50% of enterprises donated products and machines, or gave books and reference materials. By contrast, over 50% of the multinational companies had contributed products and machines, or books and reference materials, and 22.2% of them participated in voluntary activities. Donors giving donations that entail face-to-face communication with beneficiaries enable, to a greater extent, an expansion of influence and the volunteers becoming more aware of charity. By contrast, only 5% of the domestic enterprises took part in volunteering activities.17 After the Wenchuan earthquake, aside from material aid, many enterprises provided services free of charge. In the emergency rescue and recovery period after the earthquake, various types of enterprises offered free traffic, communication, and insurance services, with a total value of 4.436 billion yuan (see Table 2.4). 15

Huang (2011). Wang (2014: 31). 17 Zhang (2005: 28). 16

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Table 2.4 Specification and value of services donated to the disaster area by enterprises in 2008 Types of companies

Specification of service

Value of service

China Mobile and China Unicom

Reducing or exempting communication fees for 20 days

about 0.3 billion yuan

Bank system

Reducing or exempting donation 82 million yuan remittance fees

Postal system

Reducing or exempting donation 460 thousand yuan remittance fees

Air system

Transporting rescue teams and workers, and materials

About 3 billion yuan

Heavy industry enterprises

Providing rescue equipment and workers

834 million yuan

Insurance companies

Donating insurance to rescue workers

14.22 million yuan

Real estate companies

Donating rooms to the disaster area

About 0.25 billion yuan

Source China Charity & Donation Information Center, “2008 Report on Charitable Donations in China” (http://www.juanzhu.gov.cn) (2008/12/20)

(2)

Target fields

According to statistics from a survey of donations made by 1199 companies from 2008 to 2011, the main fields in which their public interest charitable activities occurred were first disaster relief, with an annual average volume of 2,480,600 yuan during those four years, and the next were education and medical treatment, with 801,300 yuan and 197,200 yuan respectively (see Table 2.5).18 As indicated in the “2011 Report on the Charity Donations in China,” the sum given for poverty relief and social development accounts for 28.99% of the total.19 These data show that disaster relief, poverty relief, and education were the fields which enterprise were most concerned about and where they offered vigorous funding and material assistance. The field of disaster relief is enterprises’ top priority, reflecting their strong social responsibility consciousness and humanitarian spirit. That poverty relief is one of the priorities because currently China is still a developing country with many impoverished people. Education attracting the third most in donations is a manifestation of the Chinese people’s traditional emphasis on it.

18 19

Chen et al. (2014). Meng et al. (2012: 170).

362

214

330

293

2008

2009

2010

2011

Source Cheng et al. (2014)

Average

Samples

Year

603.74

586.60

539.25

465.75

757.98

Total amount

Monetary unit: 10 thousand yuan

14.61

20.22

14.96

25.43

3.36

Donation for communities

248.06

11.65

173.06

105.59

592.01

Donation for disaster areas

80.13

92.76

80.74

129.16

40.37

Donation for education

Table 2.5 Annual distribution of 2008–2011 amounts of money donated by companies

19.72

11.45

15.95

40.45

17.62

Donation for medical treatment

3.41

3.47

8.15

1.60

0.10

238.32

449.17

246.39

163.52

104.52

Donation for people of Others disabilities

50 J. Gao et al.

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Table 2.6 2011 Statistics of donations by enterprises within the territory Unit: 10 thousand yuan, % Type of enterprises

Donation amount

Percentage

State-owned enterprises

418,694

25.83

Non-governmental enterprises

1,040,622

64.19

HK, Macao, and Taiwan funded Enterprises

55,982

3.45

Foreign funded enterprises and joint ventures

105,818

6.53

Total

1,621,116

100

Source Meng et al. (2012: 100)

2.2.1.3 1.

Donation Levels from Different Types of Enterprises

Donations from state-owned enterprises as the main part of social donations

According to relevant research and statistics, Chinese national enterprises give more than externally funded enterprises, evidenced by both their high donation share and level. The list of top enterprises in charitable donations offered by “2011 Report on the Charity Donations in China” testifies again that the top 25 externally funded enterprises (including those owned by Hong Kong, Macao, and Tanwai) gave a total of 2,019,400,000 yuan in charitable donations in Mainland China, while the top 25 Chinese non-governmental enterprises gave 3,356,180,000 yuan.20 Based on the analysis of a sampling that included 16.2 billion yuan given by domestic enterprises in 2011, the state-owned enterprises, non-governmental enterprises, and the externally funded enterprises and joint ventures gave, respectively, 4186.94 billion (accounting for 25.83% of the total donated by enterprises), 10,406.22 billion (64.19%), and 1058.18 million (6.53%) (see Table 2.6).21 In 2008 when the Wenchuan earthquake hit, Chinese national enterprises energetically donated far more funds and material than externally funded enterprises. As the principal donor for the disaster relief, they should be acknowledged and evaluated justly for their contribution to the charitable sector. 2.

State-owned large enterprises lead in large volume donations

From the 2010 list of top enterprises in charitable donations it can be seen that state-owned enterprises (SOEs) outnumber non-government enterprises in large volume donations. In 2010, Shenhua Group gave 1.038 billion yuan, taking first place in the list of top SOE donors, while the most donated by a non-governmental enterprise was the 450 million yuan given by PICC Health Insurance Group. Of the

20 21

Meng et al. (2012: 25–35). Meng et al. (2012: 100).

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enterprises with a donation above 200 million yuan in that year, 8 were state-owned and only 3 were non-governmental.22 Currently, the questions of whether SOEs have the right to donate and whether they should donate more are still under academic debate in China. There are two main opinions in this regard, one of which is that donation represents an important aspect of an enterprise in fulfilling its social responsibility. Donations are made by SOEs from the necessity of enhancing their images and making those donations is a legally granted right. The other is that when an SOE plans to donate an amount exceeding a certain sum it is not a simple behavior, as it has to be submitted to the SOE board of directors for approval and must go through a complex process. Also, if an SOE can pay more taxes to the state, this redistribution will contribute greatly to society. Hongwu Zhong is of the opinion that the SOE donation issue is a matter of science rather than of legality. In market competition, when a transnational corporation competes aggressively by highlighting social responsibility, an SOE which does not donate will lose ground to its competitor, gaining no advantage. Objectively speaking, many SOEs are still troubled by outdated conceptions concerning donations and their poor management of donations, causing their actions to be misread by the general public.23 3.

Non-government enterprises becoming the core force of charitable donation in China

In recent years, non-government enterprises (NGEs) of China have become the core force of charitable donation in China, especially since 2005 when a series of prizes was established for achievements in charitable donations. More and more NGE entrepreneurs have attached importance to charitable giving, donating millions and even hundred millions. According to statistics issued by the China Charity and Donation Information Center, since 2007 Chinese NGEs have continued to be the biggest charitable contributors in China: the year 2008 saw their donations accounting for 64% of the total given by enterprises for the earthquake relief; in 2009 and 2010 the percentage of their donations reached 55.82% and 64.55% respectively; in 2011 they donated 27.973 billion yuan, accounting for 64.19% of total enterprise donations and 33.14% of all donations.24 In terms of either the quantity or the total volume of donations, NGEs are far ahead. Comparatively, the sums given by SOEs are larger, yet they account for a smaller percentage of the profits of an SOE. The donation from externally funded enterprises tends to be tied to their marketing strategy, with a lower volume oriented towards meeting the needs of distressed groups.25 With the step-by-step growth and expansion of the non-government economy, the NGEs’ awareness of market equality has been strengthening gradually and, through charities and other means of social participation, they have begun to respond to the general public’s call for them to fulfill their 22

China Charity and Donation Information Center, “2010 List of Enterprises in Terms of Donation”, http://www.charity.gov.cn (2011/6/10). 23 Liu (2008: 71). 24 Meng et al. (2012: 114). 25 Liu (2008: 47).

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social responsibility.26 The 2008 Wenchuan earthquake triggered an unprecedented enthusiasm for giving, and as shown by “Report on Donations by Non-Government Enterprises for May 12 Earthquake Relief Work” issued by the Hurun Research Institute, of the top 100 entrepreneurs on the Hurun Rich List, 80 made charitable donations, of whom some from such enterprises as Agile Property, Rizhao Steel, and Rongcheng Steel gave more than 100 million yuan.27 4.

Externally funded enterprises emphasizing participation and management in making donations

Externally funded enterprises, though not dominant in either their quantity or total volume of their donations and not the main source of enterprise donations, constitute a force to be reckoned with. By participating in Chinese philanthropy, multinational companies make their concept of marketing known to the public. The status of joining and supporting philanthropic undertakings has been boosted by the multinational companies’ operating strategies and created conditions favorable for reaching their expected business goals. This represents a win–win operation for them and the host country. In China, there are an increasing number of externally funded enterprises which participate in an extensive and in-depth way in activities showing their social responsibility. They have designed many public welfare programs which are brand-constructive, highly original, strongly sustainable, and broadly engaging. For example, in 2010, Samsung China and China Welfare Fund for the Handicapped (CWFH) jointly launched “Samsung Charity Light of Love Program”, giving 10 million yuan each year for 5 years to fund CWFH in its series of public welfare programs dedicated to the rehabilitation of children with cerebral palsy and the language training of deaf children.28 Generally, the multinational companies in China have earned themselves a good reputation with their enthusiasm for promoting public welfare, and there have been representative ones engaging in the Chinese public welfare undertakings such as Coca Cola and Computer Technologies. Externally funded enterprises tend to be keener on participating in and managing charity undertakings. Usually the management and rank and file employees of an externally funded enterprise participate in the entire process of a charitable undertaking through carrying out the charitable program concerned. They set definite requirements for and closely watch and trace the flow and use of the funds they give to charity. Thus, donations by externally funded enterprises are liable to attract the attention from the media and the general public, and they also vigorously publicize their charitable concepts and behaviors. As informed by a questionnaire survey conducted by Gallup on multinational companies in China participating in charitable activities, and oriented to the general public, multinational employees, charity organizations and government officials, such charitable donations “did not justify

26

Liu (2008: 47). Hurun Research Institute, “Report on Donations by Non-Governmental Enterprises for May 12 Earthquake Relief Work”, May 20, 2008. 28 Liu (2008: 48). 27

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optimism.”29 Besides, recent years have also seen fluctuations in the donations of externally funded enterprises. In the period from January to November of 2007, the total import and export value realized by foreign invested enterprises reached US$ 1,138.193 billion, accounting for 57.8% of the country’s total import and export value, and yet in the second half of 2007, only 3 multinational companies donated over 10 million yuan, and of the tens of thousands of foreign funded and multinational companies, fewer than 100 each donated yearly over 1 million yuan. By contrast, 22 Chinese NGEs each gave 10 million in the same period.30

2.2.2 Characteristics of Enterprise Donations 2.2.2.1

Donation Motivation Shifting from External to Endogenous

Traditionally speaking, an enterprise engages in charitable activities for no more than two purposes. One is to establish its brand image and better its marketing through those charitable activities. As indicated by both relevant research and facts, enterprises which have made considerable contributions to charities enjoy relatively higher reputations in the minds of consumers, and they outperform other enterprises markedly in sales results. The charitable behavior of an enterprise is regarded as “transmitting a signal of its values and strength to the general public, which is important to consumers, for, particularly when complete information is hardly accessible, it can be the basis for their knowing the enterprise and judging its value orientation.”31 The other purpose is to establish public relations, especially with relevant governmental departments. Generally, an enterprise has relations with some government departments, its efforts concerning with public relations mainly aim to strengthen that relation so that it is able to “buy” some preferential policies or favorable treatment from the departments. In spite of having carried out deep reforms, as China had a centralized planned economy for a long time, various dependent relationships longestablished between enterprises and the government have not been severed. Many Chinese NGEs and foreign funded enterprises “have to face that unfair competition and spend much time and money attempting to set up and maintain good cooperative relationship with government departments”.32 In recent years, thanks to popular understanding of the concept of corporate citizenship, increasing influence of charitable culture and the Chinese government fading out of charitable donation raising market, efforts to collect donations for relief work for victims of the mega-disasters such as the Wenchuan and Yushu earthquakes have aroused the enthusiasm to donate of Chinese enterprises and citizens. With regards to the motivation for donation of Chinese enterprises, a shift from external 29

Li and Bai (2008). Li and Bai (2008). 31 Lu and Liu (2012). 32 Zhang et al. (2004: 204). 30

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push to endogenous impetus has appeared, and more enterprises are engaging in philanthropy for the purpose of truly giving back to society, bringing benefit to the homeland, educating employees. This has won consistent praise from society and the public at large.

2.2.2.2

Donation Path

The donation path serves as the connection between the donation resources and the areas receiving donation. It determines to a considerable extent the efficiency and effect of an enterprise as a donor. The periodic office of China Entrepreneur conducted a survey in 2005 concerning which kind of organizations undertook donations, showing that the top three organizations most frequently chosen by domestic enterprises were the China Charity Federation and its branches (60%), the China Red Cross Society (40%), and non-profit public welfare agencies (28%). The top three for multinational companies were the China Red Cross Society (63.6%), the China Charity Federation and its branches (45.5%), and the China Youth Development Foundation (36.4%).33 Thus, China Red Cross Society and the charity federations at various levels are the two charity organizations that enterprises in China are most familiar with. The China Youth Development Foundation and the governmental public welfare agencies are also widely known. The paths by which enterprises donate can be classified into two forms, according to the types of the organizations receiving donations from enterprises: indirect donation and direct donation. The former refers to enterprises donating through government or charity agencies, while in the latter, enterprises carry out their donation programs directly. At present, indirect donation is the main enterprise donation path. 1.

Indirect donation (1)

Government departments

Governmental departments (mainly referring to civil affairs departments at various administrative levels) acting as the recipients of charitable funds from enterprise donations is unique to philanthropy in China. As Gongcheng Zheng points out, “The governmental departments raising donations for disaster relief is a common phenomenon in China at the present stage. In the developed countries, however, the governmental departments have no right to collect donations from the nongovernmental sectors or the general public for any relief work. The phenomenon of China may be attributed to the financial means available to the government being deficient for disaster relief, and perhaps has to do with the limited development of the non-governmental charity undertakings and the state’s lacking in the law for adequate regulation and constraint of charity undertakings.”34

33 34

Zhang (2005: 28). Zheng et al. (1999: 280–281).

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(2)

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Government-run NGO

Government-run NGO refers to charity organizations established by the government, mainly covering charity federations and Red Cross societies at various levels in China. Since China introduced the policy of reform and opening up in late 1970s, those earliest charity organizations and undertakings were established through the encouragement and support of the civil affairs departments at various administrative levels, many of them have undergone a shift in status from the internal agencies under the departments of civil affairs to that of relatively independent NGOs. On the whole, the non-governmental charity organizations have grown slowly, with limited influence, so enterprises donors are more willing to choose government-run charity organizations when making donations. In China today, government-run NGOs mainly include the China Charity Federation and its branches in various regions, the China Red Cross Society and its branches in various regions, and the China Foundation for Poverty Alleviation, among others. These official NGOs are the charity organizations with the strongest power to collect donations from enterprises and have received an overwhelming majority of enterprise donations. The main reason for this lies in the fact that those official NGOs serve as the spokespersons of the Chinese government, and by comparison, the non-governmental charity organizations in China are far weaker in strength and reputation, naturally resulting in many enterprises turning to the government-run NGOs. When an enterprise chooses the path of donating through official NGOs, that is an effective response to a government call for donations and thus it is easier for the enterprise to build relations (guanxi) with the relevant government departments. (3)

Non-governmental charity organizations

Chinese non-governmental charity organizations, including the grassroots NGOs, have developed to an extent, but as their growth is slow, influence is limited, and few of them are chosen by enterprises as partners for cooperation in making donations. 2.

Direct donation

Direct donation refers to an enterprise donating not through any charity agencies, but by setting up an internal functional department in charge of its charity affairs and by giving donation directly to the beneficiaries. Donating by carrying out charitable programs directly is already a mature form of giving, popular among enterprises. Currently, this path takes only a small proportion of all the means of donations available to enterprises. A corporate foundation is sponsored and founded by a company or enterprise, which contributes money to its funds in some combination of special donations and annual donations. Generally, it and the sponsoring company are separate from each other in management and finance, and a member of its board can be an employee of the sponsoring company or an individual who has nothing to do with its sponsoring company. In other countries, this type of corporate foundation is very common, while, in China, though such foundations have space and opportunity for growth, only a small number have been officially registered.

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Donation strategy

Indirect donation

Government department

Corporate donation Governmentrun NGO

Benefit of donation Donation forms Charity organization

Non-governmental NGO

Donation raising

Funds

Materials

Credibility of NGO

Services Direct donation

Corporate foundation

Fig. 2.1 Paths of an enterprise donating and relevant influence factors

When an enterprise tries to select a donating path, it will consider a many factors, such as its donation strategy, benefits from donation, the donation raising mechanism of charity organizations, and the credibility of NGOs. Only upon taking into account all these factors can it decide on whether or not to donate. The forms of donation include funds, materials, and services. The paths available to an enterprise are direct and indirect donation, and the latter is the main one. In an indirect donation it first gives the donated funds or materials to a relevant government department or a charity organization, realizing the donation through a third party. In a direct donation, the enterprise donates funds or materials directly to the beneficiaries or entrusts them to a charity foundation it sets up on its own, which then distributes directly the charitable resources. The process of an enterprise choosing a donation path is illustrated below (see Fig. 2.1).

2.2.2.3 1.

Mobilization and Organization Mechanism

Governmental mobilization

The most important feature characterizing the donation mobilization mechanism of Chinese enterprises is the government playing a significant role as the powerful booster in pushing donations. As the main funding source of China’s charities, Chinese non-governmental enterprises, which are controlled strictly by the government in the various aspects of their producing and marketing, regard their positive response to the government’s call for donations as an effective way to get closer to the government and participate in politics. 2007 saw a charity storm sweeping the cities of China, which is the result of the government’s powerful promotion efforts. Here are two examples. When leaders in the municipal CPC committee and government of Changzhou City, Jiangsu Province, went to local enterprises and called on them to donate, they brought about the Changzhou charity storm; during the “charitable month” held in Weihai City, Shandong Province, the Weihai government pushed for donations in an administrative manner and the local companies gave the marvelously

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large total of 1.126 billion yuan in donations.35 However, this donation mobilization mechanism’s dependence on the government’s administrative promotion lacks sustainability, which is described well as only producing “impulsive growth” and “explosive increase”, as evidenced by Changzhou Charity Federation which worked the wonder of getting a 1 billion yuan in its beginning year, yet received only 100 million annually after 2008.36 At present, a steady long-term mechanism for mobilization of enterprises in China to donate has yet to be developed. On the one hand, there has not been sustained and planned development of the joint government-charity organization fundraising mechanism, and on the other hand, as enterprises make donations as a passive reaction, it is hard for them to set up their department for managing charitable fundraising, thus they usually make donations in a random manner without any long-term systematic approach. (1)

Levels of government raised donations

Tuan Yang and Daoshun Ge differentiate the government’s actions of raising donations from enterprises into three levels of administrative involvement. First, social mobilization for donations, which has the least administrative involvement, is usually made known to the public through mass media, and imposes no administrative influence on companies. Second, administrative mobilization, which is made known to the public through channels under supervision of the government, such as industry associations, and which has some influence on companies. Third, mandatory requisitions, which are made known to the public through relevant administrative departments and exert considerable influence on companies.37 (2)

Influences of governmental donation-raising on different types of enterprises

Government mobilization imposes obvious effects on the public welfare donation behavior of enterprises, but the influence is different on different types of companies that adopt different strategies in response to government mobilization. As the government’s administrative mobilization capacity increases, the degree of freedom companies have to make decisions declines. As foreign-funded companies are protected to some extent by relevant preferential policies, they can avoid administrative fundraising and mandatory requisitions, make choices of their own free will regarding the government’s social mobilization, and decide for themselves whether and how to donate. However, they also regard government mobilization as important reference information and take it into the choice range informing their decision-making. As far as multinational companies are concerned, “the attempt to win the favor and trust of the government by means of providing various public

35

Liu (2008: 124). Gao and Yang (2014). 37 Yang and Ge (2003: 42). 36

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welfare donations and supporting the cause of China’s education and further to establish well-grounded cooperation with relevant government departments should be an advisable pathway of participating in the politics indirectly.”38 Domestically funded Chinese companies can also autonomously select social programs that are mobilized by the government, but when faced with the government’s administrative mobilization, they have to passively accept. These companies are divided into state-owned enterprises (SOEs), and privately owned companies. Some SOEs feel that the governmental mobilization is a large burden, as they have no choice but accept the mandatory or imposed requisitions. Though the privately owned companies are close to overseas funded companies in their attitude towards governmental mobilization, they lack self-consciousness in making choices and planning corporate donations, showing a tendency to respond to government mobilization in the form of “one case, one decision.” As found from a survey of 30 cases, 11– 12% of overseas-funded companies make donation decisions in response to government mobilization, while for Chinese-funded companies the figure is 25–27%. This can be interpreted as the two having different understandings of and strategies for coping with the governmental mobilization, even though they both respond to the government mobilization.39 As a part of the process of making charitable donations in China, the government mobilization mechanism has considerable influence on enterprises making donations, but the influence is different on different types of companies. As mentioned above, overseas-funded companies, due to protection from preferential policies, can avoid administrative fundraising and mandatory requisitions. Chinese-funded companies, though also able to make independent choices regarding social programs advocated by the government, have to accept passively the government’s administrative mobilization and thus are more liable to give donations to the civil affairs department or government-run charity organizations. The fundraising influences exerted by different intermediary agencies on enterprises are also different. In China, the biggest influence comes from the various levels of charity federations that are governmentrun NGOs, with large enterprises and local enterprises tending to answer positively their calls for action. By contrast, fundraising efforts by grassroots NGOs have trouble achieving an effect. Though they can gain some funding through repeated effort, the funds are often from enterprises which have already established cooperation with them or have some private relationship with their leaders. 2.

Charity organization fundraising

The enterprises that charitable organizations approach for fundraising are usually those they hope to give. A charitable organization can look to many businesses, but for a given non-profit organization, there are usually only a limited number of businesses that can collaborate with it.40 Companies that are easy to get donations from include the following types: local companies, companies which are carrying 38

Zhang et al. (2004: 205). Yang and Ge (2003: 42–43). 40 Wang (2002: 207). 39

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out activities having to do with certain charity organizations, companies which have announced fields of charity that they plan to support, companies with private relations with charity organizations, and large-scale companies. Still in the early stages of development, China’s charity and public interests organizations have done not very well inducing enterprise charity. Even though their number has increased every year, on the whole, they have not been very successful in enhancing their credibility and their administrative color restrains to a great extent the charitable behavior of enterprises. In practice, enterprises are liable to give their donations to charity organizations with considerable influence and prestige. These organizations not only have high credibility, but also close ties with the government. Not only can enterprises rest easy regarding trustworthiness, it also helps them to raise their profile and improve relations with government departments. The relationship between a charity organization and an enterprise is also important to the success of the former in raising funds from the latter. Usually, charity organizations tend to turn to key enterprises as the major objects of their fundraising efforts, for these enterprises are locally well known and perform well in business, have a fine public image, and are also big taxpayers. When charity organizations set such enterprises as exemplary donors, the small and medium sized enterprises around them have an easier time taking part in donation activities. Thus, key enterprises actually constitute the main source of charitable funds. But at present, there are still disordered phenomena in enterprise fundraising, such as extended fundraising and repeated fundraising. It is also impossible for enterprises to meet the fundraising demands of each organization. Thus, the domestic enterprises are usually averse to and reject these run-of-mill donation demands. 3.

Enterprise donation strategy and internal mobilization

In the past, the corporate donation concept prevailing among Chinese enterprises was “giving back to society and bringing benefit to homeland”. With the development of market economy in China, that concept has become more and more strategic and the donation behavior of enterprises has turned from simple to complicated, and from random to sustainable. Aside from the institutional trend of donation management institutionalization in national enterprises, some large SOEs have set up special departments in charge of managing their own donation affairs or founded their own charitable funds, advocating their employees to personally join in philanthropic activities by operating charitable programs. Donations by enterprise employees constitute an important part of corporate charitable donations. The highest level attainable is the internalization of philanthropic ideas into the values of individual employees, so as to help employees to reach ideal values. However, in practice more enterprises are involved in philanthropy as a means of enhancing cohesion and building enterprise culture. As the role of employee donations in enterprise donations is not one to be ignored, some large enterprises have established special committees for the management of employee donated funds . These committees are charge of mobilizing and managing the use

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of the funds raised. For example, China Telecom Group set up a fund management committee for employee donations. In 2003 the labor union of the group organized a charitable activity of showing love and donating to people in Banbar County, Tibet, an area affected by Kaschin-Beck disease. The positive response from labor unions at various levels of the group raised a total of 10.15 million yuan in charitable donations.41

2.3 Individuals In other countries, donors are commonly classified into two types: individuals and legal persons. Individuals generally refer to those who donate directly to charity organizations in the name of individuals, while legal persons refer to those who donate to charity organizations in the name of their entities as legal persons. The individual donations and private donations to be discussed below belong to the category of donations by natural persons.

2.3.1 Current Situation for Individual Donations 2.3.1.1

Basic Situation

Donations by individuals have never been the main source of funds of charities in China. Despite signs of gradual growth in donations by individuals in recent years, that growth is not steady and balanced. The total amount donated by individuals in 2013 was about 26.336 billion yuan, accounting for 32.7% of cash donations and representing an increase over 2011.42 In Chinese society today, there are problems with both the first distribution dominated by the market and the second distribution dominated by the government. According to data from the Chinese Ministry of Finance, the high-income stratum, which accounts for 20% of China’s population, controls 80% of bank deposits, but due to the poor tax policy regulations, individual income tax comes mainly from the ordinary working-class people. In 2005, 65% of the total individual income tax was contributed by the working-class and only 10% by the wealthy stratum.43 Thus, there should be high expectations for the individual and social donations from the third distribution. Due to the lack of reasonable adjustment of individual income and expenditure in the taxation system, trend for personal donations in China is not positive. Under the current tax incentives for charitable donations, an individual can only deduct from taxable income when donating money 41

Committee for Managing Funds Donated by China Telecom Group Employees, “Report on the Use of Funds for Aiding Tibet”, http://www.Chinatelecom.com.cn (2009/1/10). 42 Yang (2014: 19). 43 Xie (2006: 170).

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to various charitable organizations regulated by the state. Obviously, this taxation policy does not have a sufficiently significant effect on individuals’ incentives to donate.44 Furthermore, the ordinary people of China have not shown much enthusiasm for philanthropy. In 2005, private donations in the United States amounted to US $241 billion, or US $828.7 per capita. Per capita income in the United States was 38 times that of China, yet US per capita charitable donations were 7300 times higher than in China.45 In this sense, the reason for the “plight of philanthropy” in China does not lie only with enterprises or the rich and powerful, but with all of Chinese society. A survey showed that 86.0% of individuals who donated did so only when they felt pity for the victims of catastrophic disasters such as SARS (Severe Acute Respiratory Syndromes), floods, and earthquakes, and that only 6.0% were regular donors to charity organizations during ordinary times.46 Regarding the sources of charitable donations, 75% of the donations in the United States are from individuals, while in China, before 2008, the percentage generally was lower than 20% and most donations were from enterprises and public institutions.47 The funds given by individuals in China go mainly via NGOs in the area of poverty relief, but as the total amount is small, these funds account for only 1% of all for poverty relief funds (calculated on the basis of data concerning the composition of the poverty relief funds issued by “Seven-Year Priority Poverty Alleviation Program of China”), far lower than the 8% contributed by social organizations.48 Also, an analysis of the funding sources of charitable foundations in Shanghai found that of non-directed donation incomes, 26.4% are from units and only 8.1% are given by individuals. The remaining 65.5% are of a mixed origin, contributed by the districts, counties, and sub-districts.49 So, donations from organizations are far greater than from individuals. The reasons for individual donations lagging behind can be summarized as follows: First, the overall economic level of China has yet to be raised, and the incomes of most people are low, limiting the capacity to give. Second, the stratification of the Chinese society intensifies the popular misconception of charity, with charity usually regarded as something concerning only the rich. Third, the transparency of charity information is inadequate and the credibility of the charity organizations is not high. Forth, an organizational system and public opinion environment which can effectively stimulate giving enthusiasm on the part of individuals is lacking.

44

Guo (2014). Nick (2007: 50). 46 Yu (2008: 129). 47 Chen (2012: 24). 48 Ye and Pei (2009). 49 Li (2006: 77). 45

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Table 2.7 Statistics of domestic donations by individuals in 2008 Purpose of donation Low temperature, rain and snow, and freezing disasters in the south of China May 12 Wenchuan earthquake (including special CPC membership dues)

Amount (billion yuan) 0.421 40.8

One Day Charity, Spring Wind Action, and other large scale fundraising activities

3.2

Individual donations received by charity organizations (excluding earthquake relief donations)

0.5

Other daily donations from individuals Total

0.909 45.83

Source China Civil Affairs Ministry Office for Coordination of Charity Undertakings and China Charity & Donation Information Center, China Donation Network (http://www.juanzhu.gov.cn) (2009/1/22)

2.3.1.2

Some Positive Changes in Individual Donations

As proven by the experiences of many countries, individuals are the main source of the charitable funds available to NPOs and the participation of the general public is where the energy of philanthropy resides. In the United States, individual donations account for about 80% of all charitable funds and almost every American citizen contributes each year to one or more charity organizations.50 Individual donations will play an increasingly important role in the future development of charity in China and especially in nurturing the lofty morality and loving heart of the public and in promoting popular philanthropy. There have already been some positive changes regarding the situation for individual donations in China. The most obvious evidence is that the number of individuals making donations and the total amount donated has continued to grow. According to the “2011 Report on Charitable Donations in China,” in 2011, the total amount donated by individuals at home and abroad reached around 26.72 billion yuan, accounting for 31.62% of all social donations, representing a year-on-year increase of 3%.51 Corporate matching of individual donations has also emerged as part of Chinese philanthropy. In early 2008, when South China was stricken by a major snowstorm, people from all walks of life were ardent in donating and the amount given by ordinary people was as high as 421 million yuan, accounting for 27.3% of total domestic donations.52 In the same year when the Wenchuan earthquake occurred, almost all Chinese people participated in donations for relief work. The year 2008 saw the total donations of individuals surpassing the amount given by enterprises, a defining change (Table 2.7). 50

Wang (2002: 205). Meng et al. (2012: 118). 52 Wang (2008: 38). 51

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2.3.1.3 1.

Forms of Participation and Target Fields

Diversified participation forms

Aside from donations of funds or material, donating time or services as a new means of donation has become increasingly popular. The Wenchuan earthquake and the Beijing Olympics were two major events in 2008 that triggered a high tide of service volunteering in China, with an increase in volunteers of at least 14.72 million. Of those, more than 3 million Chinese and foreign volunteers went to Wenchuan, Sichuan and worked in earthquake stricken regions. There were more than 10 million volunteers in support areas, making an economic contribution of 18.5 billion yuan. For the Beijing Olympics, 1.7 million volunteers offered more than 200 million hours of services.53 Stock equity donation refers to natural persons, non-state-owned legal persons, and other economic organizations’ investment holding enterprises giving stock equity through relevant internal decision making procedures for the purpose of public welfare donation.54 Compared with traditional money and material donations, equity donations do not reduce an enterprise’s cash flow or hinder its normal investments and operations. Such equity operation is conducive to preserving and increasing the value of charitable funds, and introduces the market mechanism into the realm of charity donation. Gensheng Niu, the founder and former chairman of Mengniu Dairy Group, who is reputed to be “China’s First Equity Donor”, set up Lao Niu Foundation in 2004, China’s first non-public foundation run by a family and funded privately. He and his family members donated all company shares they held and the main part of their bonuses. Heren Philanthropic Foundation and Xinhua Charity Fund, both in Fujian Province, are also renowned foundations which have donated stock equity to support the public welfare. 2013 saw a breakthrough for stock equity donations in China, with many equity donations by individuals, each over 100 million yuan in market value.55 At present, the paths by which an enterprise makes equity donation include through charitable organizations, setting up their own foundation dedicated to equity donation management or managing through a trust company, or via other non-profit public institutions. Among these, charitable trusts will be probably a better choice as a future corporate equity donation management and operation model. Members of the general public buying welfare lottery or sports lottery tickets is also one of the important ways of participating in charitable donation. In 2008 when the Chinese charity ranking list was unveiled in Beijing, the “China Charity Special Award”, which was added into the award pool for the first time, was presented to “Chinese Lottery-Buyers.” 2011 saw lottery sales gaining momentum across the country, raising 68.87 billion yuan in public welfare funds. Yearly welfare lottery 53

China Civil Affairs Ministry Office for Coordination of Charity Undertakings and China Charity & Donation Information Center, China Donation Network, http://www.juanzhu.gov.cn (2009/1/22). 54 China Ministry of Finance, “Circular on Financial Issues Concerning Enterprises Donating Equity for Public Welfare”, (FE (2009) No. 213), October 20, 2009. 55 Wang (2014: 32).

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Fig. 2.2 The general public’s evaluation of the welfare lottery with regards to public benefit. Source Shandong Province Welfare Lottery Center and Qilu Advertising Survey Co., Ltd., “Report of Project of Surveying Welfare Lottery in Shandong Province (Qingdao City)”, July, 2007

Fig. 2.3 Main purposes of buying welfare lottery. Source Shandong Province Welfare Lottery Center and Qilu Advertising Survey Co., Ltd., “Report of Project of Surveying Welfare Lottery in Shandong Province (Qingdao City)”, July, 2007

sales reached 127.79 billion yuan, collecting 38.87 billion yuan in public welfare funds, and the sports lottery issuance reached 90.3 billion yuan, collecting 30 billion yuan of public welfare funds.56 Chinese lottery-buyers have made a tremendous contribution to China’s social welfare and charitable public welfare undertakings, which reflects to certain extent the motivation of the lottery-buyer group to participate in charity. As shown in Fig. 2.2, the lottery-buyers’ evaluation of the public benefit of the welfare lottery is higher than that of non-lottery-buyers. In the survey, the respondents gave “ordinary” or above in evaluating the public benefit of the welfare lottery and most lottery-buyers see relatively high public goods content in the welfare lottery. Figure 2.3 shows that the main purpose of those who buy lottery tickets is not just winning a prize, for the proportion of lottery-buyers who intend to contribute to 56

Meng et al. (2012: 32).

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welfare undertakings exceeds 15%. This indicates that, to the general public, buying lottery tickets is a new way of participating in charity. Additionally, alongside the progress of social networking, donating small sums online has come to play a more important role. All types of public welfare and charitable organizations have begun to probe the various channels of making charitable donations in order to encourage individuals to donate. Up to September, 2013, China’s online donation platform had raised total donations of 520 million yuan and reached 560 million participants.57 2.

Mainly targeting disaster relief

As indicated by Shanghai’s report, “Citizen and Charity: A Large-Scale Social Survey in 2008,”58 the main field for individual donations is disaster relief. The number of people who chose to give donations for the Wenchuan Earthquake was much larger than for anything else. Obviously, the citizens’ enthusiasm to donate is directly proportional to the intensity of state publicity and the severity of the disaster. Only an emergency like Wenchuan Earthquake can arouse the widespread concern of all people. At the same time, the intensity of state and local government propaganda calling for donations is also a key influencing factory. Of the options other than the Wenchuan Earthquake, the one attracting the greatest attention was still “disaster relief,” which was chosen by 25.8% of respondents. This trend is congruent with the result reported by a 2002 survey of charities, where the number expressing willingness to donate to impoverished regions was also higher than those willing to donate to people with disabilities, seriously ill patients, orphaned and disabled children, and distressed students. Clearly, it is the disasters which impact broad regions and inflict large one-time casualty tolls that have been the easiest trigger for stimulating the general public’s enthusiasm to donate. The share of those participating in these other donation activities are 20.3% (aiding the impoverished), 13.6% (aiding distressed students), 8.6% (aiding the disabled), and 7.9% (medical help) (see Fig. 2.4). Worth mentioning is that option of international aid attracts the least attention (0.7%), indicating that generally Shanghai citizens do not think of giving aid for disasters that occur abroad. By analyzing the 0.7% of respondents surveyed, it can be found that one’s vocation has much to do with willingness to participate in international aid. As shown by the data, the professionals and retirees account for a majority of those who are willing to join in international aid, and, by contrast, ordinary employees and public institutions are indifferent to this realm of donation.

57 58

Wang (2014: 43). Anonymity (2009).

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Fig. 2.4 Shanghai citizens’ donation willingness and target fields. Source Anonymity (2009)

2.3.2 Features Characterizing Individual Donations 2.3.2.1

Relatively Concentrated Donation Transmission Paths

Charitable activities such as “One Day Charity” or “One Day Charitable Heart” held by charity federations in various regions not only mobilize enterprises to donate, but also pay yet more attention to small individual donations. It is obvious that government departments are the main forces driving behind the “Charitable Month,” “One Day Charitable Heart,” and other similar activities. The means of individual donations are closely related to the organizational mobilization mechanism. Since the efforts to organize and mobilize individuals to donate are made by the work units they belong to and the communities where they live, the initial recipients of individual donations are their work units and communities and few individual donations go directly to charity foundations or charity agencies. In an overwhelming majority of cases, the traditional means is used, that is, an individual donates to his work unit on the spot. Although there are also new ways and means of donation through mobile phones, the Internet, banks and other emerging forms of donation, their proportion is very small. Among the main reasons for this situation include the following three: first, the mobilizing mechanism, second, a lack of trust in charity organizations, and third, that other means of donations are not as convenient. Individual donations, via their work units or communities, are then gathered and transmitted to the charity federations and the civil affairs department. They are seldom taken directly by nongovernmental charity organizations (see Fig. 2.5).

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Donations from individuals

Residents

Neighborhood committees

Civil servants

Government units

Employees

Enterprises

Community charity branch

Civil affairs departments

Charity federation

Industry associations

Fig. 2.5 Path of donation transmissions from individuals

2.3.2.2

The Organizing and Mobilizing Process Depends on Work Units and Communities

The mechanism organizing and mobilizing charitable donation by individuals is mainly characterized by their passive response to donation mobilization through their work units and communities as the organizational media. This manner of mobilizing individual donations falls under the concentrated type in terms of both its donation time and location. The “Charitable Month” and “One Day Charity” activities held each year are the main ways used by charity organizations in various regions to raise funds, and almost all the yearly income of a charity organization coming from individuals is donated during the concentrated period of time that contains these two activities. Charity organizations do not have routine means of receiving donations from individuals, while ordinary people also lack in motivation and behaviors for regular and continual donations. Since 1978 when China began to implement the policy of reform and opening up to the outside world, its urban social management system has undergone a change from the “work unit and street committee system” to the “community system.” This period of which is referred to by some scholars as the “post-work-unit period,” in the sense that it is a transitional period when the influence of the work unit system on urban society, though weakening, has not vanished completely.59 In China, as citizens are still living in work units, these work units exert considerable influence on their values and behavioral patterns. In such social conditions, individuals donate mainly through their work units or community committees, with few going directly to charity organizations. According to the results of a survey on Chinese citizens’ charity consciousness in 2003, the general public participated in donation activities organized by their work units or labor unions of their work units more often than in other 59

He (2007a: 66).

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activities. This represents a major feature characterizing charitable and public welfare undertakings. About 90% of the interviewees said that their work units organized donation activities, and 87.9% of them said that they had participated in the activities organized by their work units.60 A large scale social survey conducted in Shanghai in 2008 indicates that 65.7% of Shanghai citizens made donation via their work units, colleges, or schools and 47.3% via community committees. These are also the main channels most commonly used for donations. Furthermore, 28.1% of Shanghai citizens were of the opinion that the street charity box represents the most convenient means of donating.61 Because of the low cost of mobilizing donations via work units, charitable foundations lean more and more toward mobilizing work unit based collective donations, rather than individual donations. Charitable foundations have a long way to go in developing direct donation markets for individuals. Additionally, the general public is unfamiliar with other charity organizations aside from several major ones such as the China Red Cross Society, China Charity Federation, and their branches in various regions. However, donating to these major charity organizations is not as convenient as donating via work units or neighborhood committees.

2.3.2.3

Deficiencies in the Individual Donation Incentive Mechanism

Clearly, taxation is one of the important means of encouraging individuals to make charitable donations. Thus, establishing and perfecting the tax incentive mechanism can improve not only the economic incentive of individuals to make charitable donations, but also through the improvement of individual income tax related incentive policies strengthen the charity awareness of the citizenry. This will gradually expand the scope of charitable donations and further realize the socialization of charitable donations.

2.4 Donation by Individuals: A Case Study of the “One Day Charity” Square Activity The “One Day Charity” is an annual program launched in 2004 and carried annually out by the Shandong Province Charity Federation (SD Federation). The method of fundraising is characterized as, “The government exhorts, leaders take the lead, all walks of life connect, and all people participate.” It is conducted in a concentrated manner across the province in mid-May of each year, encouraging individuals to donate one day’s income and profit-making enterprises to give one day’s profit to aid disadvantaged groups. In 2004 and 2005, charity organizations at various levels of the province collected 230 million yuan and 560 million yuan respectively. In the 2006 60 61

Xu and Zhang (2004: 89). Zhou (2009).

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“One Day Charity” period, the present research group conducted a questionnaire survey of those who participated in relevant public square fundraising activities and donated, as well as non-donors, in order to learn their understanding of the charity activity, donation behavior, and the factors influencing donation.

2.4.1 Survey Background and Sample Introduction On June 10, 2006, to promote the “One Day Charity” program province-wide, the activity “Love Moving Qilu (Qilu is another term for Shandong) 2006 Shandong Province and Jinan City ‘One Day Charity’ Volunteers’ Activity” was launched jointly by the SD Charity Federation and the Municipal Jinan Charity Federation. That day saw over a thousand students from Shandong Architecture University, Shandong Vocational College of Foreign Affairs Translation, Shandong University of Arts, and Jinan Vocational College, serving as volunteers engaged in simultaneously publicizing charity donations in six public squares and business streets of Jinan. Volunteers were divided into groups of three students who, wearing ribbons and holding charitable containers, conducted their work in the designated areas. After the activity closed, they turned over all the charitable containers to the office of SD Charity Federation. According to relevant statistics, over twenty thousand people joined the charity activity on that day, donating 5982.64 yuan. This survey was carried out through convenience sampling by Shandong University sociology majors. They issued 900 questionnaires in QC Squares and HL Square, of which 796 were returned as valid, a response rate of 88.44%. The researchers used the statistical analysis software SPSS13.0 to analyze the data. Of the respondents, there were 444 men (55.78%) and 352 women (44.22%), with age, education, work unit, and monthly income in Table 2.8.

2.4.2 Features of Donors’ Charity Knowledge and Behaviors The volunteers’ activities as part of the “One Day Charity” program were oriented toward public collection of donations from anonymous donors. The mobilizers did not exert direct organizational control on those mobilized to contribute, who joined mainly because of agreeing with the ideology or concepts put forward by the former. The mobilized side had considerable freedom in deciding whether to participate or not, as there was no possibility that they would suffer any reputational or political losses from refusing to participate. By analyzing the data of the survey, the following points were found.

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Table 2.8 Dscritptive statistics of the surveyed samples Variable

Category

Percentage

Variable

Category

Percentage

Age

24 and below 25–35 36–45 46–60 Above 60

30.53 21.48 21.10 24.75 2.14

Work unit

Government organ and public institution

19.47

Institution of learning

24.12

State owned enterprise

26.01

Privately owned enterprise

9.92

Joint venture

2.39

Others

18.09

Subtotal

100

400 and below

22.61

Education

2.4.2.1

Subtotal

100

Under primary school

0.25

Primary school

1.76

401–800

24.31

Junior high school

10.55

801–1200

21.11

Senior high school

31.41

1201–1600

16.33

College and university

52.89

1601–2000

9.67

Graduate program

3.14

2001 and above

5.91

Subtotal

100

Subtotal

100

Monthly income (yuan)

The Public’s Potential Awareness of and Enthusiasm for Charity and Public Welfare

Quite a few pedestrians joined in the street activity for raising charitable funds, which indicates the potential of awareness of and enthusiasm for charity on the part of the public. Of the respondents to the survey, 60.1% donated, expressing their support for charity and their care for the groups of people needing assistance. For the donation amount, three donors gave sums above 500 yuan and those who gave 50 or less accounted for an overwhelming majority of all donations. According to onthe-spot observations, most donors took a 10 or 5 yuan banknote from their pockets and some others gave 1 or 2 yuan. Some parents playing with their children at the public square, gave them some money and let them put it into the charity boxes and experience donation, as to educate them. As shown by the survey, a large proportion of the public is willing and able to make charitable donations. According the statistics, 56.6% of respondents participated in

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“One Day Charity” activities one or more times.62 Even among those not necessarily in any organized charity activities in the everyday life, the members of the public lent a hand to those in difficult situations, offering to help and support as much as they could. 71.4% of the survey respondents answered definitely that they donated for those cases of school dropouts, orphans and childless old people, handicapped children, and those with serious illness, among others, which they knew of through media reports. When asked “When you meet someone in the street who asks for help to you, will you offer him or her help?” 54.8% answered, “Yes, I will,” and 18.8% said they would “Walk around and ignore.” That the percentage is over half indicates, to a certain extent, that the Chinese people cherish the spirit of helping others overcome difficulties. Additionally, regarding the choice of donee, the questionnaire asked, “If a colleague, townsman, classmate, and friend of yours needs help, do you offer a donation?” 98.1% gave an affirmative answer, which reflects the behavioral principle of differentiating between acquaintances and strangers and emphasizing assistance to the former prevalent among Chinese regarding charitable donation.

2.4.2.2

Considerable Differences in Public Recognition of Charity

The data show that the public had some knowledge of the “One Day Charity” program that has been conducted for three years. 46.6% of respondents said that they know of the activity, while 53.3% said otherwise. Regarding the destination of charitable funds, most showed high concern, with 87.2% answering “I am concerned where the charitable funds go.” 97.5% are of the opinion that charitable donation can help the beneficiaries solve problems in their lives. 24.2% said it could be a “great help,” 73.3% said “some help,” and just 2.5% said “little help.” From the survey, we know the following. First, the public knows little of the domestic law on donations for public welfare undertakings or the relevant favorable taxation policies. This means that efforts to publicize the law and policies are inadequate. 81% answer that they do not know of the favorable tax treatment for charitable donation, with only 19% being aware. Secondly, most people do not have a clear sense to obtain records of donation and demanding tax deductions, nor have they developed habits in such a regard. Of those who say that they know the favorable taxation policies, if they are asked further, “When you have donated, will you ask for any proof and correspondingly demand a tax deduction?”, only 5.7% said they will, while 13% said otherwise, and 81.3% offered no answer at all. Thirdly, favorable taxation is hard to put into practice, as the working rules and regulations are not clear and the procedure of handing tax incentives is unclear, which directly influences donors’ enthusiasm and general behavior. Why do donors not demand tax deductions? According to the relevant results, respondents who feel “as the donated 62

From 2004 to 2006, Shandong Charity Federation carried out the “One Day Charity” activity three times successively in various departments and industries in the province by the administrative channels.

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sum is very limited, there is not much of a deduction to speak of” account for 2.5%; those who feel “unwilling to demand, since the formalities are too complicated”, 2.8%; those who “do not know how to apply for the deduction”, 1%; those who think “they do not want return, for a donation is a contribution”, 4.9%. An overwhelming majority of the respondents gave up on answering the question. The “Law of the Peoples Republic of China on Donation for Public Welfare Undertakings” introduced in 1999 stipulated that corporations and other enterprises may be given preferential treatment in enterprise income tax. Furthermore, the rules for implementing the “Regulations on the Enterprise Income Tax of the People’s Republic of China” and “Law of the People’s Republic of China on Individual Income Tax” also encourage the use of donation to deduct an equivalent amount of income tax. However, these policies have not been known by the public. Thus, the relevant issues calling for a prompt solution are how to improve the existing preferential taxation policies, to simplify the procedure and application process, to better the social atmosphere and policy conditions for encouraging donations, and to protect the public’s positive initiative in participating in charitable donations.

2.4.2.3

Work Units Still Make Up the Main Source of Information Concerning Donations

Donation information being accessible to more people constitutes a precondition for better results in charity fundraising. Through what channels have donors accessed information regarding donations and a path to donate? In the survey, most respondents choose their work unit as the relevant transmitter of information. Work units serving as information transmitters and organizers for donations has been a common practice in the unit-based (Danwei) culture. The workers in the work unit based system are dependent on work units not only in their work but also likely in gaining information and resources for living, exchanging, and even social participation. Some respondents say that they come across donation activities in certain places, of which public squares are the ones most often chosen by charity organizations to publicize donation information. Additionally, the financial reports of charity organizations are directly connected with the public’s donation behavior, because only after they know a charity’s financial information can people trust a charity and make donations. The survey found that 7.7% of respondents who knew of these reports and checked them, 31.4% knew and did not check, and the remaining 60.9% did not know of them. This indicates that most people in contemporary society do not know or understand the financial reports of charity organizations. When people lack adequate knowledge of donation information, it is impractical to expect them to trust charity organizations and be willing to contribute to charity.

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More Donated Funds Going to the Areas of Disaster Relief, Emergency Relief, Poverty Relief and Education

The respondents show striking differences in the areas they target for donations. There are higher percentages in disaster and emergency situation relief (50.9%), poverty relief (45.4%), assistance to the handicapped (36.8%), and education (36.2%), and lower percentages for environment protection (9.7%), sports (4.5%), medical treatment and public health (9%), providing for the aged (7.6%), and unemployment (5.8%). This result shows that in current Chinese society disaster and poverty relief remain the main target of charitable activities. Based on both the first distribution according to individual competence and contributions and also the second distribution realized by the state through taxation and financial-economic levers, society and government should work to promote the third distribution, that is, the non-governmental charitable assistance. Through this, all people can share in the fruits of social and economic development and have access to living guarantees and development opportunities, constructing a peaceful and harmonious society.

2.4.2.5

Are Donors More Willing to Give Money Directly to Recipients or Inclined to Choose Charity Organizations as a Medium?

In today’s society, there are two main ways for the general public to donate. One is to give money directly to recipients and the other is to make a donation to an organization that will transmit or allot the donation to the recipients. Which of these two ways is preferred by the public? The survey shows that most donors (62.1%) are more willing to give money directly to recipients, while those who are more inclined to donate to foundations or charity organizations account for 28.2%. This demonstrates that, when there is not a system by which donors can know whether their money reaches the targeted recipients, donors are more willing to give money directly to recipients. This result presents both a challenge to and a requirement for charity organizations. Namely, how should they enhance their credibility and information transparency so that the public can truly believe that the current charity system and organizational conditions can ensure the basic realization of the donors’ purpose? The worry about donations not used reasonably or failing to reach those who need it is the main reason for the public more willing to donate directly to the recipients. If donors lack confidence on the final destination and use of indirect donations, it will inevitably to affect their enthusiasm to participate in charity. The survey also asked: “When the government, charity organizations, your work unit, your community, the news media, and other organizations are organizing donation activities, which do you prefer to donate to?” The data obtained show that the respondents who choose a charity organization account for 55.9%, while only a low percentage chooses others (government, 7.4%; work unit, 7.1%; community, 4.4%; news media 4.5%). The reason why people tend to trust charity organizations is that with their very function and specialization being to organize charitable donations they obtain more social trust than other organizations.

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2.4.3 Factors Affecting Individuals’ Donation One thousand student volunteers received less than 6000 yuan in donations from the street and public square “One Day Charity” activity, which was far from what the organizer had expected. What exactly affected the public’s donation behavior?

2.4.3.1

The Credibility of Charity Organizations Significantly Affects the Public’s Donation Behavior

As shown by the survey data, when answering “Which factors do you think have a negative impact on the public’s donation behaviors?” respondents choosing “The charity organization lacks public trust” accounts for 47%; “Limited by low income, I want to donate but feel unable to,” 19%; “The channel for donating is inconvenient,” 8.3%; “The charity organization is not well known.” 8.2%; “The target recipient of donation does not belong to the group of people I am most concerned about,” 5.5%. It is clear that to the general public, the main factor restricting donation is that the charity organization lacks credibility.

2.4.3.2

The Donation Amount Is Closely Related with Income Level

Although it is often said that “It does not matter how much the donation is, and anyone can make one,” one’s income level obviously affects donation levels. As indicated in Table 2.9, the donation amount is closely related with the monthly income, and lower monthly incomes correspond to lower donation amounts. Most of those who give less than 50 yuan have a monthly income less than 400 yuan, while almost all those who give more than 50 yuan belong to the group with a monthly income more than Table 2.9 Relationship between monthly income and donation amounts Monthly income (yuan)

Donated amounts 50 and below

51–100

Below 400 and having no income

178

2

401–800

31

801–1200

55

8

1201–1600

41

8

3

1601–2000

34

17

3

2001 and above

30

34

Total

369

69

101–200

201–300

301–500

2

2

Above 500

Information missing

1

1

1 2

1

1

12

3

4

1

20

7

7

3

321

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400 yuan. This shows that though groups of people of all different income levels may donate, their donation amounts have much to do with their income levels. At present, the economic structure of China is troubled by the unreasonable phenomenon that the proportion of the residents’ income in the national income is on the lower side and the proportion of labor remuneration in the primary distribution is also on the lower side,”63 which has negatively affected the ordinary citizen’s actual economic capability to donate.

2.4.3.3

Different Donation Raising Locations and Means Suitable for Different Types of People

Differing from the general forms of organizing donation, the “One Day Charity” activity is a public square and street donation raising effort that mostly engages donors in their identity as ordinary citizens, rather than agencies, enterprises or other work positions. According to on-the-spot observations, the majority of donors were students from universities and colleges64 and some middle-aged and older retirees, who had relatively low monthly incomes or even no income. Thus, different donation raising locations and means are suitable for different types of people. Such public square and street fund raising activity is more effective for small-sum donors and those who have never joined in any donation activity organized by their work units. In summary, participating in charitable donation is an obligation a citizen should fulfill, but how to enhance the public’s awareness of donation and the efficiency of organizing donation raising activities calls for deeper consideration. At present, non-governmental charitable donation behavior in the strict sense has been far from forming its own norms and the collection of charitable resources has been highly dependent on administrative power. The sound development of philanthropy requires the creation of a favorable atmosphere for non-government philanthropy, an increase in the level of the “primary distribution” available to ordinary citizens, along with improvements to relevant support systems and measures. At the same time, more reliable and convenient donation channels and means should be made available to the general public.

63

In the developed countries, the proportion of the workers’ rewards in the national income reaches 55% and even more, while, in China, the year 2007 witnessed the decrease of the proportion from 53.4% in 1997 to 39.7% (See Haitao Du, “Expert: Unreasonable National Income Distribution Attributable Finally to Economic Structure”, People’s Daily, December 31, 2009). Relatively low and imbalanced labor reward level is one of the important factors affecting the ordinary residents’ capability of making charitable donation. 64 According to the statistics with regard to vocations, of the donors in the activity, students were the biggest in number, which was directly related with the fact that student volunteers served as the donation workers on that day. Those student volunteers from several universities and colleges, when carrying out their task, thought that they themselves should show their loving heart by giving some money of their own.

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2.5 Features and Motivations of Charitable Donations Made During the SARS Crisis In the 2003 fight against Severe Acute Respiratory Syndrome (SARS), a great many Chinese enterprises and public institutions, social organizations, and individuals were active and many charitable activities were held all across the country. Almost daily, the media published information of generous charitable donations by various domestic enterprises, public institutions, and social organizations, innumerable groups of people, families, and individuals, by overseas Chinese and students studying abroad, and by governments, enterprises, and individuals of other countries. SARS was a catastrophe, yet the crisis brought about an opportunity for the entire country and people to their pool efforts for charitable assistance. The critical moment also spurred us to deeply consider many questions.

2.5.1 Features Characterizing the Charitable Assistance During the SARS Crisis Compared with the donation in a normal period, donation in an abnormal period has some different features and forms and the government plays a more prominent role in organizing, coordinating, and standardizing donations than usual.

2.5.1.1

Clearly Defining the Channels to Receive Social Donations

“When the country is in difficulty, every common man should fulfill his obligation.” In China’s battle against SARS, there was an upsurge in donations from all walk of life. However, in the early period when the SARS epidemic broke out and the public did not know the channels for making donations, there was some confusion. For example, during the peak of Beijing’s fight against SARS, various regions, industries, enterprises, and, individuals across the country gave supporting donations in many ways to an overly large number of recipients that included the following: the Beijing Municipal SARS Prevention and Treatment Leading Group Office; Beijing Municipal Office for Management of Disaster Relief Donation Reception Affairs; Beijing Municipal Center for Disease Control and Prevention; major hospitals; various departments in the Beijing Health Bureau system; social assistance agencies and public welfare organizations such as the social assistance center under the Ministry of Civil Affairs, China Charity Federation, Youth Foundation, and the donation center of Project Hope; and even some service industries such as aviation and communications, among others. Considering the possibility of confusion in giving and receiving donations at this critical moment, on May 3, 2003, the General Office of the State Council of PRC issued the “Circular on Strengthening the Management of Social Donations in Funds and Materials for Preventing and

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Treating Atypical Pneumonia” in time, which stipulated clearly that the civil affairs departments and health departments were responsible for receiving cash and material social donations for fighting atypical pneumonia and that the Red Cross Society of China and China Charity Federation might also join in the work of receiving. Any other departments and social organizations were not allowed to receive social donations and if they had received social donations, they should turn them over as soon as possible to the civil affairs departments and health departments. Any practice not conforming to the above provisions was illegal. At the same time, the departments in charge of receiving had to work according to “Law of the Peoples Republic of China on Donation for Public Welfare Undertakings” in receiving and allotting the social donations and publishing relevant information through the media and the Internet, subject to social supervision. Thus, at a critical moment, the clear definition of qualified departments to receive donations alleviated, to a great extent, confusion caused by many enterprises, public institutions, social organizations, and individuals, who, though enthusiastic in donating, did not know definitely where they should give donations and even donated to departments or organizations not legally qualified to receive social donations. In this way, the possibility of distribution confusion and waste were reduced as much as possible, ensuring that the most important things was sent to the places where they were needed most. Smooth donation channels undoubtedly make up an important aspect of charitable assistance. As evidenced by the donations after the outbreak of SARS, convenient and quick access to funds and material by both the people who need assistance and the relevant departments depends on smooth donation channels. In recent years, with the development of the social charitable assistance undertakings in China, the government has kept improving the policies concerning charitable donation and the number of donors has also grown rapidly. However, on the whole charitable assistance undertakings have still been in a relatively primitive and fragmented situation and the cases where social assistance becomes bogged down because of poor donation channels have occurred repeatedly, proving more serious at some moments of crisis. This weakness makes it fully clear that, to do well in coping with disaster and pooling charitable efforts, the state needs to set up a relatively complete system for operating donations and open up different but equally accessible donation channels under both routine and emergency conditions.

2.5.1.2

Formulating Special Regulations on Donations in Responding to the SARS Crisis

SARS was an epidemic China had not experienced before, and up to now neither a miracle cure nor an effective preventive vaccine has been developed. Its strong contagiousness and uncertainty determine the particular means and content of donations, for which the Chinese government has formulated special donation regulations for times of crisis. Regarding the means of donation, to avoid SARS spreading among gatherings of people and enhance the public’s awareness of self-protection, the circulars issued

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by the General Office of the State Council, Ministry of Civil Affairs, and Ministry of Health all strictly required that, during the fight against SARS, social donations were to be mobilized across the country, but charity performances, sales, games, and the like were to be avoided, and activities and ceremonies involving gatherings of people for donation purposes should also be also avoided. The suggested way for donating funds was transfers by local banks or post offices. Generally, no ceremony was to be held for donation programs, but for large-volume donations, brief handover ceremonies could be arranged when necessary. These requirements for the means of donation during the special period were based on the same principle, that is, to protect the donors’ interests and avoid the spread of SARS. The previous normal ways of donating were banned and choosing new and suitable ways of donating was inevitable. As far as the donated content is concerned, differing from the previous practice of making no special requirement for donations for disasters such as floods and earthquakes, some specific requirements and specialized arrangements and designations were made by the government for anti-SARS donations. Considering the actual work of preventing and treating SARS, the designated donation objects, aside from cash, included sterilizing and protective articles, anti-microbial and anti-viral medicines and reagents, diagnostic equipment such as X-ray machines, treatment and custodial care equipment such as breathing machines, and transportation equipment, such as those for medical aid and epidemic prevention. Different critical incidents call for different means of handling. Preventing and treating SARS mean that for the first time such definite and conditional requirements were made by the central government and local governments for social donations in materials. This was unprecedented in the practice of social donations in China. The purpose of doing so was to maximally integrate social resources, make use of the effective things to handle the crisis, and fight SARS as quickly and efficiently as possible, safeguarding people’s lives and health. Regarding the scope of use for donations, it was also strictly stipulated that social donations in funds and material should be allotted and used according to the principle that a fixed sum was for fixed purpose and of guaranteeing support to the key areas on the basis of a comprehensive plan. Not long after the SARS outbreak, the General Office of the State Council, Ministry of Civil Affairs, and others emphasized that the departments and units in charge of receiving social donations for preventing and treating SARS should, according to the “Law of the Peoples Republic of China on Donation for Public Welfare Undertakings” and other relevant regulations, respecting the intention of the donors, ensure that all social donations in funds and materials would be used for the prevention and treatment of SARS and the assistance thereof, and that no other uses were allowed. Meanwhile, provisions were also made for targeted donations and non-targeted donations in funds and materials: if a donor made clear his or her intention of a recipient, the fund or material he or she donated should go to the target as intended in timely manner via direct transfer by the relevant department to the recipient. When the donor of funds did not specify a specific recipient, the funds were treated as non-directed charitable funds, which could only be used for rescue, relief, diagnosis, and treatment of SARS victims and purchase

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of medical equipment, as well as for some designated uses such as subsidies to hygiene and medical workers. Donated materials could only be used by the medical and health organizations in their work of preventing and treating SARS. The clear definition of the use and scope of the social donations ensured resources concentrated to the greatest extent in the fight against SARS, minimizing waste and meaningless consumption, satisfying the desire of all donors.

2.5.1.3

Promoting Standardization and Institutionalization of Donation

During the process of fighting SARS, the management of charitable donation in China underwent a series of changes. One of the most important changes was the increased standardization and institutionalization of donation. 1.

Introducing the information publishing and publicity system

To fight SARS, ensuring that the resources of social donation were used to the greatest extent, and satisfied the desire of many enterprises and the public to donate, the government not only clearly designated departments qualified to receive social donations, but also introduced an entire system for information publishing and publicity, set up information consulting telephones, opened donation hotlines, and made known via the media to the public the telephone numbers, fax numbers, and accounts of departments receiving donations. This facilitated donations coming from all walks of life. Around April 27, 2003, when Beijing Municipality was in the most serious period of its SARS epidemic, it opened 24-hour “Fighting SARS and Showing Loving Heart” hotlines for social donation at the municipal and district or county departments of civil affairs and also set up a Beijing municipal center for receiving of social donations for disaster relief that was ready to receive any donations by units or individuals.65 Similarly, many other cities also opened donation hotlines. Additionally, the national system for social donation publicity was introduced in a timely manner and made full use of various media for publicizing timely information of receiving and using social donations. This ensured that the society at large was fully informed of the sources of donations and the elements of the donation process, including donors, recipients, the amounts of donated funds and materials, and the department which received them, as well as the management, allotment, and uses of social donations. In this way, efforts were undertaken make all donations transparent to the public. As a comrade from the disaster relief department of the Ministry of Civil Affairs said, “All the funds and materials donated by from walks of life are intended to save lives. Now, SARS is wreaking havoc, and the whole nation is engaged in fighting it. We make sure that the information of the source, use and allotment of every item of the social donations, no matter how much it is, is made known to the public, so as to let the donors rest assured and let the recipient knows

65

Yang (2003).

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who the donor is. Thus, by making everything concerning the donation transparent, we accept social supervision.”66 The authors found at the website of PRC Ministry of Civil Affairs that, up to June 26, 2003, the ministry had published statistical data on receiving donations 16 times, and since May 7 of that year, there was a new report available to the public every 3–4 days on social donation statistics. 2.

Strictly operating by standardized procedures

To maximize the efficiency of social donation in the fight against the SARS epidemic, the government formulated a rigorous set of procedures. Social donations were to be received, registered, tabulated, and categorized by the qualified departments following the designated channels; for every item of donated funds or material, a receipt should be given to the donor, and all donation receipts that were manufactured under the supervision of the PRC Ministry of Finance and have been approved and issued by the ministry should be legal and valid; social cash and material donations should be managed and used strictly as required by their designated scope of use; social cash and material donations should be allocated in a timely fashion; all social donations should be subject to supervision, inspection, publicization, and auditing. The government of Beijing Municipality, then the city with the most serious SARS epidemic, for example, promulgated a “Circular on Strengthening the Management of Cash and Material Donations for Preventing and Treating Atypical Pneumonia,” to standardize giving and receiving donations. It put forth the special requirement that, with regard to the management and use of the donated funds and materials, all departments at various levels formulate working procedures and set up a responsibility system; when receiving donated funds and materials that they ensure every piece be checked and that a legal and valid receipt and a thank-you note be presented to the donor; donated funds and materials were to be registered and tabulated, and that all of them were guaranteed to be for preventing and treating SARS; any embezzlement or use for other purposes was banned; that donated medicine and medical equipment were to be checked by the relevant drug supervision and management departments and stored in specially designated depots; that donated hygiene and epidemic prevention products, health care products, and foods, etc. be confirmed and inspected by the relevant health departments and transferred to the civil affairs departments in charge of their storage and go through the procedure for receiving donations.67 The standardization of procedure not only ensured the most efficient and timely use of the donated resources but also won high levels of social trust, leading to more giving enthusiasm and higher levels of giving among members of the public.

66

Ji (2003). General Office of Beijing People’s Government, “Circular on Strengthening the Management of Social Donations in Funds and Materials for Preventing and Treating Atypical Pneumonia” (BJGG (2003) No.17), May 8, 2003.

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Strengthening the inspection and supervision system

Strengthening the supervision, inspection and publicization of the management, use, and auditing of cash and material social donations and providing informative feedback in a timely manner to donors were important measures the government took to further standardize and improve the work of receiving social donations aimed at the prevention and treatment of SARS. The funds and materials donated by members of society from all walks of life, despite differences in quantity and kind, had one point in common. They expressed the desire of the donors for better results in preventing and treating disease, fighting SARS, rescuing and aiding victims, and developing the cause of public health. Given that, how could the donors’ and the recipients’ rights and interests be effectively protected? How could the benevolent desire of society be turned into reality and a loving heart translated into action? How could the reputation of the Chinese philanthropy be safeguarded? The answers to these questions called for more than the publicity, mobilizing, and advocating efforts made by the departments concerned. Only by the establishment and implementation of a rigorous and standardized inspection and supervision system could they be fully guaranteed. To this end, the State Council, Ministry of Civil Affairs, and Ministry of Health emphasized on many occasions that effective measures must be taken to ensure strict inspection, supervision, and auditing would be put into place for social donations against SARS. Specifically, four measures were taken as follows. First, the civil affairs departments concerned were required to set up an offense reporting system, making known to the public the offense reporting telephone numbers, and intensify the supervision over social donation. Second, it was stipulated definitely that the civil affairs departments should, jointly with other relevant departments, investigate and ban illegal fundraising activities in various forms and crack down on fraud and other illegal criminal behavior carried out in the name of donations. Third, all work concerning social donations should be subject to the supervision by the society and public opinion, and information on social donations should be published in a timely manner to ensure the openness and transparency of the receiving, allotment, and use of social donations. Fourth, auditing should be intensified and after finishing the work of donation the departments which received social donations should be subject to audit by the audit department at the same administrative level. The formulation and implementation of all these measures provided for the continued operation of social donations and provided the conditions and guarantees needed for the implementation of crisis relief. 4.

Establishing an effective incentive system

As for other social donations, social donation during the SARS outbreak was still based on the voluntary principle. Localities could not organize any form of coercive donations or fundraising activities, nor could they adopt administrative orders or rigid measures for requisition. The voluntary principle embodies the original intent of charity and is the basic condition on which the existence of charity depends. However, voluntary donation does not mean there is no need for government or society to encourage donations. On the contrary, the establishment of various incentive systems

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and their implementation are conducive to the sound development of charity. This positive significance was clearly reflected in social donations made during the SARS outbreak. After the outbreak of SARS, the adjustment of the pre-tax deduction policy played a key role in the daily increase of enterprise donations. On April 30, 2003, the PRC Ministry of Finance and the State Administration of Taxation jointly issued a circular allowing anyone to deduct entirety of a donation for the prevention and treatment of SARS from their income prior to tax payments. Soon after the policy was promulgated, amount of funds donated nationwide grew substantially. Beijing alone, during a period over a month that followed the SARS outbreak, received 3.8 billion yuan in social donations, exceeding the total donated for the 1998 summer floods. Before the SARS epidemic, as stipulated by the “Interim Regulations of the People’s Republic of China on Enterprise Income Tax”, “Donations for community benefits and charitable donations by a taxpayer in a year are deductible up to 3% of the taxable income.” In other words, if the value of the donated funds and materials by an enterprise is more than 3% of the taxable income, the enterprise shall pay its income tax for the part over 3%, thus engendering the phenomenon that the more an enterprise donates, the more taxes it has to pay. This will naturally restrain enterprises’ enthusiasm for donation. Therefore, the adjustment of the pre-tax deduction threshold greatly stimulated enterprises’ zeal to donate. Thus, it is clear that the previous regular stipulations regarding donation and tax payment limited enterprises’ initiative in making donations, while the special preferential policy for taxation of donation aiming at preventing and treating SARS served as an important mechanism for encouraging Chinese enterprises to donate.68 Raising charitable funds means much for social assistance. During the time of the SARS epidemic, the Chinese government promptly introduced a special program of assistance to SARS victims into its routine assistance policies, ensuring that the greatest possible guarantees for livelihood and medical assistance were given. The considerable charitable donations to a certain extent made up for a lack of government financial resources, reduced the cost of treating the crisis, and, together with the government funds invested in the fight against SARS provided a strong and effective safeguard. Of course, many of the current donation policies made and measures taken against SARS, despite highly praise by the society at large and their effective support in fighting the SARS epidemic, are the results of the administrative behavior or policy that have occurred in special cases of national emergency, rather than belonging to the category of modern laws, regulations, and policies. In China, whether the effectively proven donation policies or quasi-policies introduced during the time of SARS can be turned into durable regular common policies, laws, and regulations, whether can a democratic-based procedure of formulating policies and an effective mechanism of implementing them be established, and whether can discreet social donations, by pursuing the donation policies for handling common crises, be pooled into an 68

Zhong (2003).

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integrated resource, and the efforts thereof be translated into a standardized and long-effect conduct of social donation, will be the post-SARS questions calling for urgent considerations.

2.5.2 Analysis of Motivations to Donate in the Case of SARS Among all societies and groups of people, the motivations underlying social donations have always been multifarious. Some scholars classify the motivations of donors in China and other countries into various types, such as selfless devotion, mutual aid and care, sympathy for the weak, image shaping, economic strategy, political need, fishing for praise, and even egotistical.69 Taking into consideration the donation behaviors during the SARS period, we divide the motivations of donors coping with a crisis into the following types.

2.5.2.1

Sympathy and a Loving Heart

Conveying sympathy and a loving heart to disadvantaged groups of people is the most common motivation of donors during ordinary times. In recent years, the main objects of the charity in China include those who meet serious difficulties in their life, such as teenage dropouts, handicapped persons, laid-off workers, childless old people, migrant peasants working in cities, as well as the victims of natural disasters. Many concentrated or regular donation raising activities have been held to meet their needs and help them with their difficulties. Sympathy and a loving heart constitute the basis for social donations and the Chinese nation has cherished the traditional virtue of sympathizing with the weak and offering help to those in difficulty. When the unexpected and sudden outbreak of SARS shocked people’s lives and led to serious disaster and social panic, everyone found it hard to avoid becoming a victim, especially those who did not enjoy medical insurance and the orphans who had tragically lost their parents. Once the media reported the difficulties those victims were suffering, great sympathy, pity, and concern were aroused immediately, which turned into an ardent drive for giving. SARS leading to a large volume of donations was due to this psychological effect.

2.5.2.2

Adoration and Admiration

The social donation activities for resisting SARS in 2003 are saliently featured by the characteristic of many donations being direct at medical workers. Many cash and material donations were meant for frontline medical workers treating SARS victims. They did not belong to a disadvantaged group of people and enjoyed the 69

Zheng et al. (1999).

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salaries and allowances paid by the government to them, with medical insurance and special welfare subsidies. The reason why the public dedicated their loving heart to them through donating funds and materials to them lies in two points: when SARS struck, they worked hard in saving lives, which exposed them to great danger and hardship, they could not be replaced by others, and the disaster victims needed them urgently, making it necessary to provide them with the best working conditions and living guarantees. More importantly, the public was moved and stimulated by many of them displaying the spirit of devotion and self-sacrifice, and thus esteemed their accomplishments, admired their character, and hoped to express their heartfelt praise and adoration of and care for them by donating funds and materials to them. In fact, donations in this sense do not entirely have the meaning of helping a certain group or individual, but rather are more inspiration, encouragement, and praise for the frontline medical personnel. They are also a tribute to the selflessness and fearlessness of the medical staff and support for the entire fight against SARS.

2.5.2.3

Responsibility and Support

Unlike the disasters such as earthquakes and floods, the SARS crisis not only affected the elderly and children, but also adults in the prime of their lives. It not only related to the local population but also affected the migrants. It not only affected the interests of the government, enterprises and public institutions but also directly affects the immediate interests of everyone, that is to say of all members of society and even all inhabitants of the entire global village. Thus, the responsibility for the battle against SARS was to be shouldered by all of society, which called for unified effort. It is by such a strong sense of social responsibility and mission that a large number of enterprises, families, and individuals at home and abroad joined in various donation activities. Ming Yao, a famous Chinese basketball player, and Shanghai TV Station jointly launched the “Super Star and Super Love: Live Program of Fighting SARS”, which raised over RMB ¥500,000 and US$ 280,000 within three hours. Yao himself contributed RMB ¥500,000.70 Citizens’ awareness of social responsibility constitutes the basis for promoting social mutual assistance, and is a strong force for solving formidable problems and overcoming daunting difficulties. In the battle against SARS, enterprises, the general public, and even Chinese students studying abroad, overseas Chinese, and foreign friends who cared for and loved China, though they had no other means to engage in the work of preventing and treating SARS, chose to donate what they could and thus join vicariously in China’s fight against SARS.

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2.5.2.4

Interests and Public Relations

Of course, it is unrealistic in contemporary China to require that all donors have a strong sense of social responsibility and a lofty self-denying spirit. When a crisis occurs, generally, enterprises and individuals are anxious on behalf of the disasterhit group of people and are touched by the brave and devoted frontline rescuers, but at the same time it is also hard to be free of consideration of their own interests, including those of their departments or work units. Complex psychology can form a powerful incentive to donate and act. Some telecommunications companies blended the expansion of their scope of business and their donation activities, not only satisfying the needs for communications in SARS relief work but also boosting their shares of the market of the industry they belonged to. China Unicom announced that it would donate a set of Uni-Video, its broadband video conference system, and a set of its video-phone systems, worth about 5 million yuan, to the PRC Ministry of Health and health departments and health bureaus in provinces, municipalities, and autonomous regions. It provided for free the cabled or wireless switching-in services and relevant equipment for the operation of the two sets.71 Beijing Mobile and Nokia Corporation cooperated to donate 100 cell phones to the Beijing Municipal Bureau of Health and frontline medical workers and in the meantime gave the medical workers China Mobile cellphone cards which were charged with 1 million yuan total and were rechargeable.72 In view of more and more students learning online at home, China Netcom seized the opportunity and donated online learning cards to students in the disaster hit areas. These students could log in the portal website “CNC Community” for free; previously the educational program offered on that website required a fee. Additionally, the donation activities conducted by some enterprises at home and abroad, though intended to meet the urgent need to lives, involved their motivation of enhancing corporate public relations initiatives and other steps along those lines. Such self-serving and profit-making donations may differ in their realm from altruistic philanthropic donations, but they are still of precious value to the people who need support and rescue during the crisis, forming the concept of mutual assistance and fraternity, as well as the common aspiration of society. It is worth noting that, under a market economy, capital always pursues maximum profits and that moral preaching is not enough for the public to get money out of their pockets in the direction of social philanthropy. Thus, it is necessary to formulate a series of preferential policies, such as the tax-exempt treatment and progressive taxation in levying the estate tax and individual income tax, which are favorable to charity and make philanthropy profitable to donors, thus leading to social wealth being invested in charitable causes.

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Crowd-Following and Obedience

Generally, the voluntary principle mandates that any individual donation must be made of one’s own accord. However, during a critical period this principle will be discounted at times. After the outbreak of SARS, as social donations increased gradually, governments at various administrative levels reiterated the principle of voluntariness and that requisitions and forced donation were not allowed, and deduction from salaries was banned. Nevertheless, due to limited locations and means for donating, individual donors had to depend on their work units to give. The commonly adopted procedure was that first the leadership of a unit put forward the initiative and encouraged donations for the fight against SARS. In some units, donation boxes were made and the leaders served as the active responders and led in lining up and putting a certain amount of donations into the boxes or had some workers specially assigned as responsible for collecting donations. Upon seeing leaders and colleagues in one’s department participating, one would, though not necessarily voluntarily, follow them and donate. Thus, the pressure of the donation situation often caused the occurrence of crowd-followers. It is worth mentioning that even the amount given by a crowd-following donor might be self-adjusted according to the amount donated by the leader or first donor. Regarding the donation amount, generally speaking a non-leader should not give more than his leader and those with less income should not give more than those with more income. There were other cases where whether donation should be made and how much should be given were the result of collective discussion or the decision of the initiator followed by others in a unit. Of course, there was no forced donation, nor was there any amount set by the superior organizations. In such cases, the driving force came from the integrated effect of the affect and influence of others in the same unit, his unwillingness to become an object of others’ private talks and public discussions, and his willingness to leaven a good impression on others. Apart from the several general donation motivations, there were other types which showed up in the SARS crisis period, such as donations for gratitude, business cooperation, seizing opportunities and giving presents, fishing for praise and reputation, advertisement effects, tax evasion, and even making profitable use of loopholes. How to recognize these different donation motivations and how to guide the sound development of charity call out for continued exploration to better understand their internal laws and paths. Of course, charity should not be defined by motivation, but rather have the actual effect as the standard of evaluation. “Regardless of the form of donation, no matter the motivation is, as long as charity involved, it shows that one has begun to accumulate morality.”73 Society at large should vigorously advocate charitable donations made on a higher plane of morality and with no intended return, yet it should also understand and welcome those donations benefiting both the donors and others or even those that are motivated by certain interests.

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2.6 Conclusion and Discussion The above discussion is devoted to proving the behavior of the government organs, enterprises, and individuals as the three main types of donations. Of them, enterprises have been the main source of philanthropic funds in China, but both the government and individuals have begun to play an increasingly important role. Informed by our study of the conception, donation status, and behavior of the three types, we can say that their behaviors are characterized by the following features. Firstly, an administrative mobilization mechanism. The government has played an important role in the development of philanthropy in China, particularly in the charitable mobilization mechanism. Administrative force has been an omnipresent factor in the process of the three types of donations mentioned above and is the feature shared by all of their mobilization mechanisms. Just as they behave when dealing with routine work, government departments have taken action to mobilize donations in an top-down way and divvied up their tasks into subtasks to be fulfilled on various levels, even to the point where there is a suspicion of forced donation. For the corporate donation mobilization mechanism, the government’s mandating function has also been obvious, for the various aspects of the production and management in either SOEs or non-government enterprises have been under strong government control. Other industries and agencies (including organizations with political power at the grassroots), have been also operating under the leadership of higher government departments. Thus, all types of donation mobilization have a strong administrative color. Secondly, a unit-based mobilizing mechanism. Under the influence of planned economy, the unit-based system still plays a unique role in Chinese society, and naturally mobilization for charitable donation has not been separated from the influence of the unit-based system. When individuals participate in charity, they are mainly responding positively the call of their work units and mobilization organized by the unit where an individual works or by the community where he lives. Both ways are very effective. Similarly, donations in the government agencies, public institutions, and enterprises have been carried out through their own calls and mobilization. Different units have different capabilities to mobilize. In this regard, the governmental agencies are the strongest, followed by SOEs, non-governmental enterprises, and community and sub-district committees. Thirdly, concentrated means of donation. Summarizing the means used by the types of donors shows that civil affairs departments and officially sponsored NGOs at various administrative levels have received an overwhelming majority of donated funds. Needless to say, donations by the governmental agencies and public institutions have gone straight to the civil affairs departments or the China Charity Federation system. Most donations from enterprises have also been received by the officially-run NGOs. The reason for this phenomenon is that the officially-run charity organizations have served as mouthpieces of the government, while Chinese non-governmental charity organizations are not comparable to them in strength or prestige. Thus enterprises are naturally unwilling to donate to the latter. Furthermore,

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when an individual donates funds or material to his work unit or his community residents committee, the latter will also turn over it to the relevant civil affairs department or the China Charity Federation system. Fourthly, diversified forms of donation oriented toward concentrated areas. Donations from enterprises and individuals are the most obvious in their diversity of forms. Apart from traditional donations in cash and material, many other forms such as donating voluntary services or equity, and the welfare lottery have emerged. The realms of donation are concentrated on such several main areas as disaster relief, poverty relief, and education. The area of disaster relief has attracted the greatest volume of donations, while other areas such as medical assistance, aiding the handicapped, and community development have gotten much less in charitable funds. Fifthly, a tendency to reduce administrative color in donation mobilization. According to “China Charity Development Guidelines (2006–2010),” one of the working principles for developing charity in China is to adhere to the governmental promotion and non-governmental implementation. This is the description used in the state-level policy documents issued on the role of the government in developing charity. On July 18, 2013, the National Ministry of Civil Affairs and Yunnan Provincial Government jointly held a symposium concerning with efforts to promote social construction and innovate in social organization. On that occasion, Yunnan Province announced that the government of the province had retreated from the market for public welfare and charitable donations and, unless catastrophic disasters occurred, it would not participate in any social fundraising activities for donations.74 Meanwhile, the province issued “Yunnan Province Regulations on Promoting Charity,” which clarified some relevant issues and stipulated that the principle of adhering to governmental guidance, non-governmental operation, and social participation, and standardization and transparency, should prevail in the development of charity. This was the first decision by a provincial government to publicly retreat from the charitable donation market, a good sign of the government jumping out from its dual role as both a player and a referee. The de-administration of the charitable donation mobilization can free the government from the suspicion of imposing donations, conducive to eliminating the malignant inclination of the government to demand enterprises or society to make donations. Thus it brings the concept of charity back onto a voluntary basis, and its development depends on charity culture and non-governmental forces. Types of philanthropy in China are in the process of constant change, as the composition of the types, the role played by each of them in charity and their donation behaviors have continued to change. In the past, enterprises were the main type, while individuals contributed little. However, the year 2007 saw as much as 3.2 billion yuan donated by ordinary people, and in the next year 2008, the catastrophic Wenchuan Earthquake lifted the total amount given by individuals to 45.8 billion yuan, surpassing the total from enterprises and other social organizations. As the Chinese general public becomes increasingly enthusiastic to participate in

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philanthropy, individual donations will keep growing. The donation concept prevalent among Chinese enterprises used to be “repaying society and bringing benefits to the hometown”. With the development of the market economy in China, the corporate concept of donation has started to become more strategic and the factors motivating enterprises to donate have turned from external to the internal and spontaneous, which is a good trend. Corporate donation behavior has been going from simple to complex and random to be sustained and enterprises have paid more attention to the management of their donations. There has been a trend of government departments starting to fade out of the charitable donation market step by step and increasingly emphasizing their role as a guide and booster, rather than as a direct participant, turning over operations of charities gradually to the society. This highlights the principle of the governmental promotion and non-governmental implementation. The key for the future development of philanthropy in China is still to make greater efforts to exploit more charitable resources and encourage further diversification of donation types. At present, as donations from enterprises constitute the principal part of the source for the charitable funds in China, these enterprises should be given continued encouragement to foster their concept of corporate citizenship and be offered preferential taxation policies. As the individuals are one of the important types for charitable donation, the government and charity organizations should provide more channels by which individuals can donate conveniently, thus encouraging the further development of individual donations. As far as fundraising is concerned, efforts should be made to innovate and bring about more modes of donation and to nourish the concept of a “fundraising market” so that more forms can be employed to tap potential charitable resources. Currently, the important factors affecting individual donations include the credibility of charity organizations, the average income level, the means to call for and raise donations, among others. The future development of charities depends on the further construction of a good atmosphere for non-government philanthropy, the lifting of the primary income distribution level for ordinary people, and the improvement of relevant systems and their supporting measures. Only by this way can the credibility of charity intermediary agencies be elevated, the economic conditions of citizens be lifted for their participating in charitable donation, and more reliable and convenient donation channels and means of donation can be provided for ordinary donors.

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Chapter 3

Donation Intermediaries and Their Behavioral Characteristics Qin Li, Weiwei He, and Yanbin Cheng

Charity is carried about by non-profit organizations. One of the focuses of charitable donation should also be the cultivation and development of intermediary organizations. This chapter will describe at length the operating mechanisms of charitable foundations and empirically analyze them through two case studies concerning the SD Charity Federation and SD University Education Foundation respectively.

3.1 Types of Intermediaries for Charitable Donations and Their Current Status Intermediary agencies are non-profit organizations operating among the government, enterprises, social organizations, and individuals. They work as providers of professional services, such as contacting, coordinating, and evaluating. They play an intermediary role for information communication, coordinating agency, consultation and planning, legal services, and advertising medium.

3.1.1 Types of Charitable Donation Intermediaries Tuan Yang classifies charitable organizations into three types: community charitable organizations working at the grassroots level, intermediary charitable organizations,

Q. Li (B) · W. He · Y. Cheng Shandong University, Jinan, China e-mail: [email protected]

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and charitable service institutions.1 Grassroots community charitable organizations aim to satisfy the special needs of its distressed groups and, of China’s charitable organizations, these organizations are the most active in keeping close contact with ordinary people. Intermediary charitable organizations mainly include charitable foundations at various levels, with wide fundraising scopes. Some are so vast as to cover almost the entire country. The China Charity Federation and the various regional charity federations are examples of this type. Charitable service institutions provide direct services to special groups of people, for example, the elderly, orphans, and the handicapped. There are many such organizations and they are usually small in scale, with fixed staff, workers, sites, and facilities. Examples include Dongfang Xiwang (lit. East Hope) Children’s Village in Xingtai City, Hebei Province, and Yulin (lit. Woods-Raising) Orphanage in Baishan City, Jilin Province.2 Starting from the practical aspects of philanthropy, Zheng Gongchen categorizes charitable organizations into three types: fundraising, implementing, and coordinating. From another criterion, that is, the task or duty that a charitable organization fulfills, he classifies them into five types as follows. The first is the public benefit organization with mixed tasks or duties. The second is the comprehensive charitable organization with multifaceted services or programs for charitable purposes. The third is the specialized charitable organization, established with the definite objective of fulfilling one task or duty related to a specific object. The next type is the coordinating organization that does not do its own charitable work, but instead has the main function of coordinating the relationship between other charitable organizations and the government. The last type includes organizations subsidiary to others. Though most enterprises make charitable contributions via donations, there are also some which have set up charitable or public welfare organizations as their subsidiaries, as to integrate with philanthropic activities and play a role such as that of establishing an enterprise foundation.3 The operating models employed by charitable organizations make yet another criterion for their classification into three types. One type is the fundraising and giving charitable organization, which aims to collect and integrate social resources and then allocate them to other public welfare organizations. A second type is that established with the main task of operating programs and providing social services. It receives funds by concluding agreements or contracts with the fundraising organizations and the government. The third one is a mixed type of charitable organizations, which concurrently engages in collecting resources and operating programs.4 At present, an overwhelming majority of the charitable organizations in China, large or small, belong to the third type, that is to say that they both collect resources and operate programs concurrently. Both the first and second type are relatively uncommon. In the present study, the definition of the intermediary charity agency is based mainly on the operating types of charitable organizations in China, as well as on 1

Yang (1998). Ibid. 3 Zheng (2005: 36). 4 Beijing Normal University China Philanthropy Research Center (2012: 73–74). 2

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their philanthropic functions. It is mainly concerned with various foundations and charitable federations,5 which are referred collectively to as charitable foundations. These intermediary charity agencies attempt to collect funds from enterprises and society at large and then give those funds to organizations which provide charitable services or to groups of people in need, thus functioning as a bridge and link between donors and beneficiaries.

3.1.2 Types of Charitable Foundations and Their Current Status A foundation (or charitable foundation) is a non-profit legal person established with the purpose of carrying out public welfare undertakings according to the law by making use of the property donated by natural persons, other legal persons, or organizations. As provided by the “Regulation on Foundation Administration” introduced in 2004, foundations are divided into those that solicit contributions from the general public (hereafter referred to as public foundations) and foundations that are prohibited from soliciting contributions from the general public (hereafter referred to as the private foundations). According to the “Regulation on Foundation Administration”, there are also differences in the provisions for their initial capital, organizational structure, property management, and information disclosure. For original capital, the amount required for a national public foundation shall be no less than RMB 8 million yuan, for a regional public foundation no less than RMB 4 million yuan, and for a non-public foundation no less than RMB 2 million yuan. Regarding organizational structure, for non-public foundations established with private property, no more than 1/3 of the board may be made up of close relatives. For other foundations, close relatives may not serve on the board concurrently. Regarding property management, public foundations shall spend at least 70% of the previous year’s total income on activities for the public good that are provided for in their Articles of Association, while non-public foundations shall spend at least 8% of the previous year’s fund balance on activities for the public good provided for in their Articles of Association. Regarding information disclosure, a public foundation is obliged, during and after the fundraising period, to disclose information of its planned activities, the planned use of funds raised and the actual flow of funds, while a non-public foundation, as it does not carry out any such fundraising activities, is not bound by the duty to disclose such information.

5

With China Charity Federation and the local charity federations and charity associations in various provinces, regions, and cities as its mainstay, the charity system of China has been administered in a way with reference to that for the administration of public foundations, which are required to issue yearly work reports and disclose information, so they are also put into the category of charitable foundations in the present study.

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Public foundations can be differentiated in the following ways: according to the scope of their fundraising into national public foundations and local public foundations; according to their operating mechanism and foundation structure into independent foundations, operational foundations, corporate foundations and community foundations; according to their field of activities into charitable, educational, artistic and cultural, scientific and technological and others, of which about 31.88% are charitable, the largest proportion of any type. From the perspective of the relationship between the foundation and the government, Chinese foundations can be divided into four categories. There are purely official foundations, for example the National Natural Science Foundation, which is itself a government department. There is also government-run foundation with private support, for example the Soong Ching-ling Foundation. These foundations raise operating funds from society, but by their nature are public institutions. The third type are privately-run institutions with government support. Such foundations do not fall under national public institutions and can be operated and managed autonomously. However, they are closely linked with relevant authorities and will inevitably have certain degrees of official “color.” The China Youth Development Foundation and China Charity Federation are relevant examples. Finally, there are purely private foundations. The types of operation, management and work of these civilly-run foundations are decided by the foundation itself. There are also many overseas foundations with active offices or agencies in China to their support charitable activities, for example the Bill and Melinda Gates Foundation. Having developed for many years, charitable foundations in China have grown into various forms. Yongguang Xu sums them up as falling under eight types, which are (1) community foundations, such as the Guangdong Harmony Foundation; (2) family foundations, founded by rich and powerful families; (3) independent foundations, such as One Foundation, Narada Foundation, and More Love Foundation; (4) foundations with a business background, such as the Tencent Foundation; (5) foundations with a government background, such as the China Foundation for Poverty Alleviation, China Social Welfare Foundation, and China Social Assistance Foundation; (6) foundations with a religious background, such as The Amity Foundation and Ren Ai Charity Foundation; (7) professionally operated foundations, such as Ai You Foundation, Alashan Ecological Foundation, and Shanghai Adream Foundation; (8) university foundations, of which there were 437 in 2014, accounting for 10% of all foundations and having total assets of RMB 21.1 billion, 22% of the total held by foundations in China.6 In China, the foundation is a social organizational form imported from abroad. In the past, it fell under the category of social groups. As stipulated in Article 2 of the 1988 China Foundation Management Method, “The term ‘foundation’ mentioned herein refers to non-profit non-governmental organizations which are legal persons incorporated for the purpose of managing the funds donated by other social organizations and other organizations as well as individual persons at home and abroad

6

Yongguang Xu, The Eight Forms of Foundations in China. http://www.foundationcenter.org.cn, accessed on Nov. 25, 2014.

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of their own accord.”7 The first seven foundations in Mainland China were established in 1981. In 2004, the government of China introduced “Regulation on the Administration of Foundations”, and as stipulated in Article 2 of Chapter 1, “The term ‘foundation’ mentioned herein refers to non-profit legal persons incorporated for the purpose of doing public good, with the use of properties donated by natural persons, legal persons or other organizations in compliance with these regulations.”8 According to this regulation, the foundation is separated from social organizations. As provided in the 2004 “Regulation on the Administration of Foundations,” foundations are divided into foundations that raise funds from the public (public foundations) and foundations that may not raise funds from the public (non-public foundations). Before 2004, an overwhelming majority of more than 80% of foundations in China were public. After 2004 when the “Regulation on the Administration of Foundations” was promulgated, non-public foundations have grown rapidly. After 2005, the annual growth rate of non-public foundations in China has been over 20%, while the corresponding rate for the public foundations has been about 10%. By December 2014, the total number of foundations in China was 4,134, of which 1,476 were public foundations and 2658 were non-public foundations (Table 3.1).9

3.1.2.1

Public Foundations

In America, independent private foundations account for about 85% and corporate foundations about 5% of the various types of foundations. The total percentage of foundations and foundation assets accounted for by two types, both of which are non-public, is over 90%. That means the corresponding percentage for community foundations and operational foundations, which both raise funds from the public, is less than 10%. Almost all of the large foundations in the United States are private.10 Similar trends have appeared in the growth of foundations in China. Though the number of public foundations has continued to increase, their relative percentage has been decreasing. By the end of 2011, the percentage of public foundations had fallen to 47%. Generally, public foundations in China have been operating for a longer time and on a larger scale, while they tend to enjoy advantages in either their funding base or their income limits. At the end of 2011, the total assets of public foundations were 10 billion more than those of non-public foundations in China, probably as a result of the more extensive funding sources accessible by public foundations.11 The main sources of income for most public foundations are fiscal appropriations and subsidies, as well as social donations. Additionally, the preservation and increase in value of their assets serves as one of their income sources. The income structures of the 7

Wang (2005: 5). PRC Ministry of Civil Affairs (2004). 9 China Foundation Center, Number of Foundations of China, http://www.foundationcenter.org.cn (2014/12/17). 10 Xu (2004). 11 Liu (2013: 24–28). 8

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Table 3.1 2012 numbers of regional foundations and distribution of types Regional distribution

Number of Percentage Public Percentage Non-public Percentage Number of foundations registrations in MCA of China

Jiangsu

424

13.4

184

43

240

57

3

Beijing

395

12.5

130

33

265

67

147

Guangdong

372

11.7

109

29

263

71

12

Zhejiang

287

9.1

126

44

161

56

3

Hunan

151

4.8

94

62

57

38

1

Fujian

148

4.7

24

16

124

84

3

Shanghai

147

4.6

50

34

97

66

3

Sichuan

96

3.0

58

60

38

40

1

Inner Mongolia

87

2.7

41

47

46

53

0

Henan

84

2.6

37

44

47

56

2

Shandong

78

2.5

35

45

43

55

1

Shaanxi

73

2.3

31

42

42

58

1

Liaoning

69

2.2

42

61

27

39

1

Hubei

69

2.2

24

35

45

65

2

Jilin

63

2.0

23

37

40

63

0

Anhui

62

2.0

19

31

43

69

0

Heilongjiang

59

1.9

35

59

24

41

0

Tianjin

54

1.7

22

41

32

59

0

Shanxi

48

1.5

22

46

26

54

0

Hebei

44

1.4

16

36

28

64

1

Yunnan

44

1.4

33

75

11

25

0

Hainan

43

1.4

20

47

23

53

0

Ningxia

41

1.3

22

54

19

46

0

Chongqing

41

1.3

25

61

16

39

1

Jiangxi

34

1.1

16

47

18

53

0

Gansu

33

1.0

25

76

8

24

2

Xinjiang

33

1.0

22

67

11

33

1

Guangxi

30

0.9

15

50

15

50

0

Guizhou

28

0.9

27

96

1

4

0

Qinghai

21

0.7

11

52

10

48

0

Tibet

12

0.4

10

83

2

17

1

Total

3170

1348

43

1822

57

186

100

Source China Foundation Center, “National Trends in Development of Foundations in China in Terms of Quantity and Distribution”, http://www.foundationcenter.org.cn (2014/12/17)

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Table 3.2 Income compositions of public and non-public foundations of China in 2010 Unit: Ten thousand yuan, % Foundation

Public foundation

Non-public foundation

Income structure Income

Percentage

Income

Percentage

Donation

1,504,200

84

942,501

92.4

Governmental subsidy

176,659

9.9

5927

0.6

Income from investment

42,207

2.4

43,428

4.3

Membership fees

1600

0.1

661

0.1

Income from services

8657

0.5

1020

0.1

Product sales

12,421

0.7

2388

0.2

Others

43,868

2.5

24,576

2.4

Total

1,789,711

100

102,0491

100

Source Yang (2013: 56)

public and the non-public foundations are different and as shown in Table 3.2. Public foundations’ main income sources are social donations and government subsidies, the main sources for non-public foundations are the preservation and increase in value of their capital and donations. Clearly, public foundations are more dependent on the government than the non-public ones, which abide by market principles in boosting their resources. In November, 2007, the “Report of the Fund-Raising Market for Charity in China” issued at the first China Foundation Fundraising Information Conference, analyzed samples from 204 foundations. According to the report, in 2006 the 204 foundations raised RMB 3.323 billion in charity funds. Thirteen foundations raised more than RMB 100 million, including Shanghai Charity Foundation, Peking University Education Foundation, China Youth Development Foundation, China Welfare Fund for the Handicapped, and the China Foundation for Poverty Alleviation. Most of these are national public foundations, though there are also some non-public foundations and regional foundations. The funds collected by the thirteen foundations reached RMB 2.221 billion, accounting for 25% total raised by all foundations in China.12 In 2010, the public foundations’ total donation income was RMB 15.17 billion and their spending on public welfare was 12.74 billion (Table 3.3).13 According to the “Annual Report on Philanthropy for the Year 2013” issued by the China Charity and Donation Information Center, in 2013 a total of RMB 98.942 billion nationwide was donated in funds and material from all sectors of society and both domestic and overseas sources. Donors tended to choose foundations and charity federations as the main recipients of and important channels for their donations. These two types of organizations received over 70% of all donations nationwide, of which 12

China Charity & Donation Information Center, “China Philanthropy Welcomes the Arrival of the Era of Rapid Growth”, http://www.juanzhu.gov.cn (2007/11/5). 13 Xu (2013: 125).

100 Table 3.3 Financial data of two types of foundations of China in 2010

Q. Li et al. Unit: Yuan Indicator

Public foundations

Non-public foundations

Total assets

32,458,057,389.11

22,485,078,032.23

Net assets

30,987,643,720.29

20,198,390,357.18

Total income

17,854,639,290.66

10,234,261,914.29

Income from donation

15,171,778,585.45

9,467,364,244.34

Total expenditure

13,546,503,032.18

5,217,320,226.35

Public welfare expenditure

12,745,629,492.00

4,913,897,251.16

Source Yanmei Liu, Yongmei Zhou, and Qing Tian, “A Comparative Study of the Financial Features of the Public and NonPublic Foundations in China”, Xuehui (China NGO Research), 2013 (7:15)

the total for the charity federation system was RMB 33.9 billion and that for all types of foundations was RMB 37.345 billion.14 Of all the charitable foundations, the largest in organizational scale, the strongest in fundraising capability, and the most influential in the society at large is the system of charity federations, comprising China Charity Federation and charity federations or charity associations at the provincial, municipal, and county levels. At the provincial level, the charity federation of Zhejiang Province has grown quite rapidly and in 2006, 95% of all the 101 cities and counties (county-level cities and urban districts) of the province had set up their own charity organizations. Over time, the accumulated funds raised reached RMB 2.5 billion, of which 1.5 billion had the names of the corporate donors.15 The charity federation of Jinjiang, a county-level city in Fujian Province, was the first county charity organization in China to exceed RMB 100 million in funds raised (Table 3.4). Another large scale system of charity organizations is Red Cross Society of China and its branches across the country. The national Red Cross Society of China is under the leadership of the State Council of China, with branch societies set up at the provincial, municipal, and county levels. Currently, it has 31 provincial Red Cross societies and the two societies in Hong Kong Special Administrative Region and Macao Special Administrative Region, which together have about 20 million members in more than 70,000 primary level organizations. In 2013, Red Cross Society of China system received over RMB 3.202 billion in donations from society.16 China Red Cross Foundation is a national public foundation launched and administered by the

14

China Charity & Donation Information Center, “Annual Report on Philanthropy in China for the Year 2013”, http://www.charity.gov.cn (2003/10/8). 15 Wu and Li (2006). 16 China Charity & Donation Information Center (2014: 100).

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Table 3.4 Donations received by charity federations at various levels from 2007 to 2013 Unit: 100 million, % Year

Total value of funds and materials

Annual growth rate

Year

Total value of funds and materials

Annual growth rate

2007

41.4

−2.22

2011

203.89

−15.9

2008

187.9

353.58

2012

268.65

20.94

2009

90.6

−51.78

2013

339.11

–

2010

242

–

Source “Annual Report on Philanthropy in China” for the years from 2007 to 2013, issued by China Charity & Donation Information Center

Red Cross Society of China and registered with PRC Ministry of Civil Affairs, having the independent status of a legal person. The sources of donations to public foundations in China merit attention. In countries with developed charities, for example, the United States, donations from individuals account for about 80% of the total, while only 5% comes from companies, and the rest, from foundations.17 By contrast, in China, the main donors for public foundations are corporate, as indicated by the data on nine national public foundations (See Table 3.5). From the above data, the proportion of donations from natural persons to totals received by China Social Welfare Foundation and China Charities Aid Foundation for Children, the most recently established of the nine, are obviously higher than those of others. After analyzing their programs, we find that their funds clearly went to the grassroots level and the programs they funded were closer to the public and more innovative than those of others, making it easier to win support from the public. According to a survey, in 2011 the China Foundation for Poverty Alleviation had the most natural person donors, with a total of 13,405,000, at the same time that few of the other foundations even exceeded 100 thousand. In cooperation with some banks, China Foundation for Poverty Alleviation introduced a bank card and credit card based system for monthly donations. Through small sum donations and timely feedback, the foundation has entered into trusting relationship with more and more individual donors. Such trusting relationships constitute the fundamental basis for the sustainable development of the public foundation. The first charitable foundations of China in the last two decades of the twentieth century came into being under government promotion and support. Most of those foundations were launched by organizations or individuals closely related with the authorities in charge of the area, and the programs they conducted overlapped very much with the work scope of administrative departments. Thus, they were tinted with a strong administrative color. Later on, a majority of them developed into large public foundations or charity federations. In the early years of China pursuing reform and opening up to the outside world, there were many social undertakings that needed 17

Xu (2012).

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Table 3.5 Proportions of incomes from donations by natural persons to totals received by nine national public foundations of China from 2010 to 2011 Organizations

Time of establishment

Proportion of income from donations by natural persons to total China Children and Teenagers Foundation

China Children and Teenagers Foundation

1981

20% (2010)

China Welfare Fund for the Handicapped

1984

2% (2010)

China Population Welfare Foundation

1987

18% (2011)

China Women Development Foundation

1988

24% (2011)

China Youth Development Foundation

1989

10% (2011)

China Foundation for Poverty Alleviation

1989

21% (2011)

China Red Cross Foundation

1994

12% (2011)

China Social Welfare Foundation

2005

54% (2011)

China Charities Aid Foundation for Children

2009

54% (2011)

Source Yang (2013: 80)

to be carried out and secondary industry was the priority sector from the perspective of government funding. Very limited funds were invested in social undertakings like science and education, meaning that the diverse needs of society could not be satisfied. The government tried to access social resources, but it was restricted by law, while social organizations, particularly charitable foundations, were legally entitled to receive donations and carry out fundraising activities. Meanwhile, for the purpose of social control, the government actively pushed for the establishment and development of charitable foundations under a dual management system. Initially, there were difficulties in operating the organizations, as some were lacking in credibility and those targeted to give donations lacking in wealth. Additionally, the wealth of society was concentrated in government departments and the state-owned economic areas, and thus, without a doubt, the most effective way of mobilizing and organizing resources was to use administrative power and influence. Given this, the foundations established early in China were meant to facilitate government control of society and obtaining of social resources. The government depended on them for access to social resources, solving social problems, and alleviating the crisis of legitimacy, while those foundations, by resorting to use of government’s strong political resources and organizing, coordinating, and mobilizing capabilities set up their own organizational systems and effectively mobilized social resources.18 With such a social situation 18

Li and Chen (2009).

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and institutional background, China’s public foundations tend to be related to the government in various ways. With the development and improvement of China’s market economy, tremendous change has taken place in the social and economic environments where public foundations are situated. On one hand, as accumulated private wealth has continued increasing, non-public foundations have risen rapidly as a new force and have played a more important role in philanthropy, making inroads into the status and share of the charity market held by public foundations. On the other hand, the government has released a part of the social space, promoting the development of the citizen society and enhancing the civic consciousness in China via social reform oriented toward a “small government and large society.” This had led to more questions regarding the legality of the public foundations with strong official color using public wealth. This has forced them to seek to transform themselves and make an effort to become more independent and socially-based with regards to their funding sources, decision-making governance, personnel employment, and program implementation, among other areas. In this way, they have gradually reduced their administrative color and changed their relationship with the government from one of attachment to cooperation. The earlier a foundation has taken strides to reform itself in a more social direction and the greater the strides that it has taken in that direction, the greater influence it has exerted on society and the greater the role it has played in bringing about social benefits.19 For example, the China Foundation for Poverty Alleviation and China Youth Development Foundation have realized independence and socially-based operation in areas including personnel, finance, fundraising, and program implementation.

3.1.2.2

Non-public Foundations

Early on, the number of non-public foundations in China was very small, a dearth mainly caused by three restrictions. One was the low development level of China’s economy during that period, with both individuals and enterprises having very limited financial resources. Another was the weak charity consciousness of both enterprises and individuals. The third was inadequate government support for non-public foundations.20 However, the introduction of the “Regulation on Foundation Administration” in 2004 marked the non-public foundations’ “permit” to enter the charity market and in recent years their growth has been very rapid. In June 2005, the Heungkong Charitable Foundation, the first national non-public foundation registered with PRC Ministry of Civil Affairs, started its operations with initial fund of RMB 50 million.21 According to the China Foundation Center Network, there were 1098 non-public charity foundations in China at the end of 2010. This was the first time that the number of non-public foundations had exceeded the number of public charitable 19

Xu (2010: 117). Ma (2004: 40). 21 Zhang (2006: 14). 20

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foundations, which there were 1077 of at the time. In 2011, China’s non-public foundations made their first joint donation to beneficiaries abroad after Japan was slammed by a magnitude 9.0 earthquake and massive tsunami. The China Non-Public Foundation Development Forum launched a joint initiative to support disaster relief. Eleven non-public Chinese foundations donated RMB 1.42 million for constructing “environment-friendly collective restorative housing” in the areas hit by the disaster and supporting the “Citizens’ Disaster Rescue Center” in carrying out disaster relief activities. On the whole, non-public foundations registered with regional departments of civil affairs have grown faster than those registered with the national Ministry of Civil Affairs, particularly in Jiangsu, Beijing, Guangdong, and Fujian. In Beijing, for example, 2005 was the first year that more than 10 non-public foundations registered with the municipal Department of Civil Affairs. Five years later, the corresponding number was 33, equal to almost total number of public foundations registered in the city.22 The main reason for the rapid growth of regional non-public foundations is that the registration standard required by the national Ministry of Civil Affairs is higher than that required by regional civil affairs departments.23 Non-public foundations are classified into four main types. The first type is company-like foundations funded by corporations, which operate by employing specialists in running philanthropic organizations. A typical foundation of this type is Narada Foundation, a national non-public foundation established in May, 2007, with approval of Ministry of Civil Affairs, which serves as its relevant administrative agency. It had RMB 100 million in initial capital from the Shanghai Narada Group Co., Ltd. It provides funds to other non-governmental organizations through project bidding to support the education of the children from families of migrant workers, voluntary services for psychological care, innovative work for public benefit, and construction of non-governmental and non-profit “new citizen schools.” The second type is university foundations. As the non-government sector has steadily paid more attention to education, university foundations have received more social donations every year. A typical example of this type is the Zhejiang University Education Foundation. The third type is corporate foundations. For example, the Bright China Foundation in Beijing, established by funds mainly given by Bright China Holding Co., Ltd., which provides funds for “Bright China” public welfare enterprise training programs, education, care for orphans, prevention and cure of diseases, poverty alleviation and disaster relief.24 The fourth type is those foundations set up by individuals, for example, the Feng Jicai Folk Culture Foundation and Mei Lanfang Art Foundation.25 Currently, most non-public foundations are established by individuals and private businesses, while there are fewer SOE foundations and university foundations. After China’s introduction of the “Regulations on the Administration of Foundations” in 2004, tremendous changes have taken place in the social backgrounds and 22

Liu (2012). Sun and Liu (2011: 20). 24 Xu (2006: 20). 25 Narada Foundation (2012). 23

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institutional environment in the country. On the one hand, thanks to rapid economic growth for over thirty years after China began to pursue the policy of reform and opening to the outside world, the non-governmental sectors have accumulated large quantities of material wealth. This has constituted the fundamental material basis for the flourishing of non-public foundations in China. Various ownership elements coexist, the private economy thrives vigorously, and the donations given by private enterprises and the rich have become the main source of funds to the non-public foundations. On the other hand, a radical change in China’s social structure from a highly homogeneous society to an increasingly heterogeneous society has taken place. This has caused considerable economic imbalances between urban and the rural areas and between different regions, with a result of yet more serious inequalities. In spite of the primary and the secondary distribution of national income, the gap between rich and the poor in the various social strata is still too large, which calls urgently for the tertiary distribution through the socializing mode so as to narrow substantially the gap which has kept widening and satisfy the need of the society. Additionally, China’s emerging entrepreneurs have begun to pay more attention to their social responsibility and to returning their wealth to society after completing to an extent their accumulation of wealth. Many of them have given money and founded their own foundations and engaged in charitable activities according to their own philanthropic preferences or ideals. In short, the rapid growth of non-public foundations in China after 2004 has much to do with the diversification of the national economic structure, changes in social structure, and increased consciousness on the part of entrepreneurs. Since 2009, the yearly growth rate of the total income of China’s non-public foundations has surpassed that of its public foundations (see Table 3.6), though the total income and expenditures of public foundations still outweighed those of the non-public ones up to 2012. Though there has been an explosive growth in both the number and capabilities of charitable foundations in China, there is still a clearly imbalanced ladder-like distribution in different regions. The number and scale of the charitable foundations in the east is far greater than those in the west and, in particular, the number Table 3.6 Yearly total income and growth rate of foundations Unit: 100 million Type

Public foundations

Year

Yearly total income

Growth rate (%)

Non-public foundations

2008

169

–

46

–

2009

124

−27

65

40

2010

179

44

102

58

2011

159.67

−10

100.54

−1.4

2012

180

–

–

–

Yearly total income

Growth rate (%)

Source China Foundation Center Network. “A Survey of Public Foundations of China” ( (2012/06/29)

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and capabilities of charitable foundations in Beijing, Tianjin, Jiangsu, and Shanghai lead the country.26 The western regions are a little above than the central regions. Within the west, the scale and quantity of charitable foundations in Qinghai, Xinjiang, Gansu, and Sichuan are greater than those in such more central southern provinces as Guangxi, Yunnan, and Guizhou. Such an imbalanced pattern in the development of charitable foundations intensifies the diversification of the mechanism for operating charities, for the stronger the capability of a foundation is, the better its operating mechanism meets the requirements for a non-profit organization, while the operating mechanism of a foundation weaker in capability is more subject to habitual influence of government.

3.2 Organizational Operation Mechanisms of Charitable Foundations The “Regulations on the Administration of Foundations” introduced in 2004 mark the official inception of modern foundations in China. The Fourth Plenum of 16th Congress of CPC held in the same year was emphatic that “efforts should be made to improve the social security system incorporating sound social insurance, social assistance, social welfare, and philanthropy,” the first time the definite term “philanthropy” appeared in an important party document. The Fifth Plenum of 16th Congress of CPC made the requirement clear in more definite terms as “supporting social assistance activities including philanthropy, donation, and mutual aid.” In March, 2005, the State Council for the first time wrote “support the development of charities” in its work report to the National People Congress of China. In its 2006 work report, it reiterated “make more efforts to promote the development of social welfare and charitable undertakings.” The Third Plenum of 18th Congress of CPC passed the “Decision of the Central Committee of the CPC on Some Major Issues Concerning Comprehensively Deepening the Reform,” which put forward that more efforts should be made to innovate social governance, activate the vitality of social organizations, and develop philanthropy by making full use of non-governmental forces. Thus came a new opportunity for the growth of charitable foundations. As proven by experience, the operating mechanisms of charitable foundations are closely related to a country’s social system and government policies. As a result of promotion by current policies and institutional reform, the operations of charitable foundations have been increasingly fruitful and mature, with various specific modes emerging. As philanthropy is a way of allocating resources, obtaining and circulating resources serves as its lifeline. Therefore, whether its mechanism of raising funds is well grounded and effective determines directly if an organization can survive; whether or not its mechanism of transferring charitable funds is rational and effective directly impacts whether it can gain credibility and have sustainable development. In the following section, 26

Wang and Jia (2002: 30–31).

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107

the organizational operation mechanism of a charitable foundation in China will be discussed with regards to the raising and circulating funds.

3.2.1 Features of the Fundraising Mechanism The survival and development of charitable foundations cannot be separated from economic resources, which directly determine the breadth and depth of their scope of operations. In particular, public foundations are more dependent on external economic resources, so access to sufficient, stable, and sustainable economic resources is the first task their organizational operations aim to fulfill. There are multiple sources of financing, of which financial support from the government, income transfers from the welfare lottery, social donations, operating income, and increases in the value of their funds are the most important. On the whole, the income from charitable donations in China has continued increasing, the channels for raising charitable funds have been expanding, modes of raising funds are more and more diversified, and more attention is being paid to the performance of the fundraising activities. The mechanism for raising funds has shifted from administrative dominance to pluralism and market dominance. In this process, charitable foundations more and more exist according to principles of rationality, with various fundraising mechanisms coexisting.

3.2.1.1

The Large-Donation Mechanism Featuring Foundation-Oriented Multi-actor Cooperation

Generally, the fundraising activities carried out by China’s charitable organizations are characterized by their seeking broad and stable support from all sectors of the society through active cooperation with the government, enterprises, other social organizations and individuals. It is also defined by coordinating and pooling various efforts in a joint attempt to develop and use charitable resources. Currently, the mode of attracting foundation-oriented large donations is widely adopted by charitable organizations. In this regard, there are two forms of funds in a foundation, one of which is set up by enterprises and the other by individuals. Of these two forms, the former is dominant at present. In the U.S., if a single donation accounts for 2% or more of the total funds raised by a foundation, it is defined as a large donation. For example, the China Youth Development Foundation raised RMB 267 million in total funds in 2010, so based on the 2% threshold, a single donation of 5 million or more was a large one. The large donations it received that year were generally given by legal persons. In 2010, the Chinese Foundation for Poverty Alleviation accepted two large donations, one of which was the RMB 200 million given by the father-son duo of Cao Dewang and Cao Hui for the drought-stricken southwest of China, with the other being the RMB 137 million given by the JDB Group. These donations accounted for 37 and 25% respectively of the total funds the foundation raised that

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year, 62% of the total when taken together.27 There are three main fundraising modes available to foundations: original funds, program funds, and named funds given from the increased value of the principal. When a foundation moves to establish itself it focuses on some enterprises that perform well economically as targets for fundraising, promising to bestow honors on them in return. Depending on the type of organization, the government will also give some financial support as a starting fund for charitable organizations. From this, a new foundation can get its initial capital or original fund. In the case of program funds, a foundation can solicit funds from some enterprises and the society in the name of a specific charitable program, so as to get the funds to carry out the program. Such a funding source can be named for a separate program, and different sources can also be gathered for a single program. These funds can be given as one-time donations or yearly installments. For named funds given from the increased value of the principal, with a specific charitable program as the platform, a charitable foundation can sign an agreement with an enterprise to donate a set amount. The donation will not necessarily be made all at once, investment of the funds will be operated by the enterprise and the earnings from it will be given to the foundation for supporting a specific charitable program.28 Concentrated large-scale fundraising activities that rely on foundations and integrate major forces can enhance the clustering effect of resources and establish a stable long-term fundraising mechanism to maximize the benefits of charitable fund-raising. In essence, it is a quasi-marketing strategy for raising funds, which has been come about partly due to some inspiration from fundraising experience in other countries and partly as a result of correct choices based on China’s national conditions. It has promoted the continued increase in total charitable funds and at the same time brought some challenges to the sustainable development of the charitable fundraising mechanism. It is one of the hallmarks of government-supported charitable organizations that the government funding constitutes the original fund, a hallmark that differentiates them significantly from other charitable organizations. Particularly during the early period for a public charitable foundation (e.g. China Charity Federation or China Red Cross Foundation) when funds were scarce, fiscal appropriations no doubt provided a major development boost. For example, in 1996 when China Red Cross Foundation was incorporated, the government granted it RMB 50 million in start-up capital from fiscal appropriations.29 When the Jinan Charity Federation of Shandong province, was set up, the Jinan Municipal CPC Committee and Jinan Municipal Government offered it RMB 5 million in funds, which solved its problems with its office space, staffing and other issues.30 The Jinjiang Municipal Government allocated RMB 10 million in special funding as start-up capital to establish the Jinjiang Charity Federation of Fujian Province.31 27

Xu et al. (2011a). Wu et al. (2006). 29 Wang (2007). 30 Du and Gao (2006: 3). 31 Yang and Ge (2007: 30). 28

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In contrast to public foundations, most non-public foundations can only get their initial capital with the support of enterprises or individuals. For example, after the “Regulations on the Administration of Foundations” was introduced in 2004, the Heung Kong Group gave a contribution of RMB 50 million for the establishment of Heung Kong Charitable Foundation one year later, and in 2006 Wang Zhentao gave RMB 20 million to set up the Wang Zhentao Charitable Foundation, the first foundation named after an individual in China. Considering the difference between public and non-public foundations engendered by the government grants, the “Regulations on the Administration of Foundations” stipulates definitely that the initial capital to incorporate a public foundation shall not be less than RMB 4 million, while for a non-public foundation the corresponding standard is only RMB 2 million. Current policies and the design of the system have greatly promoted the growth of nonpublic foundations. By the end of 2008, the total initial capital of the 39 non-public foundations registered with Ministry of Civil Affairs amounted to RMB 1.52 billion, averaging over RMB 39.05 million. This was over two times the average of the public foundations established during the same time period.32 According to a survey by the Office of China Charity Ranking, almost all public foundations receive at least 70% of their funds from large donations by enterprises. Due to the low management cost and large sums involved, public foundations prefer to pursue the “large client” strategy and make more of an effort to solicit charitable funds from enterprises and social organizations. The survey also finds that most enterprises or entrepreneurs who gave large donations chose to give them to public foundations, as they tended to favor their governmental background and investment in their infrastructure. Usually, a government background will contribute to the enterprises’ construction of their relationship with the government and when enterprises make investment in the infrastructure facilities of the public foundations, they can be entitled to have the facilities named after them, thus enhancing their reputation and popularity. Together, the government backdrop, enterprises’ preferences, and the foundations’ strategy of “leaning on a moneybag” constitute an “iron triangle,” which has continued strengthening the infrastructure orientation of donated funds and their flows within the system.33 While increasing the total amount of charitable funds donated, the triangle also causes major problem with the flow of private donations back to the private sector. At present, charitable organizations are keenly promoting raising named funds from the increased value of the principal, an option that offers more possible choices to an enterprise as a donor. The enterprise can give the principal and the increased value thereof at the same time or, keep the principal and give only the increase in value, which is less of a burden and has less of an impact on its everyday business operations. At the same time, the charitable organization can get large quantities of donations, ensuring a sustainable source of income. This means of donation is also conducive to a charitable organization’s maintaining and increasing the value of its funds. 32 33

Ai (2014). Xu (2013).

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For example, the method of the Changzhou Charity Federation of Jiangsu Province is that the principal donated by an enterprise is kept within the enterprise for legal operations, and the enterprise gives the interest of the principal, i.e. 7%, to the federation. For key enterprises, particularly those which have given over RMB 10 million, the federation will, according to their intentions, name the funds after them, so that the enterprises can easily know where the funds have gone. Though in the contract an enterprise signs with a charitable organization, it may be stated clearly that changing the legal person of the enterprise will not affect the validity of the contract, when the change actually occurs, or when the enterprise is merged, acquired, or bankrupt, the promised donation will not necessarily be carried out smoothly.

3.2.1.2

The Mode Featuring Administrative Dominance in Combination with Market Forces

In the development of charitable organizations in China, a new phenomenon has emerged: when the administrative role in the development of a charitable organization is strengthened, its market oriented operations are strengthened at the same time.34 This “administrative paradox” has complicated the operations of charitable organizations in China’s period of social transformation. Since the birth of China’s first charitable organizations, they have been under the leadership of the government and closely related to it, but not in the form of mature cooperation. In the early stage, the organizational structures of China’s charitable organizations were generally simple and their organizational function was basically equivalent to that of a governmental agencies. The Chinese government’s management of charitable foundations, public foundations in particular, has been like its administration of government departments. Public foundations incorporated in the early stage as auxiliary to the CPC and government departments acquired the right to legally solicit donations due to their governmental background and the institutional influence. Through government influence, they gained support from the society at large and had access to stable sources of income. Across the country, an overwhelming majority of the charity federations have been set up with the support of the civil affairs departments at various administrative levels. In many regions, the personnel, office spaces, sources of funds, services and activities of the charity federations are arranged by governmental departments. In some regions, despite their different official nameplates, charity federations share the same personnel with the relevant civil affairs department, or even are “offices” officially set up within the department.35 Currently, the charitable funds run by the government include various public foundations, which still fulfill the function entrusted directly to them by higher level governmental departments. The funds of public charitable foundations come mainly from fiscal resources or donations made by certain enterprises responding to the call of government leaders. So, this is a mode dominated by administrative power. This is proven by a case study 34 35

Zhao (2013: 5). Liu (2007: 14).

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of a province level organization for the aged in Shaanxi Province. According to the study, its main source of income when it was first set up was the funds provincial leaders raised personally from various departments and enterprises. Specifically, the initial fund of RMB 380,000 was given by banks and insurance companies of that province. In June 1988, it reached RMB 1 million in funds and in September 1996, it surpassed RMB 10 million.36 From the perspective of a charitable foundation, the mode dominated by administrative power over access to resources represents a rational subsistence strategy chosen under the constraint of the present institution. Under the early dual management system, it was an effective means for an organization to gain administrative legality and resources. If a government leader or a retired senior official who was closely related to the government led a charitable foundation, then the organization would gain matter-of-course administrative legality. If he participated personally in the organization’s activities and decision-making processes, his administrative function and power would bring important resources within the institution for the development of the charitable foundation.37 Meanwhile, the government controlled the appointment and removal of the organization’s personnel, thus ensuring the consistency of its actual operations with the government’s intentions. Thus, in the early period after a charitable foundation was set up, it could make use of the importance of an administrator as a symbol to create favorable conditions for its carrying out activities. To a charitable foundation, an administrator’s participation in its symbolic activities such as rituals and ceremonies could not only enhance its prestige, popularity, and legality, but also elevate its capability in raising funds and the efficiency of its activities. The state made tax-exemption policies for solicitation and operation of charitable funds available in discriminatory fashion to different types of charitable organizations. This indicates the government’s financial preference towards the administratively-dominated charitable foundations. In the interaction between the government and charitable foundations, the government could play a role in integrating resources, but at the expense of administrative interference and the realization of self-interest, leading to serious costs for this mode, ultimately to the detriment of the social self-mediation function. One consequence was government interference hurting the autonomy of a NPO, and the work a NPO did for government departments could not be connected with its remuneration or financial support, thus causing a loss of the impetus for enhancing work efficiency on the part of the NPO.38 With the flourishing development of China’s economy, private enterprises and the middle class have continued to expand and are playing an increasingly salient role in the fundraising market for charitable organizations. The administrative means of raising charitable funds has been much less effective for these groups. Charitable organizations have to make access to their charity resources more by innovating fundraising means and improving services. Additionally, due to financial opacity,

36

Ding (2005: 156–157). He (2010: 50). 38 Tao (2005: 240). 37

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administrative operations themselves may incur a “credibility crisis,” and the administrative mode of raising funds may cause resistance and antipathy on the part of the donors, threatening the sustainable development of philanthropy in the long run. These negative factors have also forced charitable organizations to find a new way out through implementing reforms. For example, since 2001, some charitable foundations, including the China Foundation for Poverty Alleviation, China Red Cross Foundation, China Youth Development Foundation, Shanghai Charitable Foundation, and Zhejiang Charity Federation, which all have taken the lead in reform, have begun to downplay and eliminate the signs of administrative operations and transformed their habitual operating modes towards the market Beijing Normal University China Philanthropy Research Center (2012: 68–69). In May, 2014, when the Yangzhou Charity Federation conducted the “One Day Charity” activity, the right to name the Slender West Lake Tunnel was auctioned for RMB 10.2 million, and activities such as televised mobilization speeches, donation mobilization meetings, public squarebased centralized donations, and soliciting charitable funds from individuals and employees in governmental departments, enterprises, and public institutions, which had been habitually practiced in the past, were all cancelled. That event not only set a precedent for charity auctions of the right to name important municipal engineering projects in Yangzhou, but also represented an innovation of the charity federation in transforming its fundraising means to expand and strengthen its philanthropy.39 A charitable organization’s marketized operations are shown through its programoriented efforts to raise funds and its introduction and promotion of charitable programs according to its marketing concepts. The operation of a project is mainly based on investigation into the project. The organization designs the plan for the charity program in accordance with the charity needs of enterprises and individuals and, by such marketing means as mass media and on-site publicity, it strives to win donors’ acceptance. Then both sides sign a donation contract which specifies their mutual rights and obligations. In this process, a charity program has greater odds of fundraising success if it has a more definite orientation. Such marketized operation is also embodied in the social mobilization for fundraising activities, which particularly emphasizes efforts to tap the potential individual donors’ resources and to build channels for it so that the practice can become regular and usual. For example, making use of celebrity appeal to solicit charitable funds from wealthy people, the “one yuan donation” and “monthly donation” conducted by the charity federation system since 2008 to promote grassroots charity activities, and the network platform-based monthly donation program to facilitate netizens’ donations introduced by the Tencent Charitable Foundation. All these efforts have contributed to the formation of a modern charitable donation pattern in China. This pattern is characterized by “individual donations as primary, bequests and foundation donations as secondary, and enterprise donations as supplementary.” Differing from the passive transformation of public foundations, non-public foundations started with market-oriented mechanisms for raising funds. These funds

39

Pan and Jiang (2014).

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CPC, government, and PLA agencies, public institutions and their members, SOEs, provincial enterprises and their employees

Raising funds through organization leaders’ personal charm Administrative orders Administrative Selective tax exemption policies pursued by the government

Public foundations

Program planning and publicity Non-public foundations

Market power Socialized donation channels

Preserving and increasing value of funds

Non-government enterprises; wealthy people; ordinary people

Fig. 3.1 Charitable foundations’ modes of raising funds

mainly come from individuals, initial capital invested by relevant enterprises, and the preserved and increased value of their funds through market operations (Fig. 3.1).

3.2.1.3

Limited Business Income and Increased Value of Funds

Business income refers to the benefits a non-governmental organization gets from its investments or business operations, including income from both short term and long term investments and income from investments in industry, stocks, bonds and insurance. Business income should not be more than 50% of a non-profit’s income, while the proportion of the business income of an NPO entity is higher than that of an NPO member.40 At present, generally, there are two ways available to a charitable foundation for preserving and increasing the value of its funds. One is to entrust its funds completely to a professional investment institution for their operations, and the other, to form its own investment team to operate them directly. Both ways are subject to decisions made by the board of directors.41 The income from program fund investments brings increases of the fund value, yet the investment orientation is subject to some restrictions. As required by “Interim Provisions on the Formation of Special Fund Management Institutions by Social Groups” issued by the Ministry of Civil Affairs of China, the special fund of a social group should be used for its special purpose and shall not be used for any other form of investment. The social group can deposit it in financial institutions and charge interest, or spend it buying 40 41

Wang and Liu (2004: 91). Xu (2009).

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national bonds, but shall not use it to buy enterprise bonds, stocks, and investment funds.42 Under this institutional arrangement, the business income of a foundation and the preserved and increased value of its funds are very limited, in fact insufficient to support its normal operations. For public foundations, particularly those officially run NGOs, the means of investment available to them are fewer as a result of their background. The annual expenditure of a non-public foundation for the public good as stipulated by its Articles of Association shall not be less than 8% of its fund balance of the previous year, and when it cannot solicit charitable funds from society publicly, increases in the value of its funds mainly depend on investments and financing, which means that available investment channels are very limited. If a non-public foundation adopts only fixed term deposits or buying national bonds, which both are of “low risk and low benefit”, it is hard for it to reach the annual rate of return of 8%. The inevitable result is that the initial capital of the foundation continues decreasing and there is even danger that it can not continue to stand by itself, unless the founder transfuses it with funds in order to maintain its accounts. For example, the founder of the Heung Kong Charitable Foundation has injected funds into it each year.43 Under the current institutional conditions, it is barely possible for a non-public foundation to gain sustainable development only by depending on the increased value of their initial capital. In 2008, the situation for China’s charitable foundations preserving and increasing the value of their funds was faced with serious challenge, because of, on one hand, the impact of the international financial crisis, and on the other, the rather limited business income and means available to them for increasing the value of their funds. In that year, most indigenous foundations in China saw negative growth in their income from investments and the shrinkage of their assets by a large margin. For example, the Narada Foundation and the Baosteel Foundation, both saw negative growth in their investment incomes. Because of the low bank interest rate, some foundations attempt to enter the capital market. The basic operating model for funds used by overseas foundations is modeled on the cycle of a reasonable investment, return from investment, a part of the return being used for charity, and the remaining part and the principal used for continued investment.44 Among China’s charitable foundations, there is no lack of examples of those which have succeeded in getting business income through the market. One of them is Jinjiang Charity Federation in Jinjiang City, Fujian Province, which has been remarkably successful in its business operations. In 2003, it obtained RMB1.64 million from the charity evening “Cherishing Love in Our Hands” held on Jinjiang’s charity day, and RMB 5.1 million in annual income from a contract fee paid by the operator of a funeral parlor in the city. Additionally, as the proposed elderly apartments are put into operation, and the cemetery area operates normally, the foundation will have more funds.45 The charity federation of H City has spent RMB 40 million of its charitable funds on investment since 2010, with an annual net 42

Qi (2001: 264). Beijing Normal University China Philanthropy Research Center (2012: 39). 44 Zhao (2013: 146). 45 Yang and Ge (2007: 30). 43

3 Donation Intermediaries and Their Behavioral Characteristics

Public foundation

Direct assistance

Indirect assistance

Non-Public foundation Calling for bidding for the program

Beneficiary

Charity program

Charitable foundation

115

Other charitable organization or non-governmental organization which wins the bid

Fig. 3.2 Mechanisms of charitable foundations for providing assistance

income of RMB 4 million.46 The assets of a charitable foundation can be classified and managed based on the principles of legality, security, and effectiveness. It should be possible to invest the initial capital and other legitimate income (for example, from membership fees and service charges) in the capital markets, so as to earn more investment income, while investing special funds donated from society and the government should not be allowed. However, in practice, some foundations make use of the time difference between the receipt and disbursement of donated funds to earn some investment income. This practice, in a short run, does help alleviate the financial strain a foundation faces, yet is harmful to its future long run growth. We should innovate investment conceptions, reduce the dependence of charitable organizations on fundraising, and encourage financial institutions to create new financial products and services which suit the features and needs of charities, so that financial capital will more productively support their development.

3.2.2 Features of Expenditure Charitable assistance and service are what the charity work aims for. Charitable foundations mainly provide assistance and service through charity programs. In China, after many years of development, foundations have become more mature in the design and operation of their charity programs, having introduced some highly characteristic and widely influential branding programs. The assistance providing mechanisms of charitable foundations can be described as in Fig. 3.2. One is foundations directly operating programs for providing direct charitable assistance to the recipients or beneficiaries. The other is that charitable foundations invite bidding for charitable 46

Zhao (2013: 146).

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projects, and charity projects are run by other charitable service organizations or non-governmental organizations, as to provide assistance to beneficiaries. The flow of the transferred expenditures of charitable foundations manifests the following features: the spending mechanism shifting from domination by administrative power to domination by social need; the ordinary mechanism with education as the priority and the emergency mechanism with disaster relief as the priority; the assistance-oriented mechanism with program operations as the vectors.

3.2.2.1

The Spending Mechanism Shifting from Dominance by Administrative Power to Dominance by Social Need

The relationship between the early charitable organizations and the government and the administration nature of the charitable foundation system led to the flow of charitable funds being administratively dominated, with the competent authorities determining the main destination of charitable funds. The public foundations’ strategy for their design and introduction of charity programs was to keep pace with the government and administrators. For example, in 2004, when the China Youth Development Foundation introduced the “Education Assistance Program of the Hope Project,” its background was the concern expressed by government leaders about the education of the children from migrant workers’ families. In fact, up to the present, the influential charity programs operated and carried out by foundations in China are, to a great extent, attributable to the government’s efforts to promote them. This administrative dominance in the work of charitable foundations was caused by high dependence on the government for access to charitable resources. At the same time, they could obtain trust from the society through government’s arrangements, which would bring them more power and space to act. Also, through administrative power they could get accurate information, a valuable resource for charitable foundations, at a reduced cost. Information meant much to charitable organizations. Since early foundations lacked an institutionalized mechanism for the appraisal of charity programs, access to charity information was particularly important for them, as the accuracy and effectiveness of the information could well determine the effect of carrying out a charity program. Additionally, since the scope of charitable assistance was wide-ranging, grasping the relevant information on the progress of a charity program, would mean that a foundation would have to pay a large cost in human and physical resources. Depending on the civil affairs departments for information reduced the cost greatly.47 During the early period of the development of charitable foundations in China, owing to the limitations from their own operational capabilities and costs, they tended to adopt a mechanism for spending funds that coincided significantly with the operating requirements of the relevant agencies in charge. With the constant improvement of the mechanism for operating public foundations and the sharp rise of non-public foundations, the administratively dominated mechanism for spending funds is undergoing a shift towards domination by social 47

He (2010: 50).

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need. The non-public foundations have independent economic and social resources and they are able to carry out their activities free from administrative power and dependence on the government. Their charity programs are more autonomous and oriented toward the grassroots and no longer only limited to those areas of the people’s livelihood that are more likely to attract the government’s attention like poverty alleviation and disaster relief. They have given more attention to some special groups of people, domains, and organizations for the public good, for example, “porcelain doll” babies and motor neuron disease patients. Besides, they have made great efforts for capacity development programs to train specialized personnel for charitable organizations. These programs, for example, the “Ginkgo Fellow Program” and “Bright Way Program” launched by the Narada Foundation, have kept growing. All these indicate that the mechanism for spending charitable funds has been shifting from mainly meeting administrative needs towards an orientation dominated by social needs.

3.2.2.2

The Ordinary Mechanism with Education as the Priority and the Emergency Mechanism with Disaster Relief as the Priority

In accordance with society’s need for charitable resources, the flow of charitable funds is diversifying. According to the “Annual Report on the Analysis of the Charitable Donations in China (2007)” issued jointly by the Charitable Undertaking Coordination Office of the Ministry of Civil Affairs and the China Charity and Donation Information Center, charitable funds in China went mainly to twelve domains in 2007, of which, the top three were education assistance, poverty relief, and disaster relief. These three made up 58% of all funds disbursed.48 This indicates that philanthropy in China is mainly oriented towards social assistance and that basic education in the impoverished areas is one of the key domains. In 2008, disaster relief, education assistance, and poverty relief were still the top three in charitable funds received. Of the daily total of RMB 30.97 billion in donations, 47% was spent on education, 18% on Olympic events and sports development, 22% in the overall field of poverty alleviation, and 6% in developing cultural and artistic undertakings, as well as medical and health services. Analyzing the funds invested into charitable services for the sample of projects from 2009 to 2011, the sum for disaster relief was the largest, accounting for 32% of the total funds spent. Next were education, health and medical care, and support for disadvantaged groups, taking up 28%, 17%, and 15% respectively. In 2011, the total assets of all foundations of China were RMB 60.42 billion, with an annual income of RMB 33.7 billion from donations and annual charitable spending of RMB 25.6 billion.49 Total public welfare expenditures accounted for 75.96% 48

Charitable Undertaking Coordination Office of Ministry of Civil Affairs and China Charity & Donation Information Center (2008). 49 Zhang (2012).

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of donation income. Meanwhile, foundation program operations were more mature and making more social contributions. China’s foundations conducted public welfare programs and activities in various domains such as education, social welfare, disaster relief, health and medical care, environment protection, law, academic studies, and culture and sports, most of which relate to the people’s livelihood. Charity expenditure in the domains of disaster relief, social welfare, education, and medical care accounted for over 70% of the total. The beneficiaries were impoverished mothers, children, students, the unemployed, the handicapped, and disease patients, among others. According to a special investigation, the proportion of charity expenditure to total incomes for 113 public welfare organizations in 2009 and 2010 reached as high as 82.57% and 98.01%, respectively. As shown by the sample data, the percentage of the charitable funds given for the four categories of direct cash assistance, capital projects, capability building, and advocacy accounted for 89.4, 4.9, 4.7, and 1.0% of all expenditure. This shows that on the one hand, China’s average annual expenditure of charity resources is about 85%, and, on the other hand, the use of the charitable funds was concentrated mainly on their direct transfer, that is, giving funds donated from society directly to beneficiaries. Too little was spent on teaching “how to fish,” and cultivating capability, either of which would truly display the professional purpose of charity services. Looking at recipients of charitable services, it can be seen that there are differences in society and industry’s degree of interest. Our analysis of the charity program data in 2011 reveals that there are discrepancies in resource allocation in all areas, with young people attracting the greatest share of resources at 16%. The proportion for children was 15% and for the handicapped, peasants, the elderly, and women, 13%, 12%, 11%, and 9% respectively. Under the ordinary mechanism, education currently is the largest domain for charitable donations. This shows that the most fundamental concern of China’s charities lies in the sustainable development of human beings. It is fair to say that China’s charities have correctly grasped the direction of national development and played an active role in promoting national and individual progress.50 The reason why there are fewer charity programs for culture and sports, environmental protection, and other areas is mainly because it takes a long period of accumulation to manifest the effect of charitable investments in these areas. Also, since it is not urgently necessary to make charitable investments to these domains, they do not arouse much attention from society at large. When the country is hit by natural disasters or other emergencies, disaster relief will become the area that calls for urgent charitable assistance, showing that the rapid response mechanism for charity aid in China is relatively sound. Charitable foundations are not oriented towards pursuit of profit and power, but rather towards the society. Their ultimate aim is to serve society by raising resources to directly provide quasi-public goods, one which the general public and social groups will acknowledge, support, and participate in. Then, it goes without saying that social 50

Beijing Normal University China Philanthropy Research Center (2012: 59).

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assistance is the main job of a charitable organization. Furthermore, its performance of social assistance will earn public trust and gain social legitimacy, which constitute the most important resources for its organizational operation and development.

3.2.2.3

The Assistance-Oriented Mechanism with Program Operations as the Vectors

The vector of the aid that a charitable foundation gives to beneficiaries is the programbased operation. Different types of charitable foundations carry out charity programs in different domains. Joel J. Orosz classifies the means used by American charitable foundations in selecting programs to fund into four types. The first is the passive type. These foundations respond to even requests that don’t have agreed requirements and their motto is to provide funding for those who come to our door. The second is active foundations, who have their prioritized programs with definite targets and send their officials out to look for the best recipients. The third type is prescriptive foundations, which define their interests and orientation clearly and require their program officials to define their domains of activity narrowly and then focus on the domain they are most interested in. The fourth type is compulsory foundations, which work in strict accordance with their agenda. They choose their own trustees, accept formal plans submitted via the trustees, and they accept almost none of the programs which do not state their requirements in definite terms.51 Generally, charitable foundations abroad operate their programs according to rigorous standards. By contrast, the assistance mechanisms of charitable foundations in China are looser and more arbitrary. However, the method of assistance through programs as vectors has become increasingly acceptable to China’s charitable foundations. China Charity Federation and local charity federations, which are comprehensive in nature, have carried out various types of charity programs. By contrast, the Red Cross Society system is specially oriented towards disaster relief and medical treatment. The China Youth Development Foundation focuses on funding programs concerned with youth education and development, of which the “Hope Project” and “Dream Fulfilling Action” are widely influential charity programs. The China Children and Teenagers Foundation is oriented towards children and has conducted some famous programs such as “SOS Children Village” and “Spring Buds Program.” The China Welfare Fund for the Handicapped concentrates on charity programs for the handicapped people’s rehabilitation, education, employment, and culture. The China Foundation for Poverty Alleviation is devoted to carrying out poverty alleviation programs. Additionally, the China Women’s Development Foundation’s “Water Cellar for Mothers” and China Population Welfare Foundation’s “Happiness Project” both are famous public welfare brands, and Song Ching Ling Foundation is an outstanding contributor to China’s international exchanges, efforts for national unification, poverty alleviation and education assistance. 51

Orosz (2000).

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Besides the particularity with a program itself, different charitable foundations also display particularity in operating their programs and assisting their targeted groups of beneficiaries. As central fundraising organizations at the same administrative level as the Ministry of Civil Affairs of China, the Red Cross Society of China and China Charity Federation are independent in their operations. Such independence is more about the independent operations of their funds, as they manage themselves the funds they have raised, and, when using their funds for disaster relief, they will first coordinate with the Ministry of Civil Affairs and then have the funds sent to disaster stricken areas. The two foundations can introduce assistance programs for “receiving at set points” in cooperation with the disaster-hit areas, by which funds raised for special programs are transmitted directly to their targets. Funds can be donated directly to designated recipients according to the intention of the donors, and, if no such intention is expressed specifically, the funds are given to recipients chosen according to standards formulated on the basis of specific principles, orientations, and programs. The purpose of China Foundation for Poverty Alleviation is to help impoverished communities and people improve their production conditions, livelihood, and health, and elevation of their capability and comprehensive quality, so that they can be in a better position to get rid of poverty, become better off, and grow in the capability of sustainable development. By program-based operations, it focuses more on fostering the recipients’ ability to develop themselves. Its programs involve “Love Parcel”, “Nest Building Action”, small-sum loans, etc. Narada Foundation, which is a non-public foundation set up by corporate funds, takes the mode of calling for bids for its programs, which aim to fund other non-governmental organizations in providing voluntary services for the education of children from migrant workers’ families, emotional care, and introduction of new public welfare programs, and to make contribution to building non-governmental and non-profit “New Citizen Schools”.52 In the wake of the May 12 earthquake hitting Sichuan in 2008, Narada Foundation provided a series of aiding programs in regard to rebuilding education facilities and other services (see Table 3.7). Charity programs are the carriers of the assistance charitable foundations provide to their recipients and also the carriers of the redistribution of social wealth. The results of carrying out the charity programs have directly to do with the effect of using social resources and the image of charitable foundations. The charitable foundations in other countries are usually keen on operating charity programs. With the growing social consciousness of charities and increasing operational capacity of foundations, China’s charitable foundations, those large scale foundations in particular, have also begun to adopt that way of offering assistance. Different charity programs conducted by various types of charitable foundations manifest different particularities. China Charity Federation, China Youth Development Foundation, and Narada Foundation are all typical foundations in successful operation of charity programs. In the following section, a case analysis will be made of a representative charity federation and by analyzing its organizational mechanism, managing mechanism, fundraising 52

Narada Foundation (2007).

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Table 3.7 Programs funded by Narada Foundation after May 12 earthquake striking Sichuan in 2008 Unit: yuan Program names

Total amount of fund

Given

To be given

General programs (13)

1,842,080.00

1,573,872.00

268,208.00

“Heart + core” program for post-quake psychological support

200,000.00

96,000.00

104,000.00

Post-quake ecological rebuilding center

153,200.00

137,880.00

15,320.00

“Hand in hand housing project” (Quake victims joining hands in building temporary dwellings)

88,880.00

79,992.00

8888.00

Explanation and selief

60,900.00

54,810.00

6090.00

193,760.00

174,384.00

19,376.00

Public welfare movies for disaster relief

52,540.00

47,286.00

5254.00

Post-quake rebuilding and health promotion

76,000.00

68,400.00

7600.00

Promotion of quake victims’ joining hands in building temporary dwellings

200,000.00

180,000.00

20,000.00

Pilot programs for sustainable rural rebuilding

198,000.00

178,200.00

19,800.00

Sunshine poverty alleviation training of skills for employment and business start-up

197,000.00

177,300.00

19,700.00

Information platform for non-governmental organizations joining in post-quake rebuilding

100,000.00

90,000.00

10,000.00

Service for children and teenagers and their families in Gaogeng township

168,900.00

152,010.00

16,890.00

Service platform for happy and harmonious home and post-quake community rebuilding

152,900.00

137,610.00

15,290.00

Training of skills for restoring post-quake production and ecology and preserving Qiang-culture

Source Narada Foundaiton Office of Programs for Funding Rebuilding after May 12 Earthquake, “Narada Foundaiton Work Report on Programs Funding Rebuilding after May 12 Earthquake”, (2013/12/18)

mechanism, and resource distribution and use mechanism, the operational features of China’s intermediary charitable organizations will be probed.

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3.3 A Case Analysis of the Operational Mechanism of SD Charity Federation The present study selects SD Charity Federation, a representative charitable organization in SD province, as its object and makes an analysis of it with regard to its operational mechanism. The large scale system of the charity federations in China is one of the most important charitable organizations of the country, and particularly in the early period of the philanthropic development in China, with the support from the government, the system, which showed strong governmental color, conducted many effective charity activities and social assistance programs. SD Charity Federation was established in 2003, which is under much influence of the provincial government. In spite of its short history, it has grown very fast, which has formed a network of charitable organizations with five levels, i.e. province, city, county, township, and village. In 2007, several members in the research group of this study, during their 6 month probe stay in the federation, collected data by conducting structured interviews and on-the-spot observations. 5 members of the personnel of the federation including a leader of SD Charity Federation, heads of two departments of the federation, a full-time employee, and a voluntary worker were interviewed,53 with regard to some aspects of the operational mechanism such as the organization’s management, fundraising, and allocation of resources. In addition, by using the documentary method, the researchers gathered some data relevant with the present study on the development of the federation, and its work summaries, open financial reports, materials for publicity, leaders’ speeches, etc., which had been accumulated over the years.

3.3.1 Organizational Mechanism 3.3.1.1

Nature of Organization and Description of Mission

SD Charity Federation, which was set up in 2003, is a provincial non-profit public welfare social organization, in which the “citizens who are enthusiastic about philanthropy”, legal persons, and other social organizations take part voluntarily.54 This statement in its Articles of Association makes clear its basic nature: It is incorporated by social forces voluntarily and is a non-profit organization and a non-governmental charitable organization. Its purpose is to make contribution to the society and, by collecting social resources, aid those groups of people bogged down in difficulties.

53

Some alphabetic letters are used to stand for the interviewees (initial letter) and their relevant information (second letter): A: the federation leader; B: heads of departments; C: full-time employee; D: voluntary worker; M: male; F: female. The numeral in the third position indicates the sequence of an interviewee in the interview. 54 SD Charity Federation, “Articles of Association of SD Charity Federation”, on May 21, 2012.

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Thus it embodies such features defining a non-profit organization as public welfare orientation, independence, and voluntariness. Up to May, 2013, SD Charity Federation has 197 members, with a board of 142 directors, of whom 52 are standing directors. As an independent legal person, SD Charity Federation’s purpose is, in a display of humanitarianism, carrying forward the traditional virtues of Chinese nation, to mobilize social forces and raise charitable funds for aiding the disadvantaged groups, and develop philanthropy and promote social progress. Its main scope of business covers nine aspects: raising charitable funds; giving disaster relief; carrying out poverty alleviation; providing charitable aids; providing public welfare assistances; conducting cooperation and exchange with other charitable organizations in China and abroad; setting up and operating, with the approval by the provincial governmental department of civil affairs, entities and non-profit institutions in accordance with its purpose and business; organizing charity publicity activities; guiding member units’ work. Since 2004, SD Charity Federation has carried out five major projects and over 20 programs. The five major projects include “Love for Straitened Families Project,” which provides help to extraordinarily impoverished families; “Morning Sun Education Project,” which assists students from poor families with finishing their schooling; “Evening Sun Project,” which helps improve the conditions in nursing institutions for the elderly; “Medical Care Project,” which offers help to serious disease patients with their medical treatment and rehabilitation, and “Love for the Handicapped Project,” which gives free medical services to the handicapped people. Up to 2013, the system of charity federations of SD province raised charitable funds RMB 9.649 billion, of which RMB 1.463 billion went to SD Charity Federation. Each year, RMB 400 million of the charitable funds set up in the entire province can be used for offering assistance and the beneficiaries reach 5.5 million person-times. In its constitution, SD Charity Federation gives a clear definition of its own organizational nature in legal and social terms. However, in practice, it is also defined as a “semi-governmental organization.” AM1, a worker in the federation, said, Our federation, like China Charity Federation as well as the charity federations at the city level in China, is a social organization. All these federations are non-governmental organizations, according to law. Nonetheless, in the current national situation, the development of charities can not be separated from the support and promotion of the administrative power and the government. At present, the administrative promotion is rather strong, and, currently, without such administrative promotion, only by a non-governmental organization’s own efforts, it would be hardly possible for it to get good development…Though basically the federation is semi-governmental, I define it as an organization run by the government and aided by the people. In fact, the charitable organizations abroad are mostly ones run by the people and aided by the government, while ours are organizations run by the government and aided by the people. SD Charity Federation is administrated by the competent governmental department.

Some scholars are of the opinion that if a charitable organization positions itself as inclined to depend on the government, it will turn easily to be a spokesperson of the latter, thus blurring the demarcation between them and taking the administrative task of the latter for its own work.55 55

Chen (2003: 5).

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SD Charity Federation sees charities as part of the social security system and understands charities from the height of the state’s policies. The Fourth Plenary Session of the Sixth Central Committee of the CPC only mentioned the charity undertaking, the Fifth Plenary Session saw it as a supplement to the social security system of China, and the sixth Plenary Session has already regarded it as one of the four major components of the social security system of the country. (AM1)

As shown by a survey, SD Charity Federation has grasped accurately its own function in the society, which is a result of its keeping readjusting its understanding under the guidance of the state’s policies. Though its actual understanding of its organizational nature is deviant from, if not contradictory to, the statement of that in its constitution, the federation has a clear awareness of its social function.

3.3.1.2

Dual Property of the Organizational Structure

The birth of SD Charity Federation is closely related to the governmental departments, particularly the civil affairs department, of which organization serving as its matrix. Before the federation was set up officially, we had had a special preparation committee for its building. At that time, XYT was the vice governor in charge of the civil affairs of SD province and when the head of the politics and law department reported to him about the charity federation to be founded, he expressed he was willing to serve as its president, leading the development of the charity undertaking in the province… Our standing vice-president was YJJ, the then head of SD Province Department of Civil Affairs…. The building housing the federation now is provided by the Department of Civil Affairs, and it is not our own, but we can use it for free. Before long, we will move into the guesthouse attached to the Department of Civil Affairs. That house is open for business and we have to pay the rent for using it. Because the Department of Civil Affairs need more office space and their rooms are not enough, we have to move to the guesthouse. (AM1)

As SD Charity Federation’s personnel and office rooms are both from the civil affairs department of the province, it seems a subordinate unit of the provincial government. The head of China Charity Federation also sees the federation and the civil affairs department as “one department with two signs” and the former as an organization not endowed with independent power of appointment or removal of personnel.56 This feature is particularly manifest in the organizational structure and personnel composition of SD Charity Federation. As proven by experiences across the world, the organizational structure of an NPO should be based on a board of directors system, by which the governance of the NPO will be institutional, socialized, and democratic. SD Charity Federation has also built its system of board and set up its constitution, which clarifies its responsibilities. According to its constitution, the Congress of Members is the highest organ of power, and the term of a congress is five years; The Board of Directors is the executive body of the Congress of Members, meeting once a year; The Standing Board of Directors 56

Tian (2004: 50).

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is produced by the Board of Directors via electing and exercises power when the latter is not in session, which meets once half a year. When the Standing Board of Directors is not in session, important work is to be dealt with by President’s Office, which comprises the President, Vice-Presidents, Secretary General, and Vice Secretary Generals, whose meeting is to be hosted by the President or a Vice-President entrusted by the President. The Board of Supervisors is the supervising organ of the federation, watching the progress of its charity work. A worker in SD Charity Federation said, SD Charity Federation and the SD Charity Federation Office are two different organizations. The former is an NPO, while the latter is set up by the SD Province Organization Committee with the approval by the 73rd Meeting of Provincial Governor’s Office of the SD Province Government. The office of the federation is a public institution establishment in charge of the routine work of SD Charity Federation. (DM3)

It is clear that the organizational structure of SD Charity Federation is dual in its nature, for it appears an NPO in form but actually a governmental organization, a public institution with strong administrative color. By separation in its internal structure, the government’s stepping in the NPO becomes legal and meanwhile the non-profit form of it is maintained. The decision-making way of an organization reflects its governance mechanism and the extent of its democratic management. As indicated in the Articles of Association of SD Charity Federation, the Congress of Members—Board of Directors—Standing Board of Directors—President’s Office pattern constitutes a top-down decision-making and performing structure. However, the federation has over a hundred directors, most of whom are heads of governmental departments or of the enterprises and public institutions as its donors. Actually, to many of them, the director of the federation only means an honorary title rather than a share of the responsibility. In the early years of a public charitable foundation, though such directors gave play to their celebrity effect and advertising effect, they did not play an obvious independent decision-making function. In practice, the President of SD Charity Federation has played an important role, who is the spokesperson of the federation and the actual leader of it.57 The routine work of the organization is decided and performed by those comprising the President’s Office. Now let us have a look at their backgrounds. The President of SD Charity Federation, former Vice-Governor of the province, is now a Vice Chairman of the provincial political consultative conference. The Standing Vice-President is now the head of the provincial department of civil affairs. The other six Vice-Presidents are also leaders of the provincial government, department of civil affairs, department of finance, united front work department, as well as the provincial federation of industry and commerce. So those who actually preside over the routine work of the federation are certain senior government officials. That means they transplant the decision-making mode they employ in their 57

An important organizational feature of SD Charity Federation is the system of its president assuming all responsibility. The president of the federation is not only the spokesperson of the organization but also a key participant in the decision-making process inside the federation and a coordinator in its activities, who plays an important role in the entire federation’s operations.

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administrative work to the federation. The President’s Office Meeting will be held on some occasions and usually randomly. For making decisions on relevant issues, a relatively formal procedure for examination and approval is followed. Generally, as regards major issues, the procedure is that first the President’s Office meets and forms the decision and then the Board of Directors passes it, and the decision does not need to be submitted to the Congress of Members. (AM1) As far as its operating process goes, SD Charity Federation still basically follows the top-down procedure. Regarding specific programs, usually it is the members of the President’s Office who propose a certain program they consider feasible, which will be performed by the subordinate sections. Compared with the disperse decision-making procedure widely adopted internationally, SD Charity Federation’s decision-making procedure smacks of too much bureaucracy, causing inevitably the administrative feature characterizing the operations of the federation, a charitable organization, which should have been more flexible and elastic than a governmental department.

3.3.2 Management Mechanism In a charitable organization, its management of personnel mainly involves that of their responsibility, incentive, and capability, as well as that of volunteers. Lester M. Salamon is of the opinion that, since a charitable organization tends to be limited by funds, it can by no means give salaries high enough to attract professionals to join in it, so the work of charity can only be done by those amateurs with a kind heart, which will affect the quality of charity services, leading inevitably to amateurism in philanthropy.58

3.3.2.1

Responsibility Management and Incentive Management

In our survey, we found that the big deal of tedious routine work has been tackled by the chiefs of the President’s Office. Under the President’s Office are five functional sections: the comprehensive section, fundraising section, assistance section, fund section, and publicity section, which are in the charge of the three chiefs of the office. Each section has full-time workers and the division of labor among the sections is clear. When interviewed, AM1 emphasized several times that the functional division within SD Charity Federation was still not made well, which was short of hands, particularly of the full-time staff at the section heads’ level. He himself was in charge of three sections and often felt inadequate in his work. The federation is badly in need of excellent management specialists. The members of SD Charity Federation have quite different backgrounds and their remunerations are also quite different with their different identities in the organization. At present, of the 18 workers of the federation, 8 are in the authorized manning 58

Salamon (1999).

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quota of a public institution, other 4 are in the authorized manning quota of the federation, and sill other 4 are transferred temporally from other public institutions. The others are workers employed by the federation, including some retired cadres, some active duty soldiers, and some university students. According to CF4, the current personnel are formed according to the principle of downsizing financial expenditure. The remunerations of those personnel members who belong to the public institution establishment are decided by referring to the state’s rules for civil servants’ wages, which means the wages of those members are linked with their administrative posts. As SD Charity Federation sees it, since it has done the work of a provincial department, its administrative level should be upgraded. At present, its personnel management follows the rules over the management of the personnel in the governmental departments. The main standards for deciding the remuneration of a member of its personnel include length of service, administrative level, professional title, and education background, which are not directly related to his work efficiency, devotion to job, and contribution to his organization. Thus the way of enhancing the remuneration of its personnel is to apply for upgrading its administrative level, though that has almost no influence on the wages of those informal workers. SD Charity Federation’s current mode of managing its personnel has much to do with the relevant government department’s strict control of the federation’s organizational personnel relations. The available spiritual incentives to individual members of the personnel include social reputation, honors, etc., yet the members of the federation personnel have not felt strong sense of belonging to the organization and that of honor. As demonstrated by international charitable organizations, in a sense, the incentive issue of a charitable organization means more than that of a governmental organization, for the resources necessary for the former to depend, to a great extent, on its own capability of making efforts and getting access to them. In the process of making access to the resources, the initiative and creativeness of the charitable organization’s personnel members are very important, and meanwhile the incentive to them has much to do with the organization’s maintenance of its image as a symbol. The personnel’s work attitude and enthusiasm directly affect the public opinion of the charitable organization, which further affects its capability of gaining resources.59 Either in material incentive or in spiritual incentive, SD Charity Federation has yet to build a system of giving incentives which can enhance its personnel member’s work enthusiasm.

3.3.2.2

The Change of Role Brought About by Shifting from Government to Charity

Since the personnel of SD Charity Federation were government civil servants, they were faced with completely different internal and external environments when they entered the field of charity. The change in their conceptions and construction of their professional capabilities means much for the organization’s existence and

59

Tian (2004: 50).

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development, which the leadership of SD Charity Federation has been fully aware of. There are several other leaders of the federation, like me, over 50 years of age, who were in the government for all of their working lives. Our thoughts and concepts needed a process of transformation. In the past we were governmental officials, and we thought our responsibility and function were how to administer well. However, as charity workers, it is much more about service. For those experiencing difficulties and disadvantaged groups we disburse benefits and goods not to provide them with alms, but rather to serve them by transferring love from society to them. This change of conception is a process of transformation… We convey the love of our people and our dedication, and the people of our own organization also undergo a process of transformation from a government official to charity worker. (AM1)

A role means the behavior expected of a person with a special social identity and it embodies a series of rights, obligations and basic responsibilities in accordance with that social identity and status. The leadership of SD Charity Federation has been conscious of the shift in duty brought about by the shift in identity. Their identity has changed from social administrators to social service providers and concepts of philanthropy should be internalized into their behaviors, fostering a work style that is closer to the general public. In the field of charity, the concepts and behaviors of the federation’s personnel have changed, but this change, in the beginning, was not accepted as something natural and logical, but rather engendered conflicts and complaints. For example, regarding organization, a charitable organization should rely on itself to raise operating funds, yet some workers found this kind of work hard to adapt to. I have often said to our workers that we accept donations from the society but we only accept love, not alms. If a boss wants to give us money in a way he deals with a beggar, or even give us the cold shoulder, as in a case I met in the past, then I will say we accept only love, not alms. When he treats us charity federation workers like beggars, we do not accept, no matter how much the donation amount is. (AM1)

Ten years after SD Charity Federation was established, the philanthropic spirit of self-sacrifice has been internalized into its workers’ behaviors. As said by a worker of the federation, “As a charity worker, one needs to muster some courage and raise charitable funds in the manner of ‘facing the music, having the gall, and talking oneself hoarse’, but more importantly he needs to impress potential donors through philanthropic spirit and dedication.”60 Charity workers have accepted their role in the field of charity, which has enhanced the level of professionalism and specialization of their work. Conflict may also crop up in the process of building professional competence. For concrete work, mastering the knowledge structure of the charity field is a prerequisite for smoothly doing work and also contributes to the SD Charity Federation’s image with the government and public. A charity worker should have a strong work ethic and specialized charity knowledge, as well as adequate competence in organizational management and operations. As a charity organization requires strong moral standards, its members should be strong in moral integrity and high in their altruistic 60

Zhang (2013).

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conscience. The leadership of SD Charity Federation has a clear understanding of the special nature of charity workers. Doing charity work well depends largely on conscience. Some are born with such conscience, and those who are wicked in nature are unfit for the charity work. Naturally good people are suited to this work and able to do it well. For example, be sympathetic and treat the weak with compassion. Without such compassion as the base, one would not be able to do charity work well. (AM1)

However, SD Charity Federation has not developed a formal system for the moral education of its workers. There is some professional ethics training based on the essence and some specific features of charity work, but it is not systematic. It would be better to compile a textbook so that all our workers can study it, this is an area of our work where we should improve. We should have systematic education for our staff and workers. A charity worker needs systematic training and study, whether from the a conceptual or professional ethics perspective, to do good work. We currently lack this. (CF4)

Speaking of the federation’s failure to carry out systematic professional training of its workers, a leader of SD Charity Federation said, Currently no university of China offers a major in philanthropy or has introduced any program for systematic training on the theory of philanthropy and basic information related to it. Still, we carried out some training in this area. For example, we had the “Smile Train Program”, which was conducted by American experts. This year, we arranged a management training program called “Charity Supermarket,” also conducted by American experts. The experts taught very actively and first introduced American charity supermarkets, after which our trainees asked questions. The managers and management personnel of our charity supermarkets asked thoughtful questions based on their own experience to the foreign experts. The effects of this training were very good. Another training program was a seminar held by China Charity Federation attended by all the leaders of our President’s Office. They did not write papers for it, but rather sat on, for example, panel discussions on the theory of international charity law. They also shared their experiences and presented their opinions on the legal status of non-governmental charitable organizations.

As found by interviews, the leadership of SD Charity Federation are keen on participating in relevant academic seminars and actively preparing to present. However, the rank and file workers have not undergone systematic training and they usually turn to self-study. In spite of their awareness of the specific attributes of charity work, federation leadership did not carry out in practice effective and systematic training and education programs. The present course of action, which is subject to administrative rules, is still adequate to maintaining the normal operations of a charitable organization. Nonetheless, a modern charitable organization requires professional operations and work by its executive team, while staff should be not only philanthropy conscious, but also strong in professional competence. Thus, strengthening professional training is an essential requirement for the sound development of charities.

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3.3.3 Fundraising Mechanism 3.3.3.1

Structure of Charitable Funds

The funding operations of a charitable foundation concern its survival and development. For a charitable organization, there are four major sources of funds: government allocations, social donations, increases in the value of funds, and income from services. Government allocations are a major source of funds for non-profit organizations in China and abroad. In 1998, the fiscal appropriations and subsidies from the governments accounted for 49.97% of the income of non-profit organizations, the highest proportion of any individual source. In 1980, the U.S. federal government provided direct funds of US$ 41 billion to the NPOs of the country, representing 35% of the latter’s total income; in Britain, 40% of non-profit income came from the government allocations. In France and Germany the percentages were higher, reaching 60% and 70% respectively. For charities, grants from government departments concerned with the public sector accounted for 12% income.61 Of income sources for American charitable NPOs in 1993, services, private donations, and governmental donations accounted for 71.3%, 9.9%, and 8.2% respectively. Of private donations, 85% came from American citizens’ voluntary donations. As shown by a Tsinghua University questionnaire survey, government allocations and subsidies are a full half of charity income in China. For contemporary charities in China, which are still at a young age, government support mainly comes in the forms of granting funds as start-up capital and preferential policies. After a charitable organization has been established and entered into a normal growth path, the government will offer less and less in funds, to the point of offering nothing at all. The charity’s sustainable development will to a great extent depend on its own capability to raise funds according to preferential policies. For the SD Charity Federation, the government’s grant was its start-up capital. “When our federation was founded, the provincial finance department offered us several million in funds, but now all of our charitable funds come from society.” (AM1) For social donations, the main source is funds donated by enterprises and employed workers during the “One Day Charitable Donation,” activity and the proportion of daily donations is very small. In spite of the great gap between China and Western countries in donation volume, the total funds donated from Chinese society have continued to grow. In 2005 the charitable donations of Chengdu City, Sichuan Province, topped RMB 10 million, 90% of which came from ordinary citizens.62 We knew from interviews that at present the main source of the SD Charity Federation’s charitable funds is social donation. One part of its charitable funds come from enterprise activities such as donating one day’s profits or setting up special charitable funds. Up to 2006, SD Charity Federation and 11 enterprises jointly set up 11 special charitable funds in Shandong with RMB 222 million in funds. Most of this total is made up of named funds 61 62

Guo (2001: 50). Yu (2005).

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where the principal is kept by the enterprises. This designation means that, under the precondition of respecting an enterprise’s intention or the enterprise designating on its own the orientation of contributions, the enterprise offers a certain amount of funds to a charitable organization as the principal, which will be kept by the enterprise. According to an agreement it signs with the organization, the enterprise gives to the fund annually at a value-added ratio agreed to by both sides and the charitable organization will represent the enterprise and use the fund to offer directed charitable assistance. This arrangement is an effective mode of building a steady, long-term fundraising mechanism developed by the charitable organization over the years. The other part of its charitable funds is individual donations from citizens. According to AM1, during the “One Day Charitable Donation” activity, funds donated by individuals come mainly from employed workers, including those in the CPC, government, and PLA, public institutions, and workers in province-run enterprises, and all the workers in the enterprises which can meet their payrolls take part in the activity. Workers in bankrupt enterprises and in those enterprises which cannot meet their payrolls do not take part. Peasants, students, and elderly persons with no family do not take part, either. For others, whether one is rich or poor, taking part in the activity depends on themselves. In total, the funds raised from this activity can reach RMB 20 million annually. Additionally, charitable materials, calligraphic and painting works, and international donations are also important fundraising channels for the federation. SD Charity Federation has received 244 sets of medical equipment worth RMB 8.5 million from the Charity Medical Sunshine Rescue Project, RMB 250,000 worth of medicine donated by Tianjin Tasly Pharmaceuticals, and 90 wheelchairs worth RMB 45,000 from the China Charity Federation, among other donations. In 2005, calligraphy and painting donation activity, the federation received 3745 pieces in total. Up to 2005, the federation received over RMB 23 million in donations from overseas.63 The total of other ordinary donations exceeded RMB 750,000, while the federation had no service or business income.

3.3.3.2

Fundraising Methods

The charitable fund structure of SD Charity Federation is similar to those of international charitable organizations. Its funding seems to have been free from government control, but we will have to see whether its fundraising methods are independent in 63

Some representative donations from overseas include: “The Smile Train Program” donated by overseas Chinese Charles Wang, president of Computer Associates International, Inc., worth RMB 1.91 million. Thanks to this program, corrective operations have been successfully performed on 813 cleft lip and palate patients. The “Gleevec Leukemia Treatment Program”, worth RMB 8.6 million, donated by Swiss said. Shandong Association of Southern California, USA, donated RMB 1.4 million for aiding 125 children from extraordinarily impoverished families to finish their nineyear compulsory education. Taiwan entrepreneur Lin Rongde donated RMB 1 million to aid some college students from extraordinarily impoverished families. Source: Yearbook of Shandong Charity Federation (2005).

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practice, which concerns the real nature of the organization. As mentioned above, the main funding sources for SD Charity Federation are donations by enterprises and employed workers, daily donations, and the increase in value of its funds. Different fundraising methods are used for different sources of donations. Donations from enterprises are its main source of funds. These donations take various forms. The two main forms are contributing one day’s profit and setting up special charitable funds. To raise charitable funds from enterprises, SD Charity Federation usually uses a form of mobilization such as issuing an administrative order. For the “One Day Charitable Donation” activity each year, a circular is sent to province-run enterprises. The circular used to be issued by the association in charge of the province’s industry under the provincial CPC Committee, which later was canceled and merged with the State-owned Assets Supervision and Administration Commission (SASAC) of Shandong Province. So now it is the provincial SASAC that issues that circular. Regarding donations from teachers and workers in universities, the provincial University Work Committee which issues that circular makes the decision. So the federation itself does not need to issue the circular. The raised funds will be transmitted to the federation. All province-run enterprises have to donate funds and there is no way to not donate. (BM2)

Funds donated by employed workers are the main source of the funds from individual citizens. Employed workers’ contributions on the basis of their willingness to show compassion manifest fully the strength of the civil society of which they are a part. However, in mobilizing and organizing donations, SD Charity Federation employs administrative means to start “top to bottom simultaneous action” across the province, as to call on individuals to contribute one day’s salary. First, a circular resembling an administrative order is issued by the competent department at the higher level to release the information on the planned charitable donation activity and then administrative mobilization from top to bottom is carried out. The “One-Day Charitable Donation” activity is held in May each year. The provincial charity federation is responsible for unified organization of the activity. From the day designated by the circular, each city in the province will start the activity. This is a mode of “top to bottom simultaneous action and multi-level management”. The provincial charity federation does not ask for funds raised at the lower levels, for we only receives funds donated by the CPC, government, and PLA at the provincial level, state-run enterprises located in Shandong and PLA troops stationed in Shandong.

Daily donations refer to the small-scale funds donated and received on a daily basis. SD Charity Federation adopts multiple forms and channels for raising funds from society. “Society-Oriented One Day Charity” is a form of fundraising directly oriented towards the general public, rather than enterprises and public institutions. It is mobilized by SD Charity Federation and volunteers participate in the activity to raise charitable funds. This form truly embodies the voluntary essence of charitable donation. Other daily donation forms such as charity concerts, donation of calligraphy and paintings, international donation, and donation hotlines all embody that principle. The amount from these, however, is rather limited. According to a rough estimate made during an interview, in 2006 the “Society-Oriented One Day Charity” activity collected less than RMB 10,000. As the federation worker in charge of the activity

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said, the primary task of that form of fundraising is publicity and fundraising itself is secondary (BM2). Though the financial effect for SD Charity Federation is negligible, the fundraising method it represents should be what the federation pursues in its future efforts. It is not only a fundraising method but more importantly embodies the true meaning of charity, that is, small amounts coming together to produce something big, and produces a satisfactory social publicity effect. In this regard, the American experience is worth drawing on. An overwhelming majority of the funds raised by the “United Way” each August in America come from individuals and its volunteers enter every community and explain what difficulties need to be overcome and what people need help, and then propose various programs. The administrative mobilization and organization model employed by SD Charity Federation causes too strong a trace of governmental operations into a fundraising method which otherwise embodies charitable essence. This trace is mainly manifested in its ignoring the income-cost ratio. In the “Society-Oriented One Day Charity” activity, the cost to run the activity was much larger than the income received. First, much money needs to be paid for the opening ceremony and then the subsidy for the over thousand volunteers, RMB 10 for each, will need a cost of over ten thousand. In America, the cost for raising one dollar is 16 cents on average, with a median cost of 11 cents. The charitable organization’s fundraising objective is not to get the funds in and of itself, but to maximize relative income from the process, that is, to raise maximum funds at the minimum cost. In this sense, the fundraising operation of a charitable organization should be based on cost-income calculations just as for an enterprise.64

3.3.3.3

Preserving and Increasing the Value of Funds

The preservation and increase of the value of funds constitute the material basis for the development of charitable foundations. Generally, the current law does not restrict in specific terms the means a charitable foundation uses to preserve and increase its funds, and only stipulates that its investment is subject to the decisions made by its board of directors, encouraging it to preserve and increase the value of its funds according to the principles of legality, security, and effectiveness, while prohibiting the practices of sharing secretly, embezzling, and misappropriating its assets. SD Charity Federation has formulated its own rules of assets management and the investments in the fund have been managed according to these rules. Regarding the management of our funds, according to relevant regulations made by the state, we can deposit them in banks or buy national bonds, but not invest them for commercial purposes. We perform our fund management strictly, as stipulated in the state’s regulations on the management of charitable foundation funds. … We either use funds to buy national bonds and make bank deposits. Our interest is tax free, for the interest on a charitable fund’s deposits is exempt from taxation. This interest can be used for charitable purposes. Additionally, our operations should ensure that our charitable funds grow at an annual rate of 6%. Our funds are divided into two parts. On part is the total principal of the funds donated by enterprises 64

Tian (2004: 178).

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yet still kept by those enterprises. Though a donating enterprise first transfers the principal to our account, we will transfer it back to it and that principal is operated by the enterprise. The principal can be used for production or other purposes, but it should be safe. The so called preservation and increase in the value of the funds just means their annual growth rate should not be less than such and such percentage, lest there be money lost. According to an agreement between the two sides, a fixed amount from the annual growth of the principal is transferred to us for funding charitable programs. The other part are the funds we operate, for example, the fund given by the Tobacco Group, which we put into a financial products. The products are commercial, but if they are guaranteed by a bank, then we can dare to put our funds into it. We have never touched those products unguaranteed by banks, no matter how high the claimed increase of value is. For those guaranteed by banks, our funds will not be lost. (AM1)

It is not the case that a charitable organization cannot engage in business, but rather that the profits shall not be shared by its members or workers, but rather shall be used to fund the charitable programs in accordance with its purpose and mission. How to better preserve and increase the value of funds is a problem all charitable organizations across the world are confronted with. Since the charity undertaking of China is still in its start-up stage and China’s charitable foundations are commonly weak in operating capability, they tend to adopt conservative means and be prudent in their efforts to preserve and increase the value of their funds. Generally, depositing funds in banks and buying national bonds are the prevailing ways chosen to achieve that end. In sum, the main fundraising method SD Charity Federation uses is driven by administrative power and the method truly embodying the voluntary principle of charitable donation is merely for the supplementary purpose of publicizing charity. If a charitable organization mobilizes donations only through administrative power, then raising charitable funds will become nothing but an imposed requisition and the noble behavior of a donor which lets him feel a sense of moral satisfaction will be lowered to a compulsory obligation. As time passes, the public will naturally lose enthusiasm in charity. If the administratively dominated fundraising model becomes more institutionalized, then charitable organizations will become more and more dependent on the government and it will be more difficult for them to attain independence and autonomy.

3.3.4 Resource Allocation and Use Mechanism 3.3.4.1

Proportion of Expenditure

A charitable organization’s allocation and use of its resources affect its credibility directly. Special funds for special use and transparent financial system constitute a necessary means for ensuring high credibility. The expenditure of a charitable organization includes charity spending and management cost, the latter including official business spending and wage and welfare payment to the workers.

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According to the current “Regulation on Foundation Administration” and “Donation Law”, we shall spend 70% of the budgeted charitable funds each year in carrying out our charity programs, 10% in payment for our work expenses, including our personnel wages and expenses in communication, electricity, and traffic. This proportion is stipulated by the state. The remaining 20% is for emergency use, which is kept ready for catastrophic disasters. For example, for the relief of the Indian Ocean Tsunami, we gave RMB 1 million.

In the 2006 annual inspection, according to “Regulation on Foundation Administration,” the Bureau of NGO Administration of Ministry of Civil Affairs adopted the following standards for the foundations registered with the ministry: Did a charitable foundation carry out public welfare activities? Was its assets negative? Was the charity spending of a public foundation lower than the required 70% of its total income in the previous year? Was the expense for its official business and workers’ wages and welfare higher than 10% of the total expenditure of the fiscal year?65 As stated in the 2004 and 2005 audit reports of SD Charity Federation, the federation’s total income in 2004 was RMB 52,483.6 thousand and its total expenditure in 2005 was 63,495.795 thousand, which is 121% of the total income of the previous year; in 2005 the expenses for its official business and workers’ wages and welfare were 5461.729 thousand, accounting for 8.6% of the same year’s total expenditure. Thus, the federation’s financial situation met the standards required by the annual inspection, only that the 2005 total expenditure surpassed substantially the 2004 total income, which is to the disadvantage of its long term development. Therefore, the federation needs to improve its system and standards for the use of charitable funds. The charitable foundations in China have been in operation at a low cost. In respect to the proportion of management cost to total expenditure, China Youth Development Foundation is about 6%; China Foundation for Poverty Alleviation, 6–7%; China Social Welfare Foundation, about 5%; China Welfare Fund for the Handicapped, 4.51%; China Procurators’ Education Foundation, 1.8%, and some foundations run by even zero-cost management. The proportions of the management expenses of the overseas public welfare organizations are higher than China’s public welfare organizations, some of which are even as high as 30%. Though the lower proportion of management expenses to the total charitable funds of a charitable foundation is conducive to winning the public’s trust on it, its long term low cost operation is harmful to its future development, for proper cost is the fundamental precondition for operating an organization. With the escalating requirements for professional and socialized operation of a charitable foundation, its demand for professional workers grows, but low wages can by no means attract high caliber professionals; some assistance modes have not meant the traditional direct transfer of funds, but have called for transformation towards fostering capability on the part of the beneficiaries, thus increasing inevitably the management cost; the management costs needed for operating the programs which are smaller in scale and require delicacy management tend to be higher than those needed for the programs which are large-scaled and pursue scale effect; The delicacy management costs of many programs abroad are

65

PRC Ministry of Civil Affairs (2006).

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even between 20 and 30%.66 In addition, the management costs of different types of foundations are different. In America, the operational foundations’ management costs tend to be higher than those of aiding foundations, and the expenses of the former for workers’ wages account for 80% of the costs. With the diversification of the foundation forms in China, the “one for all” rules for management costs have already become unfit and it is imperative to formulate more specified rules oriented to different types of foundations and programs.

3.3.4.2

Financial Reports

An NPO’s financial report must be open and transparent. The bigger the bag of charities is, the better, but the precondition is that the bag must be transparent, for only transparency can win the trust from the public and ensure access to more resources. When asked whether SD Charity Federation had prepared financial reports each year, AM1 said, Yes, we have. Our financial reports will be published on newspapers. The annual reports will state clearly, in a fiscal year, the amount of the charitable fund the federation receives, the charity programs it carries out, the amounts funding those programs, and the sum of the interest. Before they are made public, they will be examined and approved first. They are usually published on the provincial newspapers such as Dazhong Daily or Qilu Evening News, and also on the website of “SD Province Charity Network”. Our principle is being open, just, fair, and transparent, and let the society know well how the charitable funds are used.

CM5, a financial worker, also expressed that the federation’s financial management and supervision were standard and rigorous. Currently, SD Charity Federation adopts a double audit system. Each year, the designated auditing firm audits the financial affairs of the federation. The provincial Audit Bureau comes over and examines our accounts from time to time and the Planning and Financial Section of the provincial Financial Department also makes irregular examination of our accounts, which submits annually a settlement statement to the department. After the auditing process, the audit report will be submitted to the President’s Office meeting for reviewing and passing. The financial report and audit report will be published on some major provincial newspapers such as Dazhong Daily or Qilu Evening News in January or February of the next year.

From the above, it is clear that, since the transparency of the charitable funds concerns the subsistence of the organization, SD Charity Federation and its competent financial department in the government have conducted strict and standard auditing over the charitable funds and made known to the public the transparent information of the federation’s financial report via some media and channels.

66

Xu et al. (2011b).

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137

Ways of Allocating Resources in Operating Charity Programs

In carrying out the charity programs, a charitable organization must be strict with its examination and approval of the assistance recipients to ensure that the assistance go to those who need them. This concerns the actual assisting effect of the organization. As found in an interview, SD Charity Federation uses administrative means in allocating its charitable resources to guarantee the charity effect. It employs a strict procedure for the qualification of the recipients, which is its main means by which to ensure its charity effect. The examination and approval of the charity recipients have been performed on the platform of the civil affairs system, which undergo a complete procedure. If we verify the qualification of the recipients, it is easy, for we only need to call the civil affairs bureaus of the counties. Then the workers of their basic living allowance centers will call the civil affairs offices of the townships, which are clear about the impoverished families and know, for example, how many every village has and even the names of the heads of those families. The townships all have their own civil affairs offices and information can be obtained by making phone calls. For some, we do not need to call them, for all the information of their impoverished families has already been in our mind. So it is not difficult to get information of those impoverished families. (AM1)

A charitable organization’s way of giving the goods under its charitable programs reflects its socialized extent. It was found in an interview that the most characteristic way of operating a charitable program used by SD Charity Federation is that of “top and bottom simultaneous action and multi-level management,” by which to operate a program on the levels ranging from the provincial level to the county level and on the model of a level-by-level quota system for giving out the charitable goods. In the unified operation of a program, full autonomy is also granted to the cities and counties, which can carry out the charitable programs on the basis of local conditions. For the program, the provincial federation prepared over 5 million cash, divided it into different sums, and gave them to the cities, which should prepare their supporting funds. For the sum of funds we gave them, they should get ready two times that as supporting funds or more. That is, if we offered a city ten, it should prepare at least twenty and actually many cities gave thirty, fifty, or even more. We transferred the funds to the cities of the province, and they would transfer them to their counties, which would prepare also supporting funds. All the funds were given to the impoverished people so that they could have adequate money for the “Two Festivals”, i.e. the New Year’s Day and the Spring Festival. The quotas ranged from 200 at least to 600 at most. But for different cities, the quotas were different. For example, in the more developed cities such as Qingdao, Yantai, and Weihai, where the impoverished people were fewer, their quotas were higher, while some other cities such as Linyi and Liaocheng, where the impoverished people were more, gave only 200 or 300 to each family. (AM1)

Speaking of the issue, BM2 said, We allocated 50% of the funds to the cities, which should give the other 50% by themselves. For their remaining 50%, they could use it to carry out their own charitable programs according to local conditions.

Relying on the support of the civil affairs system, SD Charity Federation has gained a status of monopoly. Actually, in China, almost all the organizations like it

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are founded in a way from top to bottom. This type is typical in charitable organizations, only that the extent of the dependence of the organizations at different levels on the government is different. The lower the level of an organization is, the stronger its dependence on the government; the stronger the administrative color of an organization is, the lower its autonomy is, the easier it will be controlled by its superior charitable organization, and the more probably the superior organization forms an authority over it. In their work, the relationship between SD Charity Federation and other charitable organizations of the province is guiding and being guided, but in practice it is one of the superior’s leadership of the subordinates. Such relationship makes it more efficient to arrange comprehensively the charity work of the entire province. By means of administrative operations, the charity federation has built an activity network featuring “top and bottom simultaneous action and multi-level management,” which has elevated the work efficiency of the organization.

3.3.5 Summary The above case study of SD Charity Federation of SD Province indicates the “semi-administrative operation” characteristic of the charitable foundations’ actual operational mechanism. (1)

(2)

(3)

In regard to its organizational missfion, SD Charity Federation’s Articles of Association states that its purpose is to assist the disadvantaged groups and promote social civilization, which reflects the aim of its charities to serve society. Meanwhile in practice the federation carries out the charitable assistance, such as the five major projects, i.e. “Love for Straitened Families Project,” “Morning Sun Education Project,” “Evening Sun Project,” “Medical Care Project,” and “Love for the Handicapped Project,” and over twenty other charity programs, which have helped a great number of people in difficulties and display the consistency between its activities and its purpose. Concerning its organizational nature, the federation is an NPO in itself, but its office which addresses daily affairs is a unit of public institution. In its organizational structure, SD Charity Federation has built its board system, separating decision-making and management, which accords with the general experiences of NPOs at the international level. However, its working body is a public institution subordinate to the provincial civil affairs system, in which some governmental officials are in charge of its daily work, which is liable to bring too much bureaucracy to its decision-making mechanism and lowers its organizational autonomy. Over seven years, SD Charity Federation has got its separate office space and a full-time secretary general, which has become more and more independent in its organizational structure and decision-making procedure. In its management system, SD Charity Federation has not built its institutionalized incentive mechanism and consequently been low in efficiency of

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(4)

(5)

139

handling affairs. Most of its full-time workers come from the civil affairs department, who are inclined to bring their working habits in the government to the domain of charities. Meanwhile, it has not offered systematic and institutionalized professional training and vocational education, and been badly in need of specialized personnel, particularly management workers. The participation of volunteers in its affairs management is rather low. At present, the workers comprising the personnel of the federation come from three sources: workers with identities in the public institutional establishment, temporary workers employed from society, and volunteers, in which the second group account for 50% of all. Regarding its fundraising mechanism, the main part in SD Charity Federation’s structure of charitable funds is donated by society, reflecting the nongovernmental nature of charities. But its dominant way of raising funds is administrative, which depends on administrative mobilization, distancing itself far from the independent and social way of raising funds adopted by international charitable organizations. In its allocation of resources and mechanism of using charitable funds, SD Charity Federation’s practice is standardized and 70% of the funds have been spent in charities, with standard fund allocation and transparent annual financial reports. These respects meet the requirements for an international charitable organization, reflecting the non-profit nature of an NPO. However, what it has taken to ensure its charitable effect is an administrative path and its mode of raising funds and operating programs, which features “top and bottom simultaneous action and multi-level management,” displays strong administrative color.

1994 witnessed the founding of China Charity Federation and after that its local branches at the provincial, municipal, and county levels were founded one after another, which have developed into a large system of the charity federations in China. In the several years when this study was conducted, the system of charity federations were flourishing vigorously and, since the non-public foundations were still weak, the public foundations were the main force which fulfilled the task of raising funds and carrying out the charitable assistance. As a result of the governmental promotion, in the special background and institutional environment of China, they have been inevitably under the influence of administrative power, and particularly with the support of the government the national and local charity federations were established in a top to down way, which have operated themselves in their own logic. Obviously, their actually “semi-administrative” operational mode ensures their legality and their impressive performance and social influence. This feature indicates their responses for adapting themselves to the institutional environment with inbuilt conflicts. On the other hand, the “semi-administrative” operational mode, as a matter of fact, represents a process of the government involving itself in the operation of charitable organizations by using formal and informal means. Of course, in the process, the charitable organizations are not controlled by the government completely and the extent of the government’s administrative involvement has been varying with

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their gaming. The charity federations can be seen as a transitional form of China’s charitable foundations in the early period of their development. As stipulated in “Regulations for Registration and Management of Social Associations” of China, China Charity Federation with its branches is a judicial association under the double administration of the relevant “registration and management governmental organ” and “competent governmental departments” (i.e. the civil affairs department at various levels). After 2004 when “Regulation on Foundation Administration” was issued, a charity federation has been administered by referring to a public foundation and can carry out fundraising activities, and this has been a reason for wide criticism of it. It is registered as an association, but it has served as a public foundation and does not have to abide by the “Regulation on Foundation Administration.” Thus in its inside governance, it enjoys a high degree of freedom, and the requirement for its transparency is not as strict as for a foundation; the flow of resources is always from the non-governmental sectors to the government, which represents an inverse direction and low professional standard.67 The most serious problem with the charity federation system is its monopoly and loot of charitable resources. In 2011 the number of charity federations at and above the county level across the country is 1923, which took 25% of the funds donated from society and consequently affected enormously the survival of the grassroots charitable organizations. The 18th National Congress of the Communist Party of China put forward the initiative for the reform of the administrative system, requiring streamlining administration and delegating power, and separating politics and society. The system of the charity federations must be reformed for eliminating its administrative dominance and monopoly. Currently, the state and the provinces and cities are designing a new system in this regard. In regard to the efforts to break down the double management system, on November 22, 2011, Guangzhou City issued the “Circular on Further Deepening the Reform of Registration of Social Organizations to Promote Their Development”, stating clearly that from January 1, 2012, excluding those cases which require the municipal government’s examination and approval according to the state’s laws and regulations, the eight categories of social organizations, i.e. industrial associations, non-local chambers of commerce, public welfare organizations, social service providers, economic organizations, scientific and technological organizations, sports organizations, and cultural organizations, can apply to the registration and management department for registration.68 As regards personnel management, in 1988, the CPC Central Committee and the State Council of China issued jointly “Circular on Leading Cadres of CPC and Government Organs not to Take Leading Positions in Social Organizations”. In December, 2014, Guangdong Province introduced “Rules of Social Organization Management”, which stipulates that the state civil servants at work shall not take part-time positions in industrial associations, non-local chambers of commerce, non-governmental non-enterprise units, and foundations, and if after their retirement 67 68

Xu (2013). Chen and Zhou (2011).

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they need to take part-time positions, they should apply for review and approval according to relevant provisions.69 After 2008, China’s tax preference has been shifted from “special approval system of preference” to “generalized system of preference.” In 2008, Ministry of Finance, State Administration of Taxation, and Ministry of Civil Affairs issued jointly “Circular on Issues Concerning the Tax Pre-deduction on Welfare Donation” which stipulates clearly the conditions for qualifying a charitable organization for tax exemption and the procedure of applying for that. Up to 2010, 104 national charitable organizations got qualified for tax exemption and meanwhile the provinces and municipalities also made public their conditions for qualifying local charitable organizations for tax exemption.

3.4 A Case Study of the Fundraising Mechanism of SD University Education Foundation The present case study chooses SD University Education Foundation, a representative one of China’s university education foundations, as its object. The research group conducted a 5 month investigation and study in SD University Education Foundation and collected data by using structured interviews and on-the-spot observations. The interviews are concerned with the foundation’s operational status and fundraising mechanism, involving 8 interviewees, including one of the university leaders in charge of raising funds, the principal leader and some full-time workers of the foundation, and workers in SD University Alumni Association and the University Board.70 In addition, by using the documentary method, the researchers gathered some data relevant with the present study, including the statistical data of SD University Education Foundation’s receptions of social donations, its annual work reports, investigation reports, fundraising news reports, as well as its internal newspaper and periodicals, donation agreements, meeting minutes, and other various relevant materials, which provide the basis for the analysis and argumentation in the study.

69

Huang (2014). Some alphabetic letters are used to stand for the interviewees (initial letter) and their relevant information (second letter). C: the leader in charge of raising funds; J: worker in the foundation; A: workers in the university alumni association; B: worker in the university board; M: male; F: female. The numeral in the third position indicates the sequence of an interviewee in the interview.

70

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3.4.1 Organizational Mechanism 3.4.1.1

Nature of Organization and Targeted Domain

SD University Education Foundation is a non-public foundation founded on October 11, 2007, with the approval of the civil affairs department. It is an NPO set up by SD University under the backdrop of its running itself on an all-dimensional and open model, for raising, managing, and operating funds donated from society. Its purpose is, by absorbing and accepting donations from enterprises at home and abroad, social associations, and individuals, to support and promote the education development of SD University. With its initial capital of RMB 6 million, the foundation is an important platform of the university to raise and operate funds donated by society. The funds received by SD University Education Foundation from all sectors of society are mainly used for the following purposes: Supporting improvement of the university’s teaching and research conditions (including instruments and equipment, library resources, and buildings except the living quarters of teachers and workers); funding teaching and research programs and publication of academic works; supporting talent recruitment and lecturing trips of foreign world famous scholars to the university; funding relevant international cooperation programs and international academic meetings; setting up scholarships and subsidies for students and awards for teachers; funding activities benefiting the development of students in their comprehensive quality; funding other programs benefiting the education development of SD University.

3.4.1.2

Organizational Structure

The supreme body of power of SD University Education Foundation is its board of 14 members and each member’s term is 4 years, who can serve successive terms. Under the board are a president, a vice-president, and a secretary general, who are selected from the board members, in charge of the daily work of the foundation. The foundation has two supervisors, who are appointed by its principal donors and competent administrative authorities of business. SD University Education Foundation, together with SD University Committee for Cooperation and Development, SD University Board, and SD University Alumni Association, forms the university’s platform for its cooperation and development which engages in the university’s outward contacts and fundraising work under the unified organization, coordination, and guidance of SD University Department of Cooperation and Development. The four sections under the department constitute an information sharing system, which join hands to conduct the university’s outward contacts and fundraising work. This semi-independent organizational structure has to do with the background where the foundation was set up. When interviewed, the leader of the foundation said,

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After 2004 when the “Regulation on Foundation Administration” was issued, many universities of China began to establish their education foundations, for example, Zhejiang University Zhu Kezhen Foundation. In the same year SD University began to attach importance to cooperation in running itself, aware of the necessity of making efforts to attract social resources. In 2006, it set up its university board and one year later established its education foundation. SD University felt that for its development, besides its program and communication platform, it needed also another platform for raising funds, so after it set up its university board it founded its education foundation. It is natural for us to develop step by step in that way, that is, in the process of running the university in cooperation with society. (JM2) The idea dates back to 1997 when the funds donated from society to SD University went directly to the university’s financial department for their management. As the university’s size grew, it had the idea of setting up a special agency for the management of the donated funds. At first, making reference to the practices of some brother universities, such as Nanjing University, Shanghai Jiaotong University, Tsinghua University and Peking University, it began with the founding of a cooperation and development committee inside it by which to integrate the relevant internal units for raising funds, including the international department, planning and financial department, domestic cooperation office, alumni office, and university board. With further development of the university, we found that the funds of a university were not allowed to be used for investment purposes. Thus in some fund programs the principal kept to the donors could not be managed and operated in a standard way, and if the funds had directly gone to the university’s financial department, it would not have displayed the spirit of donation and charity. Therefore, we set up this education foundation under the university’s department for cooperation and development. (JM2)

As can be seen from the interviews, while SD University put into practice its idea of cooperation in running itself, SD University Education Foundation came into being as an NPO to meet the need of the university in advancing its work of raising, managing, and operating donated funds. From the conception of its founding to the access to the fundraising channels and information, it depends on the university’s support and its administrative departments’ participation. This determines its strong dependence on the university’s administrative departments.

3.4.2 Sources of Funds Since its establishment, SD University Education Foundation has won extensive support from the university’s alumni and all sectors of society and has raised a great deal of fund, playing an increasing important role in the university’s development. In a period of five years up to the end of 2012, the foundation received 100-odd donations from the alumni at home and abroad, well-known entrepreneurs, and social elites for scholarships and subsidies for students, awards for teachers, funds for scientific and technological research and education, which are worth a total of over RMB 400 million, including 200 million funds donated from society. These funds improved substantially the university’s teaching and research conditions, proving enormous support to its rapid development.71 71

Source: Annual Income Statistics of SD University Education Foundation (2009–2011).

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As an NPO, SD University Education Foundation orientates its fundraising efforts mainly to given individuals and organizations, in which the former is the university’s alumni and others, and the latter, legal persons of enterprises and foundations.

3.4.2.1

Individuals

The “Individual donation” in this section refers to the earmarked or unearmarked donation in the form of various materials or intellectual and spiritual wealth made by an individual in his own name to a university foundation for the purpose of supporting its construction and development. On the basis of the relation between the individual donor and the university, individual donations can be classified into alumni’s individual donations and non-alumni’s individual donations. The “alumni’s individual donation” refers to the donation in various forms made by alumni as individuals in their own names or via the alumni organizations such as their former classes and alumni associations for the purpose of supporting their alma mater’s development. Since a university’s alumni are related with their alma mater in special emotion, they have paid much attention to its growth and become an important source of funds to the university’s education foundation. Funds donated by alumni occupying an important position is a salient feature marking a university education foundation, and in the world’s mainstream systems of university evaluation, alumni’s donation has been an indicator and meanwhile alumni’s donation reflects also the education of a university. In the fundraising sources of SD University Education Foundation, the alumni’s donations are the most stable. According to statistics, in the period from 2009 to 2011, SD University received a total of RMB 35,773.4 thousand from alumni, accounting for 24.27% of all donated by society. In the amount, 91.57% was given by individuals or classes, reaching RMB 32,757.4 thousand, and 8.43% was from alumni associations, which was 3016 thousand.. The “non-alumni’s individual donations” refers to other individual donations than those given by alumni. In a society with rich ambience of charities, the altruism embodied by individual donations for funding the development of higher education and the impoverished students in universities represents an important form of realizing individual value. During the year from 2009 to 2011, the non-alumni’s individual donations made to SD University Education Foundation account for 2.55% of all social donations, in which those from Hong Kong, Macao, and Taiwan as well as overseas sources accounted for 79.85%.72 This part of donations has to do with the university’s social influence and the popularity of its education foundation. At the same time, the low proportion also reflects the inadequate ambience in favor of individual donations to education in the mainland of China. The low proportion of individual donations to all funds is an outstanding feature of the fund structure of SD University Education Foundation. Another feature not to be neglected is the big number of donations with quite different amounts. In the

72

Ibid.

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season celebrating the 110th anniversary of the founding of SD University, the foundation received over 200 donations from its alumni, the amounts of which ranged from RMB 1 to the biggest 30 million. In spite of the large-sum donations given by individuals, compared with the university education foundations abroad, the proportion of individual donations in the funds SD University Education Foundation has received is still very low. During an interview, a leader of the foundation said, The other angle is enterprises and individuals, but the large-sums have been usually given by enterprises and few large sums have come from individual donors. The feature of individual donations is the number of donations is big, yet the total amount is small. Large sums have come usually from enterprises. If an individual gives a few dozen thousands, I think, it is not a small sum indeed. (JF4)

In the present situation of economy, though some Chinese people have got rich before others, already with some basis for donations, on the whole, the economic and the cultural basis for the general public’s participation in charities has still been weak in China.

3.4.2.2

Enterprises

The corporate part in the fund sources available to a university education foundation refers to the donations given in the name of enterprises to support the university’s construction and development. According to the relationship between an enterprise and a university, the donating enterprises can be divided into alumni enterprises, the enterprises with cooperation with the university, the enterprises whose leaders are members of the university board, and other enterprises. Since China introduced the reform and opening policy, both SOEs and non-state-owned enterprises of China have grown rapidly and accumulated great amounts of social wealth, and, under the backdrop of the reform of China’s higher education system, universities’ consciousness of serving society has increased and correspondingly their cooperation with enterprises and with localities, and the cooperation between universities have been practiced widely in China’s system of higher education. All these have cemented the connection between universities and society and laid the foundation for universities’ efforts to access social resources. SD University Education Foundation is also a beneficiary from this mode of development. Before the founding of the foundation, SD University had entered extensive relationship with many enterprises, governmental departments, and other universities, and accumulated considerable resources in its cooperative enterprises and localities as well as its university board members. That means the university’s education foundation, as a special donation management platform, had already some fundraising basis when it was founded. According to the 2009–2011 statistic data of SD University Education Foundation in regard to its incomes from donations, the corporate donations account for 69.16% of all from society, indicating that they constitute the main source of the foundation’s social donations (see Table 3.8).

766.07

3550.29

5860.52

10,176.88

2009

2010

2011

Total

69.16

89.15

49.16

78.85

Percentage in total donation

1498.7

826.7

615

57

Alumni enterprises

14.73

14.11

17.32

7.44

Percentage in corporate donation

4394.84

2337

2002.84

55

Cooperative enterprises

43.18

39.88

56.41

7.18

Percentage in corporate donation

2797

1080

1667

50

Board member enterprises

27.48

18.43

46.95

6.53

Percentage in corporate donation

4369.34

3089.82

625.45

654.07

Other enterprises

42.93

52.72

17.62

85.38

Percentage in corporate donation

Note There is some overlap in the statistic data of the donations from the first three types of enterprises. The “other enterprises” refers to other enterprises donating to the foundation than the first three types

Corporate donation

Year

Unit: ten thousand yuan, %

Table 3.8 Distribution of funds donated by enterprises to SD University Education Foundation (2009–2011)

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Most of the large sum donations SD University Education Foundation received are from enterprises. On the basis of the distribution of the social donations, enterprises were the main fund source of the foundation, of which the percentage of the donations by the university’s cooperative enterprises was the highest. This fact indicates the positive effect of the university in carrying out its all-dimensional and open development strategy and also that of its external cooperation which lifted the university foundation’s capability of raising funds. It also manifests the important role played by the foundation as a bond between the university and society in tapping social donative resources and promoting the university’s education development.

3.4.2.3

Private Foundations

Education is one of the important domains where foundations play their public welfare role. In the United Sates and other developed countries, an overwhelming majority of well known private foundations such as Carnegie Foundation and Rockefeller Foundation made contributions to higher education. In the war years, these contributions effectively made up for the deficiency of the government in its investment to education and ensured the sustainable development of academic disciplines. In China, private foundations are mostly found in Hong Kong and Taiwan but in the mainland of China, since the development of foundations was very late, the number of private foundations is still very small. From 2009 to 2011, SD University Education Foundation received RMB 4386 thousand from various foundations in Hong Kong and Taiwan, including Taiwan Li-Qing Cultural and Educational Foundation, Hong Kong Si Yuan Foundation, and Taiwan Lee and Li Foundation, accounting for 3.98% of all social donations.73

3.4.3 Fundraising Mechanism Based on Social Capital 3.4.3.1

Trust as the Basis for Raising Funds

In Chinese dictionaries, xinren (信任) is usually defined as “having trust on sb. and dare to entrust him with something,” involving both levels of conception and action, which serves as the bond and lubricant in interpersonal communication. The construction of the fundraising relationship between a university and a donor is inseparable with their mutual trust, which comes not only from the credibility of the university’s education foundation but also from the mutual trust among the donors, the foundation, and the beneficiaries. As found in our investigation, the trust, which is the basis for a university education foundation’s fundraising efforts, is under the influence of such factors as the emotion of the donors, the status of the donation system, and the foundation’s own credibility. 73

Ibid.

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Trust based on emotion

The trust based on emotion between two sides refers to the possible expectation of one side on the basis of emotional affirmation in a social action to the other side’s behavior. Such trust mainly is born of interpersonal contacts or emotional affirmation. In the process of a university education foundation raising funds, the emotion based trust involves three sources, i.e. the trust born of an individual’s complex, the trust born of the affirmation of the university’s image, and the trust born of the personality charm of the fundraising workers. As far as a university education foundation is concerned, the individual’s complex may be the alma mater complex of an alumnus or alumna, or other types of complex. The alma mater complex is the original intention of almost all alumni in giving donations to their university. This is true of the alumni who have graduated from and left the university, those working in the university after graduation from it, and those still studying in it. The reminiscences of their alma mater and deep attachment to it they have cherished are enough to let them have trust on their contributions to the educational undertaking of their alma mater. When speaking of this issue, a worker in the foundation said, XX is an alumnus of SD University. When he was studying in the university, he was an impoverished student who was aided by a donor to the university. After graduation, when he knew that impoverished students could be aided via the student subsidy programs, he donated an amount of fund to SD University, for he cherished affection to his alma mater. He said, “With my donation, these aided students can graduate smoothly, and surely that is worth my funding. I am willing to help them.” (JF5)

The donation on the basis of other individual complexes has usually to do with an individual’s values, philanthropic idea, interests and hobbies, and the uses of the donation are also extensive. A worker in the foundation told us in an interview, When SD University prepared to build a fencing hall, the university received some funds donated from society. A donor, who was not an alumnus himself but the son of an alumnus of the university, said he donated in order to fulfill his late father’s last wishes.” (JF3)

2.

Trust for endorsing the university image

The affirmation of the public image of a university is an important factor for winning the public’s trust and bringing about donating behaviors. In an interview, a worker in the foundation told us the following story. A real estate company boss offered to make a donation of RMB 1 million to SD University and later each year he donated at least 1 million to the university. He told us that, as he lived near the university, he had a walk everyday on the campus and found the students of the university simple and well-mannered. He had been to many other places and also known many other universities, but he felt that this university’s students were different. The donor gave us an example. One day in a winter, it snowed heavily. When he strolled on the campus, he saw a student, who had found an old man walking with a heavy bag on the snowy path in the distance, hurry up and help the old man with carrying the bag. Sometimes, when he drove along a street on the campus, the students got out of the way for him. And he said he had never seen any report of uncivil behaviors on the campus. So he believed the university was a good one and offered initiatively to donate fund to it. (JF3)

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Trust born of individual personality charm

The fundraising workers of a university education foundation contact the donors most directly and frequently and their own work ethics and competence as well as reputation display most straightforwardly the image of the foundation. In the fundraising process, their personal charm usually serves as the bond linking both sides. When interviewed, the member of the leadership of the university who participated in the foundation’s fundraising affairs said, The personality charm cherished by the alumni of a university is usually attributable to the former university presidents, deans, and teachers who left good impression on them when they studied in the university, and of course, also to the university’s fundraising workers who contact them at present. The alumni donate funds to the university because they believe it will use them for good purposes. In this regard, there is a well known example. The former president of XM University met a boss on a plane and, in their flight, they talked about the university and the boss offered to make a donation of three millions to the university. This case, to a great extent, illustrates the role played by the personality charm. (CM1)

4.

Trust based on system

The trust based on system means the trust which is born of the agreement signed by both sides or stipulated by laws and regulations, which is ensured by the current system. In the fundraising mechanism of a university education foundation, the trust on the level of the system comes from the agreement between the foundation and the donor as well as the legality of the foundation itself. The donation agreement, the signing of which is a step in a standardized donation procedure, refers to the written agreement concluded between the donor and the recipient with regard to the type, quality, quantity, and use of the donated property. As stipulated clearly in “Regulation on the Administration of Foundations,” a foundation shall utilize its properties in accordance with the purposes and scope of the activities for the public good that are laid down in its Articles of Association. Where the donation agreement specifies the ways of fund utilization, donated funds shall be used in conformity with such agreement…Where the assisted fails to utilize assistance in accordance with agreed provisions or has breached the assistance agreement in other ways, the foundation shall have the right to terminate the assistance agreement.74 In the meantime, as a non-profit legal person, a foundation shall be subject to the authorities in charge of its supervision, which is embodied as the annual inspection, the daily supervision and administration, and the inspection of whether the foundation carries out charity activities according to law and its Articles of Association, made by the governmental department administering the foundation, the daily supervision and administration, the inspection of whether the foundation carries out charity activities according to law and its Articles of Association. Such provisions provide the legal basis for managing and using the donated property. Since the founding of SD University Education Foundation, it has formulated its system of detailed rules for donation management on the basis of the university’s status, including, for example, 74

PRC State Council, “Regulation on the Administration of Foundations”, effective since June 1, 2004.

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“Rules of Donation Management”, “Rules of Naming Donation Programs”, “Rules of Financial Management”, and “Rules of Fund Operation Management”. In this way, at the level of rules, these rules have ensured the unity and standardness of the foundation’s management and formed an open and transparent mechanism for accountability. By strengthening its supervision of the donation procedure and its feedback mechanism, the foundation has enhanced the mutual trust between it and the donors. 5.

Credibility based on information disclosure

Keeping open and transparent and making information disclosure are a mechanism prevalently advocated among foundations. After the introduction of “Regulation on the Administration of Foundations,” an overwhelming majority of university education foundations have laid emphasis on information disclosure, regarding it as an important path towards credibility. Since its founding, SD University Education Foundation has emphasized the disclosure of information, via the university’s internal newspapers and periodicals, the foundation’s website, annual summaries, and meetings of the foundation’s board, of its status of donation income and expenditure, its operation of fundraising programs, and other respects. When interviewed, a worker in the foundation said, The university education foundation has adopted a lot of ways, such as program design, information feedback, and contacts with the donors, in order to ensure that every donated sum will be utilized where it is needed so that it can produce effect as expected. At regular intervals, we make public the foundation’s income and expenditure status via newspapers and websites, keeping the public informed of the use of the donated funds, so as to foster our credibility well.

All the trust built up on the basis of emotion, system, the university’s image, personality charm, and the foundation’s own credibility will ultimately turn to the donors’ expectation of the public welfare effect their donations will produce and the foundation’s efforts to realize their expectation. The actual effect will affect directly the mutual trust between the two sides. Only effective trust can be contributive to building a social relationship network for sharing information between the donors and the foundation and to accumulating capital within the donation network.

3.4.3.2

Social Network as a Fundraising Platform

By “social network” is meant that a relatively steady system of relationships developed by the individual members of society through the interactions among themselves, which is a group of unique links between individuals or between organizations, and in which individuals or organizations function as its nodes. The formation and maintenance of a social network constitute a platform by which a university education foundation expands, accumulates and operates its donation resources. According to the different network participants, the social networks of a university education foundation can be classified into the network with alumni as its mainstay, the network

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of enterprises, the network of the colleges and departments in the university, and the network of the general public. 1.

Network of alumni

The alumni association network of a university, as the platform where the alumni of the university contact it, is one of the sections most closely related with the university education foundation. From the angle of a network, the greater the scale of the alumni network is and the more the contacts among the alumni are, the more resources the university education foundation can mobilize from it. The alumni association keeps the alumni in contact with the university via points, lines, and planes, making it possible to rally the resources in the network to the greatest extent, which serves as a platform for the foundation’s fundraising activities. The framework of SD University’s alumni association network is wide-ranging, as a worker in SD University Education Foundation mentioned, Our alumni association network is actually based on a globalized framework, and particularly in recent years, in China, we have set up over sixty alumni associations. Every city in SD Province has an alumni association and every province of China has an alumni association. In some developed regions of the country, regional alumni associations have also been set up, for example, the Yangtze Triangle and Zhujiang Triangle, where their regional alumni associations have been founded. Besides, we have set up some overseas alumni associations, particularly in some regions of the developed countries, where our alumni are relatively concentrated. … Our alumni association system is forming a large network of organizations. (AM6)

An extensive and all-round university alumni association network, in essence, is also a network of resources for the university’s education foundation. The alumni activities organized by alumni associations, such as the university leaders visiting alumni in different regions, the “back to university” parties of alumni to celebrate their day of entering or of graduating from the university, and the university’s major celebrations, can be the opportunities for the foundation to expand its fundraising channels. A network of alumni associations at home and abroad serves as not only a network for linking alumni and organizing their activities, and cementing the emotional bond between them and their alma mater, but also a network for the foundation to rally and integrate the best donation resources. 2.

Network of enterprises

In China, the donations made by private enterprises to support higher education is the result of certain social–historical conditions, which has much to do with their accumulation of social fortune and the elevation of their sense of social responsibility. Besides, under the current backdrop of educational system reform in China, the idea of multiple subjects participating in running education has been put into practice. Thus, more and more universities have begun to attach importance to fostering their capability of contacting society and serving society, and more and more programs for the cooperation between universities on one side and enterprises, localities, and research institutes on the other have been conducted. All these have laid foundation for university education foundations turning to enterprises for raising funds.

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A network is the totality of formal or informal relationships developed by the behavioral agents with the aid of the flow of resources in actually taking part in activities actively or passively.75 In its fundraising process, a university education foundation will enter inevitably into direct or indirect relationship with enterprises and other social organizations. Between enterprises and the university, the foundation should give full play to the bond as which the university board and the university cooperation and development committee function as in fortifying its link with enterprises and maintaining the existent corporate resources. In the meanwhile, by means of the advantage of the network in transmitting information and resources, it should intensify sharing information and resources and communicating with enterprises, thus elevating the capability of the enterprise network in integrating and mobilizing resources. 3.

Network for cooperation among university colleges and departments

In its fundraising process, SD University Education Foundation has also attached importance to the construction of the network with the university’s colleges and departments as its nodes. As the university’s secondary units, the relationship of the colleges and departments with their alumni is closer and the cooperation between them and their cooperative enterprises is more straightforward. Therefore, they are more liable to establish trust relationship with their alumni and cooperative enterprises. For this reason, the social networks of the colleges and departments of the university have become important channels for expanding resources. In an interview, two workers of the foundation said, After graduation from a university, the alumni may keep close contacts with their supervisors, instructors, and possibly other people who helped them when they studied in the university, rather than with the university’s education foundation. When an alumnus wants to contribute to his alma mater’s development, he does that more probably via his former teachers or others he trusts than by going to the foundation and giving funds directly to it. This is something very natural. When he studied in the university, his teachers then offered help to him, which has proved important to his growth. So when an alumnus contacts the university, he will probably turn first to those he trusts most, who have kept close contacts with him. This is a bi-directional process. When an alumnus has made success in his profession and wants to donate funds to support the development of his alma mater, then what he will do first is probably to contact those people most reliable to him. (CM1) Though the work of raising funds is what a functional unit in charge of it should do, it is also a matter of disciplinary development, which means it is something shared by the university and its colleges. Many donors, when they donate, tend to consider the development of the college where they studied or which they prefer. The alumni who studied in a college of the university or those who are in contact with the college tend to donate to it. Compared with the university, some donors may be more in favor of a certain college or some members of its faculty. (AM7)

4.

The social network for the public participation

Constructing a fundraising network oriented to a special group of individuals and organizations is an important path for a university education foundation to raise 75

Cai and Tian (2008).

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funds. By contrast, the donation by the public refers to the voluntary behavior of the donating side in the general public on the basis of the philanthropic idea or concept. The formation of such a network depends largely on the advocacy of the university education foundation and the intention of the donating side. SD University Education Foundation has taken various ways for delivering its fundraising initiatives, for example, transmitting information by the foundation’s website, Weibo (microblog), holding large scale fundraising activities or annual donation events, and the alumni’s “back-to-alma mater” activities. As described by an interviewee, Our education foundation is an NPO, and different from a public foundation, it cannot solicit funds from the general public. For example, it shall not put some charity boxes on the public sites for raising funds or have charity sales. However, it can do some other things. For example, its workers may talk with some alumni about donations. It shall not publicize fundraising information, for example, by newspapers and advertisements, but can publicize the university on its website and let the public know what problems the university is faced with…. By these ways, the foundation can establish certain initial relationship with the alumni, some entrepreneurs, and some people who are enthusiastic about charity, then deepen mutual understanding and finally find suitable donation programs. (JF3)

At present, the alumni, enterprises, university colleges and departments, and the public constitute the main body of the fundraising network of a university education foundation. This pattern is the result of China’s universities carrying out an education model with multiple participants in running them under the backdrop of China’s reform of its higher education system, which serves, furthermore, as an important bond between universities and society. The closer the relationship between universities and society is, the better it benefits a university education foundation in expanding its fundraising network. The size of its fundraising network and its capability of integrating resources determine directly its fundraising scale of a university education foundation. Therefore, promoting the resource transmitting and information sharing among different subjects in the network on the basis of taking into account their different characteristics as participants in the network constitute the core of a university education foundation’s efforts to develop its fundraising network and enhance its capability of integrating resources.

3.4.3.3

Mutual Benefit Norm as a Guarantee for Raising Funds

Mutual benefit norm represents an important principle for maintaining the relationship among the different parties in an action. Social norm embodies the consistency between social reason and personal reason which is produced by the negotiation between the two sides in which the public experience gradual trial-errors in a repeated game process for the purpose of realizing personal interests in their communications.76 The process of raising and using funds of a university education foundation also involves the mutual benefit and all-win among all the participants, which means an organic unification of their interests. Specifically, the mutual benefit norm in the 76

Chen (2011).

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fundraising mechanism of a university education foundation includes such formal norms as law and regulation norm, and acknowledgments norm and some informal norms on the basis of traditional factors such as history and culture. The formal mutual benefit norms refer to the institutional reciprocal norms in the form of officially established laws, regulations, and treaties. The main feature of such norms is their strong stability, which is productive of the trust between the parties. In the mechanism of a university education foundation, the formal mutual benefit norms mainly include norms guaranteed by policies and preferential laws and regulations, the incentive norm oriented to university colleges and departments, and the norm for acknowledgments to the donors. 1.

Preferential policies, laws and regulations

The introduction of the “Regulation on the Administration of Foundations” has given legality to a university education foundation’s reception of donations from society. Meanwhile, as an NPO serving the public welfare education, a university education foundation is entitled to applying for tax exemption. The interest income from its fund deposit is free from corporate income tax, and, within the stipulated range, the fund an enterprise or an individual uses for public welfare donation is also free from tax. Thus, when receiving social donations, compared with alumni associations and other university departments such as the university board, a university education foundation is advantageous. This advantage not only encourages individuals and enterprises to donate but also benefits the cooperation of the foundation with the university’s alumni associations, the university board, and the colleges and departments of the university, which is actually the basis for the construction of its fundraising network. 2.

Incentive norm for university colleges and departments

With the improvement of university education foundations’ performance, the strategy of employing a university-college mechanism to mobilize the initiative of the fundraisers has been widely practiced in universities in China. The funds received by a university education foundation are aimed to serve the university. The university’s secondary colleges and departments, as fundraisers, are at the same time the beneficiaries of the donated funds. Therefore, it is easier to build up the mutual benefit norm between the foundation and the colleges and departments. To mobilize the enthusiasm of the secondary colleges and departments in raising funds, some universities’ education foundations have formulated their internal incentive policies to stimulate them, for example, rules for the fundraising work and the awards thereof. When interviewed about the role played by the incentive norm in fundraising work, a worker in SD University Education Foundation said, For a university’s fundraising work, it is necessary for the specialized fundraisers or specialized team of workers to guide it in regard to the state’s fundraising system, particularly the award proportion policy pursued by the Ministry of Education, and to stimulate the university’s efforts to raise funds. If the policy stipulates that, when a university gets funds successfully, awards can be given to it, then it will be more enthusiastic. On the other hand, if a university formulates its policy of, for example, after the university gets funds due to

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the fundraising efforts by secondary colleges and departments, giving a certain proportion as awards to them, then they will be more ardent in their fundraising work. (JF3)

3.

Norm for acknowledgments to donors

Mutual benefit is one of the strategies employed by a university education foundation. In the Articles of Association of the foundation, besides the provisions on the rules of the reception, use, and management of donations, the rules of acknowledgments to the donors are also stated, which clarify the main forms of expressing gratitude to the donors for their donations or giving feedback to them about their donations, usually including registering the names of the donors for commemoration, issuing donation certificates to them, erecting tablets for commemorating the donations, publicizing the information of donations via mass media, compiling donors’ register, naming the donations after the donors, engaging the donors as the university’s advisory professors or part-time professors, etc. The donors who give large sums of funds can be engaged as members of the university board or directors of the university education foundation. In the permitted range, the university can confer certain titles of honor on the donors and offer honorable feedbacks to them, thus cementing the relationship with them. Different from formal mutual benefit norm, informal mutual benefit norm refers to the conventional mutual benefit norm on certain behaviors, which has been formed on the basis of such traditional factors as history and culture. Such norm represents some consciousness which can be incentive to certain behavior. From the viewpoint of culture, even if a donation behavior does not bring definite material feedback to the donor, it can benefit him in one way or another. The benefit can be personal psychological satisfaction, elevation of social influence, and image enhancement of an enterprise, etc. For example, the enterprises which contribute to charities are regarded as having a strong sense of social responsibility and a star who donates to charities can get a good image. Such intangible asset can also stimulate more social donation behaviors to some extent, bringing about more social resources to charitable foundations. The fundraising activities of a university education foundation are based on the philanthropic spirit displayed by the donors with intention to give funds to support education. In terms of instrumentality, mutual benefit norms are the important dynamics promoting donating behaviors. It is these formal or informal mutual benefit norms that guarantee the operation of the fundraising mechanism and serve as the bonds maintaining the fundraising network. These also constitute the basis for the long term trust built up by a university education foundation. Therefore, it is the only road for a university education foundation in improving its fundraising mechanism to establish and keep on perfecting the formal and informal mutual benefit norms and promote the reasonable mutual benefit to both the donors and the foundation itself.

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3.4.4 Summary It is found by the above study of the case of SD University Education Foundation that, trust, norm, and social network constitute the core of the fundraising mechanism of a university education foundation, and a university education foundation’s fundraising is a process of integrating resources, with the trust as its basis, the social network as its platform, and the mutual norms as its bond. Of the three, the establishment of the trust is subject to such factors as the donor’s emotion, the foundation’s own system, and its credibility, and so on; the social network platform comprises the university’s alumni, enterprises, the university’s colleges and departments, and the public; the mutual benefit norms involve the formal mutual benefit norms guaranteed by the current system and the informal mutual benefit norms confined by traditional culture. Both the fundraising cooperation of a university education foundation with the university it belongs to, the university’s colleges and departments, the alumni associations, and the university board, and its efforts to integrate resources, including the university’s cooperative enterprises, members of the university board, alumni, and other individuals and organizations, have propelled the foundation’s fundraising work. The three major factors, i.e. trust, norms, and social networks, are interdependent and inter-influencing. Trust constrains the expansion of the fundraising networks, mutual benefit norms bear on the maintenance of the fundraising networks, and the size of the fundraising networks determines the capability of integrating and mobilizing donation resources, directly concerned with the fundraising scale and development potential. Therefore, a university education foundation should promote the sound development of the three major factors to the greatest extent, which will lay the solid basis for the sound operation of its fundraising mechanism. Since their emergence in 1980s in China, university education foundations have injected new vitality into China’s initiative of reforming its higher education system, and opened new channels for making up for the insufficiency in funds for running universities, and, in recent years, they have gained increasing momentum in their development. However, in their fundraising process, China’s university education foundations have met some problems, such as the limited expansion of fund networks, inadequate credibility, inadequate trust for raising funds, and the restricted space where mutual benefit norms cannot play their role fully. The deep rooted reasons for these problems are, among others, that the socio-cultural atmosphere for charities is not dense, the system and supporting policies concerning charities need improving, the fundraising work of a university education foundation is too much subject to the university it belongs to, and a foundation’s initiative and capability of raising funds is inadequate. Thus, to improve the fundraising mechanism of a university education foundation, the following three paths can be considered. (1)

University education foundations should make more efforts to build themselves and foster social trust. First, more attention should be paid to nourishing alumni culture for creating better ambience of donation. To this end, university education foundations should play a better role in leading the publicity of charity culture and make better use of the modern communication means to

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publicize charity culture and their philanthropic spirit, better blending the idea of individual self-realization through participating in the charitable foundation into the alumni culture and bring it into the daily life of the public. Second, the social image of universities should be enhanced further to strengthen their competitiveness in raising funds. On the one hand, a university should improve its concepts of conducting its education programs to elevate its educational and teaching performance and enhance its capability of serving society and locality, thus broadening its social influence. On the other hand, a university’s education foundation should exert itself more to construct its brand, and, by using media resources flexibly, probe more fundraising programs with better brand effect and appeal to increase its social popularity and competitiveness in fundraising activities. Third, the donation procedure should be more standardized to elevate the foundation’s credibility. The university education foundations should apply more standard procedures for donation, fulfill the donation agreements better, and formulate and practice strictly their rules over using funds, operating programs, and acknowledgments to donors. It should make transparent information disclosure to ensure that the funds are used reasonably and apply just and legal fund operation and audit modes to guaranteeing scientific management of the funds. University education foundations should make more efforts to cement the relation with society and expand the fundraising network. A university education foundation should make better use of the university’s social resources available, integrate further the social capital inside and outside the university, and make the network nodes more detailed, thus expanding the size of the network. First, it can use better the alumni platform of the university it belongs to, collect and substantiate further the information base of the alumni, improve the network for the work regarding alumni to fortify the emotional bond between them and their alma mater, and mobilize them to join in the foundation’s fundraising work. On the other hand, the familiarity and emotion advantage of the university’s colleges and departments in contacts with their alumni should be given more play to. More work can be done to get closer to the alumni and serve them better so as to stimulate their ardency of contributing to their alma mater. The foundation’s overall capability of mobilizing the resources inside the alumni network and exploiting more outside resources should be upgraded to increase the proportion of the donations from the alumni to the total. Second, the influence of celebrities can be given more play to in expanding channels for raising funds. To a university education foundation, the celebrities include the university leaders, members of the university board, the directors of the foundation board, reputed scholars, professors, entrepreneurs, distinguished alumni, etc., who, with considerable social popularity and influence, can offer help to the foundation. Celebrities joining in the foundation’s fundraising work is not only conducive to enhancing the foundation’s social image and attracting more social resources but also serves as a bridge for the foundation in its contact with high level donors and broadening its fundraising channels. Third,

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the affinity with society should be cemented to attract more people to donation. With the furtherance of China’s reform and opening and its sustainable economic and social growth, more wealth of individuals and enterprises has been accumulated considerably. So university education foundations should shift their fundraising strategy and take more active measures to attract donations. By enhancing the social popularity of the foundations and optimizing their design of fundraising programs, the foundations should strengthen their connection with society to attract more people to join in the public welfare activities supporting the higher education of China. University education foundations should make more efforts to improve their internal management and mutual benefit norms. By formulating necessary rules for awarding donations, improving the inside incentive system, and urging relevant governmental departments’ introduction of supporting awarding policies, the mutual benefit mechanism between a university education foundation and its donors should be improved. Thus, the foundation’s fundraising network can be effectively maintained and the social trust on the foundation can be enhanced, adding to its advantage in its fundraising work.

First, the mutual benefit norms should be improved and necessary donation awarding mechanism should be introduced. A university education foundation should boost the social benefit of donating behaviors by such ways as bettering its rules for acknowledgments to donors, erecting honor list of donors, naming buildings after the names of donors, publishing information on media, issuing honor certificates, engaging donors as members of the university board, and providing donors with the priority right of using the university resources. The mutual benefit and win–win effect can be further strengthened to attract more donation resources. Second, the internal management of university education foundations should be improved and particularly the internal incentive system should be set up. A university education foundation needs to draw on the modern enterprise management system, forming its independent assessment mechanism which can stimulate better the fundraising motivation inside it. In regard to engaging professional fundraisers, the foundation can follow the open recruitment model of modern enterprises. Regular training of the fundraisers should be conducted with regard to the fundraising concepts, principles, and skills, and emotional maintenance, with the aim of building a strong professional team of fundraisers who are advanced in philanthropic idea and good at finding, seizing, and digging fundraising information. Meanwhile, the incentive mechanism oriented to the university’s secondary colleges and departments should be improved, so as to give better play to their advantage in contacting social resources and thus lifting the foundation’s fundraising ability. Third, the foundation should try to gain more support from the government in the form, for example, of preferential supporting policies, by which better environment can be created for the foundation’s fundraising work.

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3.5 Conclusion and Discussion The present chapter is devoted to studying the types and status quo of China’s charitable foundations, the features of their fundraising mechanisms, and the law and features of their transferring expenditure and its features. The types of intermediary organizations for charitable donations are complex, each with its own characteristics. The charity federation system of China has established from top to bottom a large organizational system and assistance system, which is seeking to shift from administratively dominated operation to the operation dominated by orientation to society and market. The growth of foundations is very rapid and the public and non-public foundations are different in their development paths and operating mechanisms. Most public foundations are related closely and complexly to the government and 99% funds granted by the government have flowed to the foundations with governmental backgrounds, most of which are public foundations; the non-public foundations are multifarious in their forms and more mature in their operations oriented to society and market, which have given nearly half of their funds to university education foundations. Since 2011, the increased quantity and growing speed of non-public foundations have outpaced those of public foundations. Despite their considerable distance from the scale, total amount of raised funds, and influence of public foundations, the non-public foundations are striving to narrow the distance. In the framework of China’s “state and society” relationship, analyzing the operations of charitable foundations in China is much theoretical and instructive. Due to the inertia caused by the charitable foundations’ dependence on the governmental resources and the habit of the government in eroding the power of the charitable foundations, the demarcation between them in their relationship has not been clear cut and definite. This fuzziness has been reflected in the operations of the charitable foundations, which are featured by the cross existence or juxtaposition of the administrative mode, the marketized mode, and socialized mode. In different types of foundations and in different historical periods of the same foundation, one of the three modes functions or they work together. At present, there are some shortcomings with the operating mechanism of China’s charitable foundations. First, most public foundations are strong in their administrative color, weak in their autonomy, and the administrative operation mechanism has still played a considerable role. Second, the ways of raising charitable funds are rather limited, with insufficient total amount of charitable funds, calling for the socialized operation forces making more efforts to tap social resources. Third, the utilization of charitable funds is not reasonable, the foundations’ credibility is inadequate, and an open and transparent information disclosure mechanism has yet to be constructed. Charitable foundations supply directly quasi-public goods by collecting social resources and assistance to the disadvantaged social groups, thus fulfilling their function of serving society. In this process, to guide and administer the charity undertaking, the state inevitably permeates into the operations of the charitable organizations by political, legal, and administrative means, which influences deeply the

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operations of charitable foundations. To promote the sound development of charitable foundations, it is imperative that, first, the relationship between them and the government be recast and the government, by reforming the current system, give up more social space and resources to them, and then the charitable foundations enhance their credibility and their self-capability of raising funds and providing assistance. Under the present social structure, specifically, it is important that the following three forces interact for a long time: the force of the state from top to bottom, the force of society from bottom to top, and the internal force from inside to outside. As far as the state force is concerned, the government needs to take initiative first to formulate and improve relevant laws and regulations. First, the relevant legislation should be upgraded and the charity law should be made as soon as possible, so that charitable organizations’ performance can be based on the laws and regulations and meanwhile if they violate them, they must be investigated and dealt with. The government of the United States has developed a multi-layered coordinative relationship with American charitable organizations by passing such laws and regulations as “Constitution of the United States of America”, “Internal Revenue Code”, and “Regulating the Management of Charities”.77 China can draw on America’s experience in this regard and define the relationship between the government and the charitable organizations clearly, ensuring that the charity undertaking and its reputation are free from injury. Second, the provisions concerning tax exemption should be set up and constantly improved so that the tax and finance policies are in favor of the development of charities. The taxation leverage can be used better to reduce or remit the taxes on the funds donated for charitable purposes, and thus donors can enjoy preferential taxation, which will encourage enthusiasm in joining in charitable donation. Third, when the technical conditions get mature, the state should start to levy legacy tax, gift tax, and even special consumption tax, and guide the rich people to take more social responsibility. The policy and law based readjusting mechanism can be applied more effectively so as to rally more social resources and push charities ahead. Second, more efforts should be made to probe the ways of cooperation between the government and the charitable organizations. The functions of the government should be transformed so that the government can realize its rational return to such functions as formulating laws and regulations, guiding at a macro level, offering financial aids, and providing policy-based support. First, the current management system should be reformed further and the entry standards should be lowered, thus promoting the well balanced development of different types of charitable foundations. Second, more social participation should be encouraged. The government can do more in this regard, for example, by building the grassroots democracy, conducting education of public welfare morality, and constructing communities as platforms for enhancing the consciousness of charity on the part of the general public. Third, more financial support should be provided on a selective basis to charitable organizations and, by such forms as call for bids and proxy agency, the business and resource which are

77

Feiock and Andrew (2006: 759–767).

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more suitable for charitable organizations’ operation can be transferred to those competent ones for their better operation.78 In regard to the social force, the first thing to be done is to foster the citizens’ consciousness of charity. The development of charity, as a social undertaking, is based on the citizens’ consciousness of charity and the social values of charity. The awakening of the social consciousness of charity is closely related with the civic consciousness, civil society, and democratic consciousness.79 Due to such factors as history, politics, and ideology, citizens in China, are weak in civic consciousness. More efforts should be made to spread the charity culture and concepts by various ways and channels such as the government issuing relevant documents, the leaders practicing earnestly what they advocate, the advocacy of charity in the entire society, the guidance of public opinions in favor of charity, strengthening charity education in schools and universities and reporting by the mass media, giving better play to the celebrity effect of social elites and the social advertising effect of the charity programs. A platform should be built up where the general public can join in charity with ease and various charity activities and voluntary activities can be carried out to encourage the public to take part in. By all these, a more favorable environment in society can be created for the sound development of charities. Second, international exchanges should be more promoted to strengthen the domestic charitable organizations’ linkage and cooperation with international NPOs. By cooperation with foreign NPOs, probably they can get their support in funding probably and draw on their advanced program management expertise, which represent an effective way of pushing the government to transform its functions and promoting charitable organizations’ self-governance. As regards the internal force, as a priority, charitable organizations should exert themselves more to foster their own capability and standardize their internal management. The most important thing for them is to build a sound system of organizational management and recruit professionals specialized in charities. Then, all their socialized and institutionalized fundraising mechanism, system for program performance assessment, and strategic development plan should be improved. They need to do more to exploit more charity resources involving those of enterprises, individuals, and other social organizations, and set up their more efficient mechanism of mobilizing and receiving regular donations. In a sense, a charitable organization should “market” itself as an enterprise does.80 This is because it needs to strive by itself to win trust from the general public and persuade enterprises and individuals into donating to charities, and, in raising funds and carrying out charity programs, needs to learn from an enterprise’s mode of market-based commercial operation and sharpen its sensitivity to social demands so that it can make rapid responses. Finally, charitable organizations should introduce a more effective autonomy and heteronomy mechanism and build a just and transparent information disclosure mechanism so

78

Ren and Jiang (2006). Ren and Jiang (2006). 80 Chen (2003: 101). 79

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as to enhance their credibility and organizational transparency. A charitable organization should make public its financial status at regular intervals, practice a strict audit system, and fortify its own capability of mobilizing social charity resources by elevating its credibility. In addition, more efforts need to be made to strengthen the governmental and social supervision and regulation of charitable organizations, set up a scientific system for their assessment, and give more play to the function of the public and the media in their supervision.

References Ai, R. (2014). A comparison between public and non-public foundations, http://wenku.baidu.com (2014/12/10). Beijing Normal University China Philanthropy Research Center. (2012). Research report of philanthropy in China 2001–2011. Beijing Normal University Press. Cai, N., & Tian, X. (2008). A study of NPO in cooperation with enterprise and its competitive edge: A network-based perspective. Studies of Science of Science, 2. Chen, M. (2003). A study of the strategic management of NPOs. Heilongjiang People’s Publishing House. Chen, Z. (2011). A study of the phenomenon of ‘The Rich Rules the Village’ in Zhejiang Province from the perspective of social capital. Journal of Nanjing Party Institute of CPC and Nanjing Administration Institute, 5. Chen, Z., & Zhou, Z. (2011, November 24) Eight categories of social organizations can apply directly for registration. Guangzhou Daily. China Charity & Donation Information Center. (2014). Annual report on philanthropy in China for the year 2013. China Society Press. Ding, Y. (Ed.). (2005). Accountability, performance, and governance: A study of the governance of the non-governmental public sectors in China (pp. 156–157). China Economic Press. Du, H., & Gao, J. (Eds.), Philanthropy and harmonious Society (Vol. 3). Jinan Press. Feiock, R. C., & Andrew, S. A. (2006). Introduction: Understanding the relationships between nonprofit organizations and local governments. International Journal of Public Administration, 29, 759–767. Guo, G. (2001). A Study of Modern NPOs (p. 50). Capital Normal University. He, W. (2010). Semi-administration: On the possible strategies available to China’s charitable organizations. Study and Practice, 4, 50. Huang, S. (2014, December 3). State public servants shall not take part-time positions in social organizations. Nanfang Daily. Li, L., & Chen, J. (2009). Coordinated governance: The actual game between public foundations and the government in China and the trends in their relationships. Xuehui (China NGO Research), 11. Liu, J. (2007). On the strategic shift of the relationship between Chinese government and charitable organizations in the period of transformation. Gansu Theory Research, 1, 14. Liu, Z. Non-public foundations: Mission and responsibility. Narada Foundation Network, http:// www.naradafoundation.org/html/2012-07/15197.html (2012/7/25). Liu, Z. (Ed.). (2013). Annual report on China’s foundation development (2012). Social Sciences Academic Press, 24–28. Ma, X. (2004). A study of China’s non-public foundations and their management system. China Civil Affairs, 6, 40. Narada Foundation. A survey of China’s non-public foundations. Narada Foundation Network, http://www.naradafoundation.org/html/2012-07/15197.html (2012/7/30).

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Narada Foundation, “About Us”, http://www.naradafoundation.org (2007/12/10). Orosz, Joel J. The Insider’s Guide to Grantmaking: How Foundations Find, Fund, and Manage Effective Programs. San Francisco: Jossey-Bass Publishers, 2000. Pan, Q., & Jiang, T. (2014, May 29). Yangzhou’s first hammer blow for the charity auction of the right for naming municipal engineering projects in China. Yangzhou Evening News. PRC Ministry of Civil Affairs. (2004). “Regulation on the Administration of Foundations”, effective since June 1, 2004. PRC Ministry of Civil Affairs, “Rules of Annual Inspection of Foundations”, issued on January 12, 2006. Qi, B., (Ed.). (2001). Non-governmental organizations: Management, construction, and development (Vol. 264). Shandong University Press. Ren, Z., & Jiang, Z. (2006). A comparative analysis of the development of charities between China and other countries: With some discussion of the approach to developing charities in China. Chinese Charity Culture Forum (Wuxi, Jiangsu) and First Mayor Forum on Charity. Salamon, L. M., et al. (1999). Global civil society: Dimensions of the non-profit sector. Kumarian Press. Sun, W., & Liu, Z. (Eds.), Annual report of China’s Foundation development (Vol. 20). Social Sciences Academic Press. Tao, C. (2005). Suppliers of social welfare: NPO, public sectors, and market (Vol. 240). Tsinghua University Press. Tian, K. (2004). Non-coordinated constraint and organizational operation: A case study of the relationship between China’s Charitable Organizations and the Chinese Government, Commercial Press. Wang, J. (2005). A theoretical interpretation of NGOs, with an analysis of the conflicts between the current laws of China on NGO and solutions. China Fangzheng Press, 5. Wang, M., & Jia, X. (2002). An analysis of the development of China’s NGOs. Management World, 8, 30–31. Wang, M., & Liu, P. (2004). An introduction to non-governmental organizations (Vol. 91). Current Affairs Press. Wang, R. (2007, October 2007). Reviving China red cross foundation. China Philanthropy Times. Wu, G., & Li, G. (2006). Research report of philanthropy development mechanism, http://www. zjmz.com (2006/10/24) Wu, G., Li, G., Huang, Y., & Tao, C. (2006). A research report of the development mechanism of philanthropy. Zhejiang Civil Affairs, 10. Xu, H. (2009, June 30). Charitable funds welcome their coming-of-age ceremony. China Philanthropy Times. Xu, H., Du, Z., & Wang, H. (2011). Breaking the misunderstanding of NPO expenditure by comparing China and Foreign foundation management costs. China Foundation Center Network, http://news.foundationcenter.org.cn (2011/7/27). Xu, H., Du, Z., & Wang, H. (2011). Large donations: The age of public foundations ‘Leaning on a Moneybag’ may come to an end. China Philanthropy Times, http://www.chinadevelopmentbr ief.org.cn/ news-3314.html (2011/4/8). Xu, Y. (2004). Spring comes for non-public foundations, China Youth Development Foundation Newsletters, 20 (December 3, 2004). Xu, Y. (2006). On the development of non-public foundations in China: With reference to bright China foundation in Beijing. Xuehui (China NGO Research), 7, 20. Xu, Y. (2010). On foundations: A study of the transformation of foundations in China. China Society Press, 117. Xu, Y. (2012). Transformational reform of public foundations: difficulty and innovation. In T. Yang (Ed.), Annual report on China’s philanthropy development. Social Sciences Academic Press Xu, Y. (2013). Yongguang Xu asks China charity federation ten questions. China Fortune, 7. Yang, T. (1998). A survey of charitable organizations in China. China Social Work, 1.

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Yang, T., & Ge, D. (Ed.). (2007). Harmonious society and philanthropy. Social Sciences Academic Press Yang, T. (Ed.). (2013). Annual Report on China’s Philanthropy Development (2012). Social Sciences Academic Press. Yu, W. (2005, November 1). Chengdu donates over RMB 10 Million in the one day charity. Chengdu Evening News. Zhang, L. (2006). Zhai Meiqing’s Heungkong charitable foundation with the registration No. 001 striving to be No. 1 in China. Spring Breeze, 8, 14. Zhang, L. (2013). Giving thanks to life and dedicating oneself to work. http://www.sdcs.org.cn/eap (2013/12/4). Zhang, X. (2012, March 6). Civil affairs ministry to introduce foundation behavior standard and activity norm. China Philanthropy Times. Zhao, H. (2013). From administrative dominance to pluralism: A study of the operations of charitable organizations. China Social Sciences Press. Zheng, G. (2005). Modern charities and their development in China. Academia Bimestrie, 2, 36.

Chapter 4

Cultural and Social Factors Bearing on Charitable Donation Jianguo Gao, Yanzhuo Deng, Xiao Wang, and Jianjun Dong

The factors influencing charitable donation are complex. The major ones include cultural factors such as traditional historical and cultural values and charitable donation consciousness, as well as external social factors like the economic development level, tax incentive policy, as well as government regulation and social supervision mechanisms. The present chapter is mainly concerned with the cultural and social factors affecting charitable donation.

4.1 Cultural Factors When probing the reasons for the massive difference in the level of charitable donations between China and Western countries, many scholars have emphasized the significant influence of differing traditional cultural values.1 Generally, the traditional cultural values of a group of people refer to the mainstream core values internalized unconsciously by the group over a complex and lengthy process of historical practice, while the charitable donation awareness of a society reflects the general opinions on charitable donation, which is itself under the deep influence of its traditional cultural values. Despite the subjective nature of cultural awareness shared between them, the former is the cultural conception in a broader and more general and abstract sense, while the latter denotes a more concrete type of behavioral motivation.

1

Yang (2009).

J. Gao (B) · Y. Deng · X. Wang · J. Dong Shandong University, Jinan, China e-mail: [email protected] © Social Sciences Academic Press 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_4

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4.1.1 Traditional Cultural Factors Influencing Charitable Donation Cultural tradition and philanthropic cultural concepts exert a significant influence on charitable donation. One way of probing the influence of traditional culture on charitable donation is to clarify the internal mechanism of different cultural traditions and relevant philanthropic cultural concepts influencing charitable donation and related behavior. In Western societies, Christianity makes up the core of traditional culture. By contrast, the core of the traditional culture dominant in Chinese society is Confucian ethics. To explain the gap between China and the West in charitable donation behaviors and levels, we need to look for a cause attributable to cultural differences, so as to get a deeper understanding of the profound influence of traditional culture on the charitable donation mechanism. The core of the Christian cultural tradition is the concept of “original sin and redemption,” from which the concepts of equality, tithe, and trusteeship were derived. The Christian concept of individual equality means that all are equal before God. Tithing means that individuals should donate one tenth of their wealth or income to the church or relief for poor. According to the Christian idea of trusteeship, the wealth an individual creates in the earthly realm is owed to the favor of God and from the grace given by God to his children, rather than something that belongs to the individual himself. The individual serves as a trustee of God’s wealth and after that wealth reaches a certain level they shall return a part of it to society in return for the grace of God. Even after they pass away, only a small part of their fortune will be left to their offspring as a legacy, while a larger part will be left to society. The Bible’s words that “It is harder for a rich man to enter the temple of heaven than for a camel to pass through the eye of a needle” and the Protestant idea that “It is a shame to die with a great fortune” preached in the Bible have also driven individuals to give their wealth to society. Thus, the Christian cultural tradition not only promotes individual donations through values, but also forms a complete and systematic system of ideas regarding charitable donation that has relatively specific operational norms. At least for Christians, charitable donations are driven not only by self-discipline but also colored by “compulsory” heteronomy. Traditional Chinese charitable donations values largely rooted in China’s traditional classical culture dominated by Confucianism, that is, thinking of charity as being built with Confucian “benevolence” as the central pillar and including such concepts as people as the root, great harmony, righteousness and interests, filial piety, and fraternal love.2 Starting by supposing that human nature is fundamentally good, the thought has Confucian benevolence at the core, advocating that individuals, especially “the successful,” engage in benefaction. This is conveyed in the saying, “In times of hardship, one should first treasure oneself; In times of success, one is expected to benefit others.” Thus, the function of benefaction has been defined on this basis as a means of accumulating good deeds for rewards in this world or beyond, 2

Wang (1999).

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which has been described as “doing good and accumulating merit.” At the same time, philanthropy is built on patriarchal kinship relations, so it will increase or decrease in accordance with affinity of blood, ethnicity, and geography.3 Compared with the influence of traditional Western culture on charitable donation behaviors in the West, the influence of Confucian traditional culture on charitable donation behavior in China is embodied in more selected ways like the purely self-disciplinary orientation, the pattern of differentiation between close and distant relationships, and the familial view of wealth. The “selective rather than common” here refers to the concept of donation by the wealthy which is emphasized by Confucian traditional culture. It requires that successful people with considerable fortune and position fulfill the moral obligation of doing good and accumulating merit, though others do not necessarily have to do likewise. The so called “purely selfdisciplinary orientation” means that the mechanism which brings about charitable donation mainly depends on an individual’s internal self-cultivation rather than on external altruistic discipline. In the pattern of differentiation of close and distant relationships, self-help and mutual help are more likely to be encouraged, while donations to strangers outside the pattern tend to be restricted. Differing from the view of wealth underlying the concept of trusteeship in the Christian tradition, Confucian culture stresses the view of familial wealth. An individual makes efforts and gains wealth more for the purpose of bringing glory to his ancestors and passing it on to and benefiting his offspring. Though the foundation in traditional culture and values should not be seen as the deciding factor bearing on charitable donation, the complexity and profundity of such influences still call for much attention.

4.1.2 Charity Awareness Affecting Donation Behaviors Generally speaking, the awareness of charity concerns the complex of various conceptual forms such as motivation, consciousness, recognition, opinion, and feelings which the members of a society show in their charitable donation. It represents their knowledge, perception, and judgment they have developed regarding charity, as well as the resultant active participation. Analysis of charity awareness can be conducted from the two dimensions of motivation and the structure of awareness.

4.1.2.1

Diversity of Internal Motivation

Regarding the internal mechanism giving rise to charitable donation behaviors, generally speaking, there are two opposing opinions, i.e. rational choice and altruistic choice. When analyzing the awareness of charitable donation, many scholars start from altruistic viewpoints such as compassion and sympathy. However, such explanations simplistically attribute the internal mechanism for charitable donation behaviors 3

Zhou (2013).

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to donors’ compassion, ignoring to some extent other possible motivating factors. Economists, when explaining the motivations underlying the phenomena of charitable donations have tended to take “homo economics” as given and thereby regarded the occurrence of charitable donation behaviors as the result of the donors’ rational choice, holding that donation behaviors can bring valuable private objects or realization of personal interests.4 On the whole, altruistic motivation remains the best theoretical explanation for the occurrence of charitable donation behaviors. After all, it is hardly possible to explain, either logically or practically, the phenomenon of voluntary provision of public goods including charitable goods through only rationality and self-interest.5 In addition to those based on rational choice and altruism, there are also charitable donation behaviors based on the psychology of mutual benefit and on the concept of trust. Scholars have found it hard to neglect “crowd-following” or “blindly following” behaviors in charitable donation that are caused by pressure from special environments or specific structures. Some scholars are of the opinion that the internal mechanism underlying charitable donation is complex and diversified, and that such complexity and diversity also manifest themselves in that the causes of specific donation behavior are mixed, involving multiple motivations such as a warm glow, social position, and social pressure.6 The empirical analyses by some Western scholars, such as Moe’s study of the industrial and commercial interest groups in Minnesota7 and Mitchell’s investigation of some environmental protection groups also strongly support this view.8 Both offer in-depth explanations of the mixed motivations of donation behaviors. All these explanations provide theoretical support to the attempt to understand diversified charitable donation behaviors.

4.1.2.2

Hierarchical Awareness Structure

As the structure of charitable donation awareness is hierarchical, it can be divided into five levels. The first level is perception, which refers to the intuitive response to and understanding of charitable donation. The second is the knowledge, the various types of experience and scientific knowledge concerning charitable donation and related issues. The third is the charitable donation values, as well as the motivation for joining actively in charitable donation activities. The fourth is evaluation, which is concerned with charitable donation and related issues. The fifth is behavioral intention, referring to donors’ conscious orientation of motivating themselves to take part in charitable donation activities. We can simplify these five levels into three: the elementary level of awareness, which is the stage of obtaining knowledge of charitable donation behaviors, covering the aforementioned levels of perception and 4

Stevens (1988); Cornes and Sandler (1994: 580–598). Cliff (1995). 6 Sargeant and Woodliffe (2007). 7 Moe (1980). 8 Mitchell (1979). 5

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Table 4.1 Levels of awareness structure Charity awareness Elementary level

Behavior Knowing

Understanding the terms and concepts Knowing behaviors

Indirect charitable donationbehaviors such as spreading information

Obtaining knowledge of the function of charitable donation Middle level

Advanced level

Approving

Affirming of charitable donation behaviors

Accepting

Being passive (due to Direct yet passive some influencing factors) crowd-following charitable donation behaviors

Endorsing, believing, and advocating

Being active (seeing charity as a citizen’s duty)

Direct and active charitable donation behaviors

knowledge; the middle level, that is, the stage of approving and accepting charitable donation behaviors, covering the aforementioned levels of attitude and evaluation; and the advanced level, a stage of endorsing, believing, and advocating for charitable donation behaviors, i.e. the aforementioned level of intention (see Table 4.1). Lower levels of charitable awareness are limited to only basic knowledge of charity concepts and an individual with such awareness does not have a strong willingness to make charitable donations. Before charitable donation is understood as a citizen’s responsibility and obligation, the behaviors of not donating or passively participating in donation are indicative of lower charity awareness. In fact, a sense of responsibility is at the core of charity awareness and, compared with other social responsibilities, charity responsibility is on the higher level. Just as different people reach different realms of morality, the charity responsibility embodied in different members of the society also differs across a gradient.9 An advanced level of charitable awareness refers to an individual gratefully seeing the relationship between himself and the society where he belongs and, aware of his social responsibility, thus repaying society directly and initiatively in a charitable way. Such realm of knowledge represents an advanced level of charity awareness that a society advocates and fosters.

4.1.3 China’s Current Charity Awareness Having entered the twenty-first century, China has witnessed the rapid growth in the total volume of charitable donations. From 2000 to 2012, the annual chained rate of 9

Zhao (2008).

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increase for social donations was about 53.9%,10 and the chained relative increase rate in the special years of 2003 (the SARS epidemic) and 2008 (the catastrophic Wenchuan earthquake) respectively reached 115 and 260%. These changes reflect the enhancement of charity awareness in contemporary China, but cannot cover up the extant lagging behind and passivity, as well as the low degree of development. The lag in charity awareness is indicated by the following two facts. On the one hand, the overall level of the charitable donation awareness in China lags far behind the overall level of China’s economic and social development, with a very obvious cultural lag behind the rapidly developing economy and the overall development level of Chinese society. On the other hand, Chinese charitable donation awareness shows passivity and lags behind the development of the charitable donation level of the country. Here the “passivity” refers to, as far as why it occurs, too much dependence on top-down government pushes, featuring weak bottom-up endogenous development. The frequent occurrence of mandatory and passive donation behaviors is typically indicative of the passive features characteristic of charitable donation awareness in China. For example, in the “One Day Charity” activities, certain sums are automatically deducted from the salaries of the civil servants and employees of government agencies and public institutions, while at the same time instances of “compelled donations” and “extorted donations” have continued to occur. Although such phenomena of “being forced to donate” contribute to lifting the absolute total of charitable donation, they are detrimental to the cultivation of charitable donation awareness and, to an extent, restrain the normal development of charitable donation awareness on the part of Chinese citizens. Compared with developed countries in Europe and America, development of charitable donation awareness in China is, on the whole, still at a low level. As concluded by a survey in 2003 of Chinese citizens’ charitable donation awareness, “There has not developed self-conscious and strong charity awareness in the whole society.”11 According to a similar survey conducted in 2012, “In China, there are still groups of the people whose charitable donation awareness is yet to be enhanced.”12

4.1.4 Main Paths of Elevating Charity Awareness The influence of public policies on charitable donation awareness tends to be through direct standardization and guidance, while having strong operability. The influence of modern media and public opinion on the general public’s awareness of charitable

10

Relevant calculations are based on the data in “Statistical Bulletin of Civil Affairs Undertakings in China (1998–2009)”and data in the “Statistical Bulletin of Social Development in China (2009– 2012)” issued by PRC Ministry of Civil Affairs. 11 Xu and Zhang (2004: 89–94). 12 Shi (2014: 157–161).

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donation should not be ignored either. Thus, this section will probe the main paths of elevating charity donation awareness from the two angles of social policies and cultural advocacy.

4.1.4.1

The Path of Public Policy

The policy-based approach to elevating China’s charity donation awareness is to eliminate obstacles hindering organizations and individuals from entering the charitable domain, strengthen process supervision, and improve the incentive mechanism, primarily by introducing public policies. First, more effort should be made to remove barriers in registration and management of social organizations, so as to expand the applicable scope for organizations and to broadly implement the policy of allowing social organizations to apply to register directly with civil affairs departments. Thus, the general public’s enthusiasm to engage in charity can be greatly invigorated, promoting their actively taking part in charitable donation. Second, administrative dominance should be further mitigated and, by adjusting relevant policies, officially run NPOs should be gradually turned into charity organizations enjoying relatively high levels of independence, changing the monopoly position of officially-run NPOs in the charity market. Thus, the efficiency of allocating charitable donation resources can be bettered and the strength of non-governmental charity organizations can be boosted. Thirdly, process supervision should be further intensified and the credibility of charity organizations should be elevated by setting up mechanisms for assessment, ensuring openness and transparency, and elimination and exit suitable to the actual development level of the China’s charity donation undertakings. Such measures help remove the public’s various misgivings over charity organizations, gradually fortify the public’s confidence in charitable donation, and stimulate their internal vigor to donate. Finally, the policy-based incentive mechanism applicable to different subjects when donating should be improved. By adjusting the tax law, the preferential taxation policies oriented toward enterprises as donors should be improved and implemented more effectively, the tax deduction rate for individual donations should be increased in a reasonable manner, and the conditions required to apply for the tax deduction should be simplified. These policy-based means can be used to guarantee the effect of economic incentive mechanisms and to satisfy the needs of various donation subjects to make rational choices in return for benefits.

4.1.4.2

The Path of Cultural Advocacy

The path of cultural advocacy refers to the method of exerting a subtle influence on the public and enhancing their modern charity awareness by means of the developed mechanism of modern communication. Firstly, following philanthropy objectively. The “objectively” here means that when stating and commenting on a charity event, the media should rationally assess the significance of charity and its future prospects, reducing as much as possible

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the negative influence of subjective factors like radical views and suppositions, and understand those unavoidable problems of charity’s initial development stage, avoiding as much as possible fragmented and isolated news or such ways of reporting. Second, giving full play to the positive function of the media to construct a healthy social and cultural atmosphere for nourishing charity awareness. The influence of news media on charity donation awareness can be realized by constructing values and concepts. Both core values of the society like integrity and friendliness, which are closely related to charity, or views of wealth and the rule of law, which are closely related to charitable donation behaviors, can be shaped and solidified by the public opinion promotion in the news media. Lastly, enhancing the public’s capability to distinguish between true and false charity information. Events in recent years, such as Meimei Guo flaunting wealth and Suntech’s “charity fraud” caused more and more people to question charity organizations. Though some of the incidents are not made up by the media, there is a considerable amount of exaggerated information based on hearsay evidence. In this era of “We Media,”13 when a public event occurs, the media should, as much as possible, avoid false information and misleading the public. Charitable organizations themselves should adhere to a just and transparent operation mechanism and respond as soon as possible once any critical incident occurs, turning the “crisis” into an opportunity. By nurturing their own credibility, they can bolster the enhancement of social charity awareness.

4.2 Economic Factors 4.2.1 Economic Level and Charitable Donation The influence of the economic level on charitable donations can be summarized as follows. Under different economic conditions, the available quantity of charity resources and development levels of different charity organizations both differ and the interactive combination of these two factors brings about differing levels of charitable donations. The main influence of China’s imbalanced regional donation on charitable donation is embodied in the charity donation level descending a “staircase” from the east through the middle and descending all the way to the west. As shown by the annual ranking of Chinese donors, the east, China’s most economically developed region, exceeds central and western China in donation volume, the atmosphere for

13

This is an Internet term, which means that, in the environment created by web technology, especially Web 2.0, the rising blogs, microblogs, shared cooperation platforms, and social networking services enable everyone to be functional as the media and communications do. An expression relative to the traditional ways of news reporting, it refers to the individual network behaviors which, though as functional as traditional media, do not need that framework where traditional media operate.

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social charities, entrepreneurs’ participation in public welfare, and the maturity of the public welfare and charity organizations.

4.2.1.1

Differences in Distribution of Charitable Resources

The economic level is an important factor determining the availability of charity resources. Generally, charitable resources are relatively abundant in developed regions and are capable of providing sufficient force for charitable donations. By contrast, charitable resources are relatively lacking in less developed regions and the donation capacity is correspondingly lower. The marked difference in the distribution of charity resources is signified by the imbalanced regional distribution of both enterprises and industrial scale. Of the 63,314 large and medium sized industrial enterprises covered by the statistics issued by PRC National Bureau of Statistics in 2012, the 39,681 enterprises in the eastern China had business income equal to 62.9% of the national total, while the corresponding industrial enterprises of central and Western China accounted for 22.2% and 14.9% respectively of the total.14 According to data from the Forbes China Charity Rank, for the year 2014 the top ten corporate donors were all located in Beijing Municipality, Guangdong Province, Fujian Province, and some other eastern provinces (see Table 4.2). Corporations on the list from Henan, Shanxi, Sichuan and some other central and western provinces were all low in either donation volume or number of donations made. In some provinces where private economy is developed such as Zhejiang, private companies have already begun to play a main role in charitable donation. As shown data from the “2012 Report of Charitable Donations in China,” the amount given in 2012 by private companies reached 27.506 billion yuan, accounting for 57.98% of all enterprise donations. Since 2007, when nationwide donation statistics began to be released annually in China, the amount donated by private companies has been over half of the total given by enterprises. As the private economy in central and western China is clearly behind, charitable donations by the private enterprises in these two regions have not been the main source of income for charitable organizations located there.

4.2.1.2

Uneven Maturity of Charitable Organizations

The maturity of a charity organization as a major recipient of donations depends on the specific level of economic development. A charitable organization’s credibility and capability to integrate charitable resources clearly affects the volume of charitable donations it receives. The growth of NPOs across the country is regionally imbalanced as result of imbalanced development between different regions. Whether in absolute number or 14

PRC State Statistics Bureau (2014).

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Table 4.2 Provinces and regions where the top ten corporations on Forbes 2014 List of China’s Charity are located 2014 Rank

Short name of corporation

Corporate actual controller

Province headquarters are located in

Region

1

Dalian Wanda Group

Jianlin Wang

Beijing

East

2

China Minsheng Banking Corporation

Wenbiao Dong

Beijing

3

Evergrande Group

Jiayin Xu

Guangdong

4

Yangzijiang Shipbuilding

Yuanlin Ren

Jiangsu

5

Shimao Group

Rongmao Xu

Shanghai

6

Century Golden Resources Group

Rulun Huang

Beijing

7

China Oceanwide Holdings

Zhiqiang Lu

Beijing

8

Tencent

Huateng Ma

Guangdong

9

Fujian Dali Food

Shihui Xu

Fujian

10

Xiangxing (Fujian) Group

Xingyuan Xue

Fujian

Source Forbes 2014 List of China’s Top Charitable Enterprises. See Forbes China. http://www.for beschina.com/review/list/002171.shtml. (2014/10/17)

capabilities, local NPOs are strongest in more developed eastern provinces, especially Jiangsu, Zhejiang, Shanghai, and Guangdong. The volume of funds raised by charity organizations in eastern provinces is clearly higher than in the central and the western provinces and an overwhelming majority of the charitable funds collected countrywide by charitable organization comes from eastern provinces.15 As the leading city in China’s Yangtze River Delta economic area, Shanghai has seen its philanthropy flourish. In 2013, the Shanghai Charity Foundation took in RMB 707 million in income from its programs to raise donations, far exceeding the capacity of other national public foundations. Excluding the Tibet Autonomous Region Charity Federation, in 2011 China’s 31 provincial charity federations, raised RMB 4.67 billion, of which 47% came from charity federations of the eastern provinces and only 28 and 25% from those of the central and western provinces respectively.16 Most of the funds raised nationwide are spent in the eastern provinces. In 2010, the statistics of thirty provincial charity federations shows that they spent a total of RMB 6.3 billion on charity, of which those in eastern provinces spent RMB 3.39 billion, accounting for 53.71% of the total (see Table 4.3).17

15

Zhang (2014). Meng et al. (2012: 203–205). 17 Meng et al. (2012: 208). 16

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Table 4.3 Expenditure shares of three regions of China in 2010 among 30 provincial charity federations Unit: Thousand yuan Region

Sum spent on charity

Proportion

Region

Sum spent on charity

Proportion (%)

East

3386,244.3

53.17

West

1678,172.3

26.62

Middle

1240,540.3

19.68

Whole country

6304,956.9

100

Source Meng et al. (2012)

4.2.1.3

Regional Differences in Total Charitable Donation Volume

In philanthropy the economic level of a region can directly be seen through the level of charitable donations. Differences in regional economic development cause the uneven distribution of charitable donation resources, with total donation volumes in economically developed regions outweighing those of less developed regions. Analyzing samples of domestic data on donations18 shows that in 2011 the three provinces of Guangdong, Beijing, and Fujian had the highest level of donations, with each over RMB 2 billion. The total volumes of donated funds and materials in Shanghai, Shandong, Zhejiang, and Jiangsu were all over RMB 1 billion. By contrast, some provinces in central and western regions such as Jiangxi and Xinjiang donated less than RMB 100 million.19 Additionally, according to data on social donations received directly by the civil affairs departments of the various provinces, municipalities and autonomous regions in 2013, the total donation volumes differed markedly by region. The amount directly received by the civil affairs departments of Guangdong alone reached as high as RMB 1.82 billion and those of Beijing and Shandong reached RMB 1 billion yuan, while those of Shaanxi and Qinghai received only a few million (see Fig. 4.1).20

4.2.1.4

Influence of Individual Economic Strength on Donations

An individual’s economic strength has particularly clear influence on their donation behavior and personal incomes level directly affects an individual donor’s capability to donate. Both the results of a survey jointly published in 2008 by the Shanghai Charity Foundation and Fudan University School of Social Development and Public Policy and also the data on Chinese citizens’ public welfare behavior that the Beijing Normal University School of Social Development and Public Policy obtained by surveying 27 Chinese cities in 2011, show the significant influence of an individual’s economic level on their donating behavior. 18

The samples under analysis are offered by China Charity and Donation Information Center via news reports, the charity organizations in various regions and donors. The relevant data here, which are based on incomplete statistics, are cited only for reference. 19 Meng et al. (2012: 156). 20 CPR Ministry of Civil Affairs (2013: 478).

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Fig. 4.1 Total amounts directly received by civil affairs departments in ten provinces in 2013. Source CPR Ministry of Civil Affairs (2013)

Table 4.4 Statistics on relationship between citizens’ economic strength and their willingness to donate If your income Number of increases respondents substantially, would you like to give more for charity?

Percentage (%)

If your income Number of increases respondents substantially, would you like to give more for charity?

Percentage (%)

Yes, I would

8104

90.3

Effective answers

100.0

No, I would not

126

1.4

Ineffective answers

It all depends

746

8.3

Total

8976 148

/

9124

/

Source Shanghai Charity Foundation, Fudan University School of Social Development and Public Policy, Citizens and charity: A large scale social survey in 2008 (Inside edition printed in 2009)

(1)

(2)

21

Weak personal economic capability is the main reason for not donating. A significant number of Shanghai citizens who had not donated in the two years prior said that their weak economic capabilities were the key reason for their donation behaviors. They made up 34.3% of all respondents21 Significant positive correlation exists between an individual’s social and economic position and their charity donation behavior. Individual charitable donation behavior is subject to the influence of one’s own personal economic status. As their overall level of wealth rises, individuals will be more willing to participate in charitable donation activities. In the aforementioned Shanghai survey, more than 90% of respondents said that if their income increased, they would give more to charity (see Table 4.4). Based on a Tobit model of the survey data from Beijing University on Chinese citizen’s public welfare behavior,

Shu (2009).

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personal work income increased by 1%, and average donations increased by 0.25%. An individual’s income has a direct bearing on their donation amount, number of donations, and willingness to donate, while an enterprise’s donation level is subject to its stage of growth. Generally, an enterprise will experience three stages: the primitive accumulation stage, the stage when it pursues scale and expansion, and the stage when it strives to build itself as a corporate citizen.22 Most Chinese enterprises are still in the first two stages, that is, they are rising. In the primitive accumulation and expansion stages, enterprises worry about social donation increasing risk. When they stand on a firm economic basis they will strive to fulfill more of their social responsibility as corporate citizens and to engage in charity.

4.2.2 Impetus and Influence of the Economic Benefit Factor There is an obvious positive correlation between charitable donation and the level of economic development. However, other economic factors that promote charitable donation should also be considered. An important one is the return in benefits brought about from charitable donation. This factor serves as the internal drive behind charitable donation behavior and the public’s awareness of participation.

4.2.2.1

Economic Benefits of Charity Organizations

Charity organizations are NPOs, but this does not mean that they cannot or should not obtain economic benefits from their operations. The launching and founding of many charity organizations, particularly most of the non-governmental or nonenterprise units, are naturally driven by certain future benefits. The sponsors or investors, though they cannot earn handsome profits, can obtain a relatively fixed income for the sustained development of their organizations. For example, the main areas into which a charitable foundation invests its capital include industrial entities, stocks, bonds, and insurance. Differing from an enterprise, which seeks economic interests and benefits so as to enlarge its market share, a charity organization sets greater store in the relevance of its economic benefits for the public welfare. Charity organizations’ participation in raising charitable funds and operating those funds is conducive to maintaining and increasing the value of their assets and, more than that, can effectively boost their independence and ability to offer services thus better fulfilling their positive function in serving public welfare. A charity organization which has a scientific system for operating its assets and has fostered high social credibility is a favorable factor for stimulating various social forces to participate in charitable donation. 22

Liu (2007).

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Enterprise Benefits

Under a market economy, enterprises tend to treat charitable donation as an important means of competition. An enterprise needs to take into consideration both economic benefit and social responsibility, for, its existence depends just as much on social responsibility as it does on economic benefit. Social donation signifies tremendous social value for an enterprise, as it enhances its social image and is “the only way it must pass to ensure its sustainable operation”.23 First, social donation is, to a considerable extent, conducive to an enterprise bettering the management efficiency of its leaders, as well as enhancing employee cohesion and internal management. Second, through social donation, an enterprise can display its sense of social responsibility, which helps it win positive appraisals and trust from all sides and thus tighten its affinity with the relevant governmental departments and with all sectors of society. A scholar pointed out that, “As far as a transnational company in China is concerned, by providing various public welfare donations and supporting China’s education, it can give a favorable impression to the government and win its trust, and thus enter into sound cooperative relationship with the governmental departments, which should be a preferable path to participating indirectly in politics.”24 Last, an enterprise making strategic donations can better its environment and add to its competitive advantage. When an enterprise invests strategically to those mutually beneficial areas of charity which can bring about both social and economic benefits, it can increase its sales income and thus have success in both public welfare and its own performance. To an enterprise, proper participation in public welfare donation can be a special marketing tool described as “Cause-Related Marketing.” This refers to the type of corporate charity activity by which an enterprise can fortify its own capability to make money. This type of corporate charity activity can be combined with specific marketing activities or be organized jointly by an enterprise and an NPO, particularly a charity organization.25 In this way, if an enterprise, by choosing a public welfare area favorable to the sales of its products, makes donations and also calls for others to donate, it will ultimately expand its market influence and increase its profits. As a new marketing tool, Cause-Related Marketing has become increasingly popular among enterprises, as it considers benefits for enterprises, consumers, and society, and thus wins extensive support from all sectors of society.

4.2.2.3

Individual Benefits

According to social exchange theory, charitable donation can directly or indirectly bring benefits that include internal and external rewards to the donor. The “internal reward” refers to the direct return, like love, gratitude, satisfaction of interests, or sense of honor from a social exchange relationship that a donor establishes in the 23

Zhong (2007). Zhang et al. (2004: 205). 25 Barnes and Fitzgibbons (1991: 20–23). 24

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process of donating. The “external reward” refers to a return from elsewhere, which generally means the realization of relatively long-range objectives in future, such as gaining status, obtaining assistance, or being obeyed. Additionally, an individual’s motivation to donate can also be avoiding taxes. For example, as the rate of inheritance tax in Western countries is progressive on the basis of a surtax system (the highest rate can be about 50%), many rich people are liable to give their fortune to charity. Since China has not begun to levy inheritance taxes and gift taxes, it has not established an “anti-driving” mechanism in which the inheritance tax and gift tax can restrict the transfer of fortunes and thus promote charitable donation. Due to the absence of these types of taxes, many people of the high-income class prefer to leave their fortunes to their relatives rather than give them to social charitable undertakings.

4.2.3 Paths for Promoting the Benefit Feedback for the Development of Charitable Donations Paralleling the great efforts which have been made to increase incomes, the tax system and other supporting measures need to be improved to protect donors’ appropriate benefits, so that charitable donation behaviors can be durably and effectively stimulated, thus promoting the sound growth of philanthropy. As far as a charity organization is concerned, it needs to start by ensuring the basic operations of its funds and then seek a breakthrough in accessing secure investments. Firstly, the public financial support from the government is an indispensable economic resource for a charity organization. Take developed countries and regions as an example. The social donations available to a charity organization, though an important income source, do not make up the only source, as a considerable part of its funds comes from government financial investment.26 An example is Hong Kong Special Administrative Region, which allocates funds for local non-governmental charity services and undertakings, objectively guaranteeing charities serving as an important pillar supporting the social security system. Thus, the charity domains and levels to be supported by government finance and the channels for that purpose should be clarified, and by formulating proper policies, institutional financial support should be provided for charitable organizations, reducing the funding pressure on them in their long term development process. Secondly, with regard to maintaining and increasing the value of their assets, charity organizations should be, getting past the restraints from their public welfare status and under the precondition of ensuring the security of their funds, encouraged and guided to maintain and increase the value of their assets by means of the various ways available in the money market. At the same time, the demarcation line between the operable capital and the donation income of charitable organizations should be made clear and the accounting of their financial affairs and their tax treatments should be handled differently. 26

Zhao (2006).

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As far as enterprises are concerned, maintaining fair competition in charitable donation, with different systems of enterprise ownership on an equal footing, is also an important means of promoting corporate donations. Currently, the evaluation of corporate donation behaviors is based more on the absolute amount than on the relative donation capacities or donation ratios of different types of enterprises. This is unfair to a large number of private enterprises which are not state-run monopoly enterprises, yet which take active part in philanthropy. Therefore, the future system of social evaluation which will guide enterprises as donors should fully respect enterprises’ own economic strength, emphasize their autonomy in carrying out strategic donations, and offer suitable preferential policies to them as a stimulus, thus creating a sound environment where, as donors, they can engage in benign competition. As the web and electronics technology develop rapidly, many forms of new media have become easily accessible. This has brought about more convenient channels for charitable donors to obtain reputational feedback. Charity organizations can, by designing and operating a series of information platforms, satisfy the emotional and moral needs of individuals’ donation behaviors. Thus, after individuals make donations, the immediate and effective spreading of the information is beneficial both to affirming the value of the individual donation behavior, so as to give feedback to the individual donors, but also to have them serve as a model for others.

4.3 Tax Factor The impact of taxes on charitable donation is mainly reflected in the implementation of the preferential policies for charitable donation through relevant laws and regulations of the tax law and tax departments, thus stimulating enterprises, individuals, and other organizations to actively participate in social charitable and donation undertaking.

4.3.1 Influence of Taxation on Enterprise Donation The most direct and explicit return brought about by charitable donation is a reduction in taxes. When an enterprise reduces its amount of tax payment by making donations, it is actually a tax transfer made by the government. If an enterprise put a part of its profits into social public welfare undertakings, it decreases the government’s operations among the intermediate links, greatly increases the funds available to the charitable undertakings, and indirectly lifts its corporate performance, and thus is conducive to overall social and economic development. In China, the current basic income tax rate is 25% for enterprises, 20% for those small and low-profit enterprises and some overseas enterprises, and 15% for new hi-tech enterprises.27 Different 27

Standing Committee of NPC of PRC (2008).

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types of enterprises may, according to different preferential taxation policies, choose themselves different recipients and donation channels. Enterprises with low annual taxable income can fully use the different rates of preferential taxation and readjust their charitable donations in order to reduce their tax burden and maximize their benefits. As for large enterprises, since tax policies for public welfare donations are closely related with their total final profits, they have to consider fully the interests of all shareholders (particularly medium and small shareholders) before making donations and attempt to design suitable donation schemes which maximize the efficiency of their donations and at the same time avoid hurting the interests of their shareholders. Of the current categories of tax in China, the two which significantly influence corporate donations are the value-added tax (a tax on turnover) and the corporate income tax (an income tax). The influence of value-added tax on the donation activities of an enterprise affects, generally speaking, its non-cash donations, for when its products have not entered into the market the tax burden is fully shouldered by the company itself. As stipulated in the Interim Regulations of the People’s Republic of China on Value-Added Tax, when an enterprise turns over the goods produced by itself, made through consigned processing, or purchased, as gratis gifts to others, they should be regarded as sales, subject to financial accounting, and according to the composite assessable price computed on the basis of the average prices at which the taxpayer or other taxpayers in a recent period sell the same type of goods, the sales volume shall be decided and the corresponding value-added tax shall be paid according to law.28 Therefore, donating behaviors will incur payment of value-added tax to a real extent. According to the current stipulations on the value-added tax, when donating something, an enterprise may choose different materials for donation so as to minimize its corporate tax burden. This is the main influence of value-added tax on its donation behaviors.29 As for the enterprise income tax, it divides the ways in which an enterprise makes public welfare donations into different categories, each enjoying a different preferential policy (see Table 4.5). The latest enterprise income tax in China cancels the provisions for the full tax deductions being applied to public welfare donations given by enterprises via NPOs to some areas such as the Red Cross Society and public benefit sites designated for teenagers’ activities, as well as donations by foreign enterprises. However the full tax deduction is still applicable to special public welfare donations for disasters and important incidents. Instead, according to the new provisions, the donated amount can be deducted to an extent not exceeding 12% of total profits. It is also stipulated that anything below the quota of public welfare donations which are not deducted and the amount donated above the quota of the fiscal year cannot be carried over to the next year. This will promote an enterprise, when choosing specific means of donation and quotas, to fully consider how to maximize its benefits.

28 29

PRC State Council (2009). Tian and Chen (2007).

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Table 4.5 Provisions in current laws and regulations for preferential taxation of enterprise charitable donations Donating means

Donating medium

Targeted recipient of donation

Tax deduction Remarks level

Indirect donation

Social organizations for public welfare, people’s governments and their departments at and above the county level

Public welfare undertakings such as education and civil affairs, or impoverished areas

An amount which does not exceed 12% of total profits can be deducted

Indirect donation

Social organizations for public welfare, people’s governments and their departments at and above the county level

Disaster-hit regions, Beijing Olympics, Shanghai World Exposition, etc

Full deduction Applicable only to special events such as emergency disasters, serious epidemics, and major national activities. Up to now, there have been six special events: the SARS epidemic; Wenchuan earthquake; Beijing Olympics; Shanghai World Exposition; Yushu Earthquake; and Zhouqu Landslide

Direct donation

None

Work unit or individual

No deduction

“Social organizations for public welfare” refers to foundations and charity organizations meeting the conditions stipulated in “Law of the People’s Republic of China on Donations to Public Welfare Undertakings”

No deduction for the direct donations to donors

Source “Law of the Peoples Republic of China on Donation for Public Welfare Undertakings” (Decree No. 11 of the President of the People’s Republic of China in 1999); PRC Ministry of Finance and State Administration of Taxation, “Circular on Issues of Pre-Tax Deduction of Donation by Taxpayers for the Undertaking of Preventing and Treating SARS” (FT (2003) No.106); “Regulations for the Implementation of the Law of the People’s Republic of China on Enterprise Income Tax” (Decree No. 63 of the President of the People’s Republic of China in 2007); PRC Ministry of Finance, General Administration of Customs, and State Administration of Taxation, “Circular on Issues of Taxation Policies Supporting the Restoration and Reconstruction after Wenchuan Earthquake” (FT (2008) No. 104); State Administration of Taxation, “Circular on Issues of Dealing with Taxation Affairs in Levying Enterprise Income Tax” (SAT (2009) No. 202)

4.3.1.1

Positive Influence

The current laws and regulations provide clear provisions for the preferential taxation of the donations made by enterprises at home and abroad. Among them, the “Law of the Peoples Republic of China on Donation for Public Welfare Undertakings” (1999)

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stipulates that the public welfare donations made by companies and other enterprises according to law enjoy preferential income taxation; the import duties of materials donated from outside the borders to Chinese public welfare undertakings and the value-added tax from the import process can be reduced or exempted.30 According to the revisions made in 2007 to the “Law of the People’s Republic of China on Enterprise Income Tax,” the percentage of pre-tax deduction on donations rose from 3 to 12%, the base for tax exemption changed from the previous total taxable amount to the yearly total profit, and the amount of donation for preferential tax deduction was made uniform for both Chinese funded enterprises and foreign funded enterprises. All these changes indicate that the Chinese government is supporting strongly corporate donation behaviors through introducing more favorable tax exemption policies. Additionally, more and more public welfare organizations have been qualified for pre-tax deductions for donations. In 2008, there were 66 social organizations for public welfare registered with the Ministry of Civil Affairs and entitled to the qualification for pre-tax deductions for public welfare donations, while by 2012 there were 148. 2013 saw 170 social organizations for public welfare qualified in two groups successively by Ministry of Finance, State Administration of Taxation, and Ministry of Civil Affairs for pre-tax deductions for public welfare donations. This increase is conducive to gradually expanding the channels for social donations, lowering the threshold for enterprises to make public welfare donations, and enlarging their range of possible means of donation to choose from.

4.3.1.2

Problems

The effect of the tax incentive mechanism depends on whether the tax system is designed scientifically and reasonably and also whether it is put fully into practice. Currently, there are still some problems preventing the tax system from playing its incentive role that involve both inadequate demand for preferential tax policies and institutional obstacles. Tuan Yang and Daoshun Ge’s survey finds that many enterprises are not very eager to obtain tax exemptions on donations. The main reasons lie in that the donated amounts are low, the procedure of applying for deductions is complicated, and the tax deduction involving donated materials is not easy to handle, among others. Besides, as the tax deduction is a behavior that comes after the donation behavior, the possible transaction cost determines whether it is worthwhile to apply for that deduction, and, what is more, since a great many donations made by enterprises are disbursed from their costs, welfare expenses, non-business expenditures, and administrative operating expenses, they do not need to apply for tax deductions.31 The reasons why Chinese funded companies seldom consider applying for tax exemption are as follows. Firstly, they have not been fully informed of the policies on the pre-tax deduction of donations. Secondly, their donations are disbursed in the 30 31

Standing Committee of NPC of PRC (1999). Yang and Ge (2003: 54).

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cost expenses. Thirdly, it is difficult to apply for an exemption for donated materials and donations by employees. Foreign funded companies, though more familiar with the relevant policies of tax deduction and exemption, have found it challenging to handle their applications. There are two main reasons for this situation. First, it is hard for them to get proof for the tax exemption. To get the proof, they must have their donations to go to designated charity organizations. As foreign funded companies have relatively more programs of their own for mutually beneficial donations, they do not necessarily donate via a designated charity agency and thus have trouble obtaining the relevant proof. Second, as foreign funded companies in China have enjoyed a preferential tax deduction for many years, applying for tax deductions or exemptions for low-volume donations, donated materials, and donations by employees is relatively unimportant.32 Currently, the main obstacles enterprises are faced with in realizing the tax deduction and exemption of their public welfare donations are as follows. Firstly, judging from the results of tax incentive policies, the current preferential taxation of charitable donations has produced different effects on enterprises with different systems of ownership. As the administrative mechanism plays a dominant role in the management of SOEs, the tax deduction and exemption policies exert little influence on them. For the private enterprises, the situations in different regions are quite different. In some regions, the local taxation departments decide on a fixed rate for taxable income on the basis of enterprise income, from which the tax can be computed directly. Thus, the charitable donation level has little to do with the corporate taxation. Secondly, regarding the donation channels, as it is stipulated by law that direct donations to recipients do not enjoy tax deduction and exemption, and, in fact, many enterprises give donations directly or via social organizations for public welfare. Many of these recipients are not qualified for tax deduction and exemption or to issue tax exemption invoices, so the influence of the tax deduction and exemption policies is very limited for these enterprises. Thirdly, looking at donated assets, many Chinese companies give non-cash donations, and, in addition to non-cash donations such as materials and services, the number of equity donations has been growing rapidly. As provided for in “Circular on Financing Issues of Enterprise Equity Donations for Public Welfare” issued by Ministry of Finance in 2009, natural persons, legal persons that are not stateowned enterprises, and other enterprises held by economic organizations as investors can make equity donations, while SOEs cannot allowed to do so. At present, as the practice of the tax deduction and exemption on equity donations is still in a pilot stage and, what is more, the current taxation system is not clear on the pricing standard for non-cash donations. These all affect the role played by tax incentives.

32

Yang and Ge (2003: 54).

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4.3.2 Influence of Taxation on Individual Donors 4.3.2.1

Individual Donation Tax Policies

Regarding measures for preferential taxation on individual charitable donations, the current “Law of the People’s Republic of China on Donation for Public Welfare Undertakings” (1999) expressly stipulates that “When donating property for public welfare undertakings according to the provisions of this law, natural persons, individual businesses of industry and commerce may be given preferential treatment in individual income tax according to the provisions of laws and administrative regulations.”33 Though the “Law of the People’s Republic of China on Individual Income Tax” has been revised for five times in the period from 1999 to 2011, the sections concerning provisions for preferential taxation of charitable donations have remained substantially the same. It is stipulated that “The part of individual income donated to educational and other public welfare undertakings, shall be deducted from the taxable income in accordance with the relevant regulations formulated by the State Council.”34 The “Regulations for the Implementation of the Law of the People’s Republic of China on Individual Income Tax” (2011) specifically stipulate that “The donation by individuals of their income to educational and other public welfare undertakings, and to areas suffering from serious natural disasters or poverty, through social organizations or government agencies in the People’s Republic of China. That part of the amount of donations which does not exceed 30 percent of the amount of taxable income declared by the taxpayer may be deducted from his amount of taxable income.”35 At the same time, tax incentives oriented towards taxpayers’ charitable donations also involve such preferential taxation such as on properties and behaviors. At present, China has not introduced any policy of preferential taxation on commodities, due to the limitation of inadequate identification of donation behaviors among the circulating links and also to prevent some taxpayers from going into profit-seeking activities in the name of charitable donation.

4.3.2.2

Weakness of the Present Tax Incentive Policies for Individual Donations

Currently, there are some illogical parts of the design of the taxation system for individual donations. If an individual donor fails to choose the proper mode and channel of donation, it is possible that, after giving a donation, he has to make a supplementary payment of the income tax. This may cause another result, that is, rather than donating to a public welfare organization, a donor may donate directly to the donee or not donate at all. However, in the actual process of donation, a great number of individuals do not know much about the policies and articles concerning 33

Standing Committee of NPC of PRC (1999). Standing Committee of NPC of PRC (2011). 35 PRC State Council (2011). 34

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donation, resulting in them receiving less than the benefits they deserve or even unknowingly violations of law. In 2005, the civil affairs system received a total of 1.7 billion yuan individual donations nationwide, yet the individual tax refund rate was zero.36 Compared with the developed countries and regions, China’s donation policy is singular and flawed. The incentive function of tax policy is inadequate, which is embodied in the following aspects. Firstly, it is difficult to get the proof required to apply for individual tax relief. The conditions for enjoying tax deduction and exemption are relatively rigorous and only by donating to public welfare organizations identified by governmental agencies as qualified for pre-tax deduction on public welfare donations can an individual take advantage of the tax refund policy. Currently, only a small number of officially run public welfare organizations such as China Charity Federation, Project Hope Foundation, and the China Foundation for Poverty Alleviation have the authority to issue the proof required for qualification to apply for tax deduction and exemption, while regular donations in large quantities to community-based charity or service organizations cannot obtain such proof. This is disadvantageous to encouraging social donations. When individual citizens make direct donations to the receiving units or individual recipients, they cannot get pre-tax deduction of income tax. After a work unit or an enterprise organizes its employees to make individual donations, usually it can only be offered a uniform donation certificate, while individual donors cannot get their own donation receipts. As for the civil servants in government departments, since their income taxes are withheld and remitted by the financial agencies, they have to go through a complicated process involving transferring documents and handling the tax deduction formalities if after their donating behaviors they need to apply for tax deduction or exemption. Additionally, in the case of a man and his wife donating their common property, questions such as how to divide the deducted amount and how to separate their donation receipt need further study.37 Secondly, the procedure of refunding donation tax is complicated. China’s current procedures for handling individual donation tax deduction and exemption are very complicated. When some enterprises apply for handling the tax exemption formalities after their making donations, they even have to resort to use of guanxi. An overwhelming majority of employees have participated in various material or cash donation activities organized by their communities or work units, but almost none of them have attempted to apply to the taxation departments for any income tax exemption. A senior official in charge of donation and relief work in a government agency once donated 500 yuan purposely and it took him two months to go through ten steps before he got a 50 yuan tax exemption.38 This case exposes the tedious tax refund process. Many taxation agencies do not even set up a standard procedure for handling the tax refund affairs. 36

Jiang (2005). Shen, F., Problems with and suggestions for the current charitable donation taxation policies. Guangdong province local taxation affairs net. http://www.gdltax.gov.cn. (2007/6/21). 38 Yuan (2006). 37

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Thirdly, there lacks a mechanism for an “anti-driving” effect. As the inheritance tax and gift tax restrict the transfer of property, they can produce the effect of antidriving donations. However, China has not introduced these two taxes, which has pushed, to some extent, people to accumulate wealth or pass it on to their offspring rather than donate it to society or charity organizations. As shown by experience, the inheritance tax and gift tax exert considerable impact on donations. The inheritance tax belongs to the category of property taxes and the object of taxation is the net value of the property left by the deceased owner. At present, more than a hundred countries levy an inheritance tax. Collecting this tax will supplement and improve the state’s tax sources, and also be beneficial to adjusting the societal wealth gap. The gift tax levied on property gifted by its owner to others before their death is a subsidiary tax to the inheritance tax, aiming at preventing the property owner from transferring his property when alive in order to have the inheritance tax on property after his death reduced.

4.3.3 Influence of Taxation on the Income of NPOs as Recipients of Donations 4.3.3.1

1.

Preferential Taxation Factors Promoting NPOs as Receivers of Donations

Guarantee and promotion on the legal level

The provisions for preferential taxation of the donation income of charity organizations are found in the “Regulations of the People’s Republic of China on the Administration of Foundations” (2004), the “Interim Regulations of the People’s Republic of China on Value Added Tax” (2009), the “Law of the People’s Republic of China on Customs” (2013), and documents issued by the PRC Ministry of Finance and State Administration of Taxation such as the “Circular on Issues of Identification and Administration of NPO Status for Tax Exemption.” Some of them stipulate that the donation income of NPOs (including charity organizations) meet the favorable conditions required for tax exemption. The incentive for materials charitable organizations receive from overseas donors is mainly provided by preferential import value-added taxation and preferential tariff treatment. For example, import duties and the value added tax on the import chain are exempted for materials directly donated gratis for poverty assistance or charity by overseas donors to the following six social organizations: the Red Cross Society of China, National Women’s Federation, China Disabled Persons Federation, China Charity Federation, China Primary Health and Care Foundation, and Song Qingling Foundation.39 39

PRC Ministry of Finance (2001).

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Regulations and rules closely linked with relevant tax laws

Existing rules and regulations are continuously updated and old ones are replaced in a timely manner. For example, regarding the regulations on the recognition and administration of NPOs’ qualification for tax exemption, in recent years, the regional limitation on NOPs’ public welfare activities has been lessened, with the original phrase “the range of activity is mainly limited within the Chinese borders” being abolished and the scope of NPO income from public welfare activities that preferential taxation applies to has been expanded. These will facilitate the promotion of charitable donations in China and abroad.

4.3.3.2

(1)

Obstacles Hindering NPOs from Enjoying Preferential Taxation for Charitable Donations

Many public welfare charity organizations have difficulty in qualifying for tax exemptions or pre-tax deductions of their income from public welfare donations. Preferential taxation for public welfare donations has two meanings. One is preferential income taxation of public welfare donations received by NPOs and the other is pre-tax deduction of income tax payable for donors who make public welfare donations. These two preferential taxation policies are subject to, respectively, the prerequisite that a charity organization is qualified to have its income from public welfare donations exempted and that the organization is qualified for pre-tax deduction of the public welfare donations. Increasing the difficulty of obtaining these two special qualifications will not be conducive to improving the ability of charitable organizations to attract donations, which in turn will affect realizing tax deductions of the organization’s own income.

Regarding qualification for income tax exemption on their incomes, up to 2012, only 30% of China’s charity organizations have registered with the PRC Ministry of Civil Affairs and qualified for tax exemption of donation income. At the same time, the situation for qualifying for pre-tax deduction of public welfare donations is not positive. A majority of social organizations, particularly non-governmental and non-enterprise public welfare units, are excluded and not entitled to issue financial instruments to donors for their public welfare donations. Take Ningbo, Zhejiang Province, for example. In that city, where public welfare charities are relatively developed, only 53 social organizations are currently qualified for tax exemptions, accounting for less than 1% of the total and only 32 social organizations have qualified for pre-tax deduction of public welfare donations, accounting for only 0.6% of all social organization legal persons. Those that have qualified are basically limited to foundations and charity federations.40 Meanwhile, in China’s current tax system, when a donor makes public welfare donation via different charity organizations, they have to face different preferential taxation policies. In particular, the gap between governmental and non-governmental charity organizations’ capacity to attract donations through preferential tax policies 40

Bao (2014).

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is too large. The special full donation amount deduction only applies to donations given to charity organizations that are approved, founded, and recognized by the state, such as the Red Cross Society of China, China Aging Development Foundation, China Welfare Fund for the Handicapped, China Education Development Foundation, and China Foundation for Poverty Alleviation. Donations given directly to community charities or service organizations cannot obtain tax deduction certificates. This restricts the role played by non-governmental charity organizations in mobilizing social resources and adopting flexible forms of raising donations. (2)

The non-profit nature of NPOs is not salient enough. Being a non-profit is an important precondition for a charity organization to enjoy preferential taxation of its donation income. At present, in the field of public welfare in China the distinction between profit-seeking and the non-profit agencies is not very clear. Fields other than medical and health services (such as education, science and technology, culture, sports, and social welfare), lack a clearly defined demarcation between non-profit and profit-seeking organizations and the relevant behaviors of these organizations, resulting in both non-profit and profit-seeking organizations sharing preferential tax treatment in spite of their differing behaviors.41 This confusion engenders the possibility of preferential taxation policies oriented towards charity organizations easily being illegally taken advantage. This is to the detriment of the public welfare role and social image of charity organizations, which will reduce the recognition of social forces and trust in the identity of charity organizations as serving the public interest. It will even depress the public’s enthusiasm to participate in social donations.

4.3.4 The Implementation and Improvement of Tax Incentives for Public Welfare Donations The “Interim Procedures for the Use and Management of Bills of Donation to Public Welfare Undertakings” issued by PRC Ministry of Finance in 2011 is conducive to public welfare donations in China gradually operating in more standard ways. The third plenary session of the 18th Central Committee of CPC made it clear that “more efforts shall be made to improve the system of tax deductions and exemptions for charitable donations and support the charitable undertakings playing an active role in poverty alleviation.” At an October, 2014 executive meeting of the PRC State Council, Premier Li Keiqang, emphasized once again that “The policy of tax deduction and exemption for public welfare donations should be implemented well and improved, more measures encouraging charity should be introduced, and the development of charitable organizations with poverty alleviation functions should be prioritized.”42 This signal points again to preferential taxation policies which function as incentives to charitable donation. We suggest that the following two 41 42

Zhan (2003). Han (2014).

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measures be adopted to ensure that the policies of tax deduction and exemption on donation income can be practiced effectively to solve existing problems in that area. First, enlarging the scope of preferential taxation policies. The latest enterprise income tax law raises the proportion of tax deduction for public welfare donations, yet there is still room for increasing the individual income tax deduction for charitable donations. To elevate level of benefit made possible by those preferential taxation policies, all the links involved in the process should be considered. Firstly, support various types of charity organizations enjoying the qualification of tax exemption on their income from public welfare donations. Secondly, allow the charitable donation of an enterprise in excess of the quota to be rolled over to the next year for deduction, so as to encourage the enterprise to increase its donation volume as much as possible. Lastly, make sure that the formulated preferential taxation policies oriented towards public welfare donations apply to different donated contents and forms, and effective tax incentive measures oriented toward diversified donation forms should be introduced in timely fashion. Second, improve the operationalization of qualification for tax exemptions. Civil affairs departments can join hands with finance and taxation departments in optimizing and implementing the process of qualifying all types of charity organizations for tax reduction and exemptions. They can also strengthen efforts to publicize the preferential taxation policies so that the charity organizations are well informed of the specific standards, requirements, and procedures for applying and handling applications. At the same time, the policy constraints on non-governmental charity organizations should be suitably relaxed and the blind spots and gaps in the existing preferential tax policies should be made up for or filled out, so as to put into effect to the greatest extent the preferential tax policies oriented toward public welfare charity organizations. Additionally, charity organizations’ capability of raising donations should be boosted correspondingly and their opportunities to receive donations should be increased so that the incentive of preferential tax policies for charitable donations can be functional and fulfill its purpose.

4.4 Internal and External Supervision Mechanisms Usually, supervision and regulation involve governmental supervision and regulation, social supervision, and charity organization self-regulation. The supervision and regulation of the donors, recipients, and their behaviors are beneficial to boosting the transparency of donations, fortifying the credibility of charitable organizations, and guaranteeing that enterprises and individuals fulfill their social responsibility. Therefore, the supervision and regulation mechanism plays an important role in maintaining the environment for charitable donations (see Fig. 4.2).

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Actors in supervision and regulation: governmental supervision and regulation society supervision and charity organizations self-regulation

Donor

Object of supervision

Recipient

Charity organization’s raising, managing, and giving out charitable funds

Corporate donation

Individual donation

Attracting donations Sense of social responsibility

Offering donations

Organizational credibility

Favorable charitable donation environment Fig. 4.2 Mechanism of supervising and regulating philanthropy

4.4.1 Governmental Supervision The main means of supervision and regulation used by government agencies include formulating relevant laws and regulations, as well as supervising administrative enforcement of them. Generally, government departments practice supervision and regulation of charity donation activities by virtue of the authority of state laws and regulations and the coercive power of government.

4.4.1.1 1.

Current System for Supervision and Its Performance

Supervision by Laws and Regulations

China’s standards for managing enterprises’ participation in charitable donation and fulfillment of their social responsibility can be found in different laws, regulations, and documents, such as the “Contract Law of the People’s Republic of China”

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(1999), “Law of the People’s Republic of China on Donation for Public Welfare Undertakings” (1999), and “Enterprises’ Accounting Standards” (2007), as well as the “Circular on Strengthening the Financial Management of Enterprises’ External Donation” and the “Circular on Issues of Strengthening the Financial Management of Central Enterprises’ External Donation,” issued by Ministry of Finance in 2003 and 2009 respectively. Specifically, the articles concerned involve the requirement for enterprises to adhere to principles of voluntariness and sincerity in their external donations, formulation and implementation of the internal procedures for managing external donations, supervision of external donations by enterprises auditing (or supervising) agencies or financial management departments, etc.43 The purpose of these is to prevent disordered donation behavior by enterprises and to ensure their proper fulfillment of social responsibility. The management of central SOEs external donations should abide by the relevant provisions in “Some Regulations on Incorruptible Employment of Leaders in State-Owned Enterprises,” which emphasizes that donations by SOEs must be approved by institutions that perform the duties of state-owned asset contributors. For the supervision and regulation of individual donation behaviors, provisions in current laws and regulations clarify the responsibility for those ill-intentioned donation behaviors such as fraudulent donations, “promising but not donating,” and “donating less than promised.” Article 188 in China’s Contract Law stipulates expressly that “In the case of a gift contract the nature of which serves the public interests or fulfills a moral obligation, such as disaster relief, poverty relief, etc., or a gift contract which has been notarized, if the donor fails to deliver the gift property, the donee may require delivery.”44 At the same time, a gift contract the nature of which serves the public interests or fulfills a moral obligation, such as disaster relief, poverty relief, etc., or a gift contract which has been notarized, cannot be canceled. The “Law of the People’s Republic of China on Donation for Public Welfare Undertakings” also provides definitely for legal liability the donor must fulfill according to his gift agreement. Current laws and regulations not only protect the donor’s rights and interests, such as the right to make free choices, but also require him to fulfill his obligation. The government’s supervision and regulation of charity organizations’ processes of raising and managing the public welfare funds are inseparable from the formulation and implementation of relevant laws and regulations. The existing “Law on Donation for Public Welfare Undertakings” and “Regulations on Foundation Administration” carry clear provisions for the specific proportion and orientation of the amount to be used in charitable donation property received by charity agencies, particularly emphasizing adherence to the purpose of the donor in using the property. Besides the provisions for direct supervision and regulation of the funds obtained by a charity organization, relevant laws and regulations also give the donor with the right to be informed on and to make suggestions regarding the donated property and protect the donor’s right to cancel and remove his donated property if it is used against the donation agreement between him and the charity organization. 43 44

PRC Ministry of Finance (2003). Standing Committee of NPC of PRC (1999).

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This is a way of conducting indirect supervision and regulation. Since 2011, there has appeared a new point to be supervised and regulated by the laws and regulations. Both the contents of laws and regulations issued by the state and legal documents issued by local governments have been emphatic in stipulating that charity organizations shall disclose relevant information to society. At present, the content of and responsibility for donation information disclosure are clearly stipulated in one law, four government regulations, four department regulations and normative documents and seven local regulations or normative documents in China.45 2.

Administrative Supervision and Regulation

The effect of laws and regulations must be ensured by effective administrative enforcement of them. According to the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” in special periods such as serious natural disasters, donated funds directly received by Ministry of Civil Affairs, as well as local governments and their civil affairs departments, should be brought under the purview of government supervision and regulation. Within the civil affairs system, administrative supervision and regulation of the donated property can be carried out mainly by such means as special examinations, as well as disciplinary and auditing inspections and supervision. Supervision and regulation over donated funds received and used by charity organizations should be implemented mainly through the public administration of the charity organizations. In the past several decades, the supervision and regulation of non-governmental charity organizations in China have been effected with annual inspections by governmental departments responsible for their registration serving as the central link. In this process, a non-governmental charity organization first submits its annual work report to the superior department in charge of its administration in accordance with relevant laws, regulations, and policies. Then, the department makes an initial examination of the report and put forth its opinion on the basis of the information available. Ultimately, the department which administers the registration of the organization carries out a comprehensiveness of all aspects to determine whether the organization passes or fails. The administrative supervision and regulation of donated funds is conducted mainly in the form of auditing charitable funds. State agencies that specialize in auditing and auditing agencies approved and set up by governmental departments, as well as their specialized auditors, are responsible for carrying out special or routine auditing of the economic behavior of charity organizations during the process of raising, allotting, and using charitable funds. In recent years, administrative control of supervision and regulation of charity organizations has been lifted step by step under the backdrop of the reform of the administration system. Since 2004, the reform allowing for a direct registration system has relaxed the restrictions on the registration and administration of charity organizations. When mobilizing social donations, the civil affairs departments no longer designate which charity organizations receive donations. Since 2011, the Ministry of Civil Affairs has started to plan

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Wang (2014: 188–189).

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to categorize social organizations engaged in public welfare and charity undertakings as public welfare charity organizations. Their supervision and regulation will be carried out on a unified basis by the Ministry’s Charity Department. The main contents of charitable donation under supervision and regulation include whether charitable fundraising behavior is standard and whether the public is informed of charitable donations and relevant financial affairs. Objects under such supervision and regulation do not include charity organizations such as Red Cross Society of China that are exempt from registration.

4.4.1.2

1.

Factors Promoting the Government Supervision and Regulation Mechanism

The Government’s Increasing Attention to Developing Charity Undertakings

The Report of the Seventeenth Party Congress of the CPC positions philanthropy as an important supplement to the social security system covering urban and rural residents, with an understanding of the absolute necessity of philanthropy in constructing the society. The Report of the Eighteenth Party Congress of the CPC further proposes that reform of philanthropy should be deepened and emphasizes that tax deductions and exemptions on charitable donations should be improved, supporting them to play active role in poverty alleviation. The Ministry of Civil Affairs has set up a special group for leading and coordinating philanthropy and a bureau for coordinating philanthropy and has released annual reports on the charitable donation in China from 2007 to 2013. 2011 saw the founding of the China Charity and Donation Information Center, which, with the support from civil affairs departments, has issued annual reports on charity transparency in China that are based on its surveys and investigations from 2011 to 2013. In 2013, as indicated by a series of documents represented by the “Annual Report on Government Information Disclosure in 2012” issued by Ministry of Civil Affairs, the government is striving to examine a system of social organizations’ public welfare information disclosure that combines administrative supervision and regulation with social supervision. 2.

Gradual Improvement of Rules and Regulations for Philanthropy

Informed by the practices of charities at home and abroad, a rigorous system of legal norms must be established for developing philanthropy. Such a system is the fundamental guarantee ensuring their healthy growth and orderly operation. China’s legislation concerning charities has accomplished considerable progress, with seven laws and regulations introduced, including the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings” and the “Regulations on Foundation Administration.” As laws, regulations, and policies play an indispensable role in pushing ahead the development of charities, in the face of the fact that China has not formed a complete legal framework covering the entry to and exit from philanthropy, the evaluation, supervision and regulation of philanthropy, the delimitation and transfer of public welfare property rights, relevant financial investments, among

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others, the consideration of “Charity Law” (Draft) has been both on the agenda of legislation and under active discussion in China.

4.4.1.3

Troubles with Current Supervision and Solutions

Relative to social supervision and self-regulation, the government’s administrative supervision and regulation of philanthropy have stronger coercive force. However, the current administrative supervision and regulation, with its main form being annual inspection and assessment, still lack a complete system of laws, regulations and rules as a guarantee. It is difficult for government supervision to be exerted effectively. Additionally, there are still issues with the coverage, efficiency, and process of administrative supervision and regulation. 1.

Relevant Supervising Laws and Regulations Still to be Improved

China has yet to introduce any special laws on charity. Legal provisions for the supervision of donating funds and the behaviors of charitable organizations are scattered through various different laws such as the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” “Regulations on Foundation Administration,” “Regulations on Administration of Social Organization Registration,” “Interim Regulations on Administration of Non-Governmental Non-Enterprise Unit Registration,” the “Contract Law,” and even management procedures formulated by relevant departments. Their overly general provisions lack the necessary oversight for specific links or controversial areas in the operation of charity organizations. For example, regarding supervising and evaluating charity organizations, concrete requirements on the bases or procedures for supervision and regulation have not been offered on issues such as related transactions and avoiding conflict of interest. The absence of detailed provisions in laws and regulations adds to the difficulty in enforcing supervision and regulation of donations. This is detrimental to coordination of relations between all interested parties, liable to lead to some blind spots in the enforcement and harm charity donation undertakings. Additionally, there is a limited scope of applicable laws defining normative donation behaviors, it is impossible to effectively regulate the direct donation behaviors of enterprises and individuals and it is difficult to guarantee the right to know and choose the right of direct donation. It is not conducive to long-term participation in charitable activities and leads to the rights to know and choose in making charitable donations being difficult to guarantee, which are not conducive to long-term enthusiasm to take part in charity. To provide effective legal constraints for the supervision and regulation of charitable donation, it is imperative to set up uniform and concrete legal criteria, upgrade the legislation of the laws which empower supervision and regulation, enlarge the supervised and regulated scope of cases and further improve relevant links in legislation, so that the authoritative and effective support of laws and regulations can be truly guaranteed for the supervision and regulation of charitable donations.

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Lack of Objective and Complete Supervision and Low Efficiency of Audits

The main objects of administrative supervision and regulation are the large-scale public foundations. In China, generally, these foundations are sponsored by governmental departments or organizations closely related to the government that gain financial support from government departments. “Government-run” charities are subject to direct management by government departments, which are both their rule-maker and the judge, making it hard to ensure that administrative supervision and regulation of charitable donations is objective and effective. At the same time, charitable organizations for which government authorities regulate the disclosure of charitable information are still mainly foundations, societies and private non-enterprise units with independent legal personalities. The relevant regulations for private charitable organizations and special funds need to be clarified. Currently, supervision and regulation of the charitable organizations’ operations of their funds are mainly conducted by auditing agencies through financial audits. As the traditional financial audit does not work for a specialized accounting system, the disclosure of donation information does not follow a uniformly specified pattern. Only relatively large foundations are capable of offering their standardized financial reports audited by a certified public accountant in accordance with the law, while some smaller charity organizations have low quality financial audits and lack standardized and normalized audit reports. Thus, it is hard for the forces of social supervision to effectively obtain information by reading audit reports. The United States has more maturity in the uniformity of financial statements offered by charity organizations. Each year, charity organizations submit “Form 990,” a uniform annual statement to the federal Internal Revenue Service. That form not only applies to all American charity organizations but also can be assessed by an independent third-party evaluation organization. In view of this, in the future, the administrative supervision of charitable donations in China needs to ensure the effectiveness of charitable resources for public welfare services through the following: requiring all types of charity organizations to provide uniform and normal financial reports and entrusting competent audit agencies to audit them; intensifying law enforcement for supervision on the basis of full donation information disclosure; introducing a proper reporting mechanism for social supervision. 3.

Post-event Supervision is Dominant; Whole-Process Supervision and Regulation are Lacking

Currently, government supervision and regulation of charitable donations is usually conducted on an annual basis. Charity organizations or donating enterprises are required to annually review and examine their public welfare donations made in the previous year. Though relevant laws and regulations emphatically reiterate the definition of the illegal donations behaviors that violate regulatory requirements, yet punitive and preventive laws, regulations, and rules are still absent. Most of these forms of supervision are post-event supervision and lack supervision of donation activities and donations before, during and after the donation. From the confirmation of charity organizations tax exemption qualifications to the legitimacy of the

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fundraising process, and the location of charity assets, seamless supervision of relevant departments is required. The 2011 “charity fraud” of Wuxi’s Suntech sounded the alarm for regulatory oversight. After that incident, the China Charity Federation reflected on its putting “too much trust” in the donor. At the same time, this incident reflects the division of the daily supervision of relevant taxation authorities and business management departments, which is not conducive to ensuring continuous supervision of all links of donation. The next step in improving the regulatory system requires the cooperation of registration authorities, business management departments, taxation authorities, and related functional departments. It will shift priority to tracking the entire process of donation behavior and motivations for donation, and change the supervision of simple evaluation to the combination of reward and punishment, so that supervision really plays a role in promoting charitable donation.

4.4.2 Social Supervision In the area of social supervision, the government has in recent years used media technologies to establish information disclosure platforms, combined relevant evaluation and reporting systems and introduced public, media, and private third-party organizations to supervise charitable donations.

4.4.2.1 1.

Existing Domestic Means of Supervision and Their Efficacy

Public Opinion

The public can supervise as individuals. A considerable number of donors not only participate directly in the public welfare undertakings through their own donation behaviors but also continue to pay subsequent attention to supervising the allocation and use of their donated funds. In recent years, advances in information technology have provided the public with convenient paths to charitable information. This has tremendously promoted the growth of the philanthropy. In particular, as non-governmental donation fundraising forms such as collecting donations online are presently growing, it is easier for public supervision to be involved in charitable donation. Public supervision requires charitable organizations to actively disclose the flow of resources to the society, as well as the use and effects of these resources, revealing information necessarily and accurately. Thus, the supervision of public opinion needs to be combined with the self-regulation of charitable organizations, and it needs to be predicated on public oversight powers that are clearly defined by law.

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Media Supervision

The role of the news media in promoting philanthropy cannot be overlooked. Publicity from the mainstream media has long been an important factor in stimulating the public’s enthusiasm for charitable donation. At the same time, the media’s tracking of and attention towards charitable donations have played a powerful supervisory role on behalf of the public. Joining hands with charity organizations, the media have advocated the transparent operation of “micro-public goods” programs launched and run on the new media platforms such as Weibo (a microblog). They have successfully fortified the social credibility of programs such as Free Lunch for Children and Love Save Pneumoconiosis. Under the backdrop of new media, social supervision tends to be realized in the following ways: undertaking professional inspection of the data and information of charitable organizations portals and guiding the public to take a more professional understanding of the situation for charitable donations; regularly publicizing and reporting charitable donation activities, the building of relevant laws, regulations, and policies, and information on charity organizations, exposing donation behaviors and processes which violate laws and regulations, answering questions asked by the public, and making up for loopholes in supervision. Through new media technology, the public can also spread and share the useful information that they have and ask questions, thus supervising the donation process. 3.

Supervision by the Third-Party Organization

The establishment of a transparency evaluation system has also promoted the social supervision of charity organizations. In 2013, Ministry of Civil Affairs issued the “Circular on Popularizing the Use of China Charity Information Platform,” which mandated more effort to speed up construction of charity information. At present, China Charity Information Centre (http://www.zmcs.org.cn/), China Foundation Center (http://www.Foundationcenter.org.cn/), and the Union of Self-Disciplinary Organizations (USDO (http://www.chinausdo.org/)) each has developed their own system of charity organization transparency indicators (see Table 4.6).

4.4.2.2 1.

Factors Favorable to Promoting Social Supervision

Public Concern and Use of New Media Technology

The occurrence of a star enterprise committing charity fraud and the Red Cross Society of China’s crisis of credibility reflect current problems with the supervision and regulation of charitable donations. They also strengthened the attention paid to charitable donations by forces of social supervision and the general public’s appeal for supervision. The development of many new media platforms such as web portals, blogs, micro-blogs, WeChat, and social networking sites have brought about new ways of making charitable donations and also new means of supervising charitable donations.

USDO

GTI (Grassroots Transparency Index)

Source Zhenyao Wang, ed., Modern Charity and Social Governance

Entrusting “China Development Brief” to monitor and evaluate by the internet channels over 1,000 non-governmental public welfare organizations which are relatively active in China

Foundations which have been inspected annually, 2214 in total

China Foundation Center

FTI (Foundation Transparency Index)

Coverage Samples are drawn from charity federations, Red Cross societies, foundations, public welfare organizations, and non-governmental non-enterprise units. 1000 samples were taken in 2013

Issuer

CTI (Charity Transparency China Charity Index) Information Centre

Name

Disclosed or not, weight, accessibility, and completeness as the four main indicators

Disclosed or not, weight, source of index information, and completeness as the four main indicators

Timeliness, completeness, accuracy, and accessibility as the four main indicators

Indicator

The third party (“China Development Brief” in 2013) is entrusted to collect the information of the indicators of the non-governmental public welfare organizations from their independent websites, blogs, official microblogs, the web pages attached to relevant agencies (such as USDO), and other channels

The collection of the index data is mainly from the yearly reports submitted by foundations to the competent department

Online monitoring of selected public welfare charity organizations, in-depth interviews with organizations, questionnaire-surveying the public, etc.

Source of data

Table 4.6 Charity transparency evaluation indexes in China (excluding Hong Kong, Macao, and Taiwan)

Releasing the current and the previous rankings on the basis of the scores the organizations get, with their ups and downs

Informing China Foundation Center of the result and publicize the score-based rankings (renewed once a month)

Star rating and scoring for the charity transparency index and issuing yearly China charity transparency report

Issuing form

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Increase Strength of Non-governmental Supervision

The gradual growth in the public’s participation in charitable donation is embodied not only in increases in charitable donation volume and instances of charitable donations, but also in the increasingly stronger appeals for the right to be informed and supervise charitable donations. The public is growing more familiar with ways to access information on charity organizations and its capability to collect and screen relevant charity donation information has continued to grow. Additionally, it has become easier for various types of public interest organizations and government agencies to use web portals to conduct public investigations into charitable donations, from which they can obtain a large number of opinions from members of the general public on charitable donation supervision.

4.4.2.3 1.

Main Difficulties and Challenges

Absence of Independent Third Party Supervision and Regulation

In China the new media and public’s supervision of the flow and process of charitable donations is relatively weak and members of the public have little information on where their donations go. This calls for supervision conducted by the truly independent third parties. Currently, the human resources and operating funds of the “third party” agencies depend on administrative departments and self-regulating charity organizations and lack support from truly independent social organizations. This deficiency makes it difficult for them to carry out independent and objective supervision and makes it easy to call their independence into question. 2.

Challenges Facing Objective and Truthful Media Supervision

As one of the main channels by which the public obtains information on supervision, the news media should take an objective and fair stance in reporting and disclosing information concerning charities. New media, with its strong capacity to publicize and mobilize, may distort true information. Much of the news media’s publicity and reporting will inevitably be influenced by certain media figures’ pursuit of sensational effects. In reality, once there a hot event attracts the public’s attention, the media will be stimulated to “make news” in order to draw eyeballs. On the other hand, when facing strong economic enticement or being under strong political pressure, the media may even become an accomplice to or a protector of scandalous charitable donation behavior. Thus, it must be clear about the significance of social supervision for philanthropy and make full use of its own advantages to turn public attention to charities towards the supervision of charitable donations, so as to elevate public participation therein.

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4.4.3 Self-Regulation of Charity Organizations Charity organizations’ capability to self-regulate is also an important factor bearing on their credibility. On the basis of their information disclosure platform, organizational self-discipline can be realized through managerial means by internal leadership and also through introducing relatively independent industry oversight.

4.4.3.1 1.

Existing Means of Self-Regulation and Effects

Supervision by Charity Organization Boards

A charity organization’s board of directors is responsible for part of its self-regulation. Through regular meetings, it hears how the donated funds are used by the executive departments, guides the organization in making self-examinations and selfcorrections with regard to the property received in donations. It is mainly responsible for maintaining the value of the organization’s internal funds, reviewing the annual revenue and expenditure budget, and guaranteeing scientific assessment and decision-making. 2.

Self-regulation Through Information Disclosure Platforms

After 2011, Chinese charitable organizations generally strengthened their selfregulation in concert with the development of internet technology. The official websites of the China Red Cross Foundation, the China Youth Development Foundation, Free Lunch for Children, and the One Foundation have received extensive public attention. At the same time, a new platform for interaction with the public was created, and annual financial audit reports were published online. 3.

Introducing “Third Party” International Supervision

The initiative of the China Youth Development Foundation led to the founding of the “Hope Project National Supervisory Committee.” Members from governmental agencies, news media, donor representatives, and the department in charge of Hope Project, among others fulfill the function of social supervision for the project. In 2012, the Social Supervision Committee of Red Cross Society of China was established. It serves as a third party supervising the work of the Society. In June 2013, the Social Supervision Committee for Guangzhou municipal charity organizations was established. Staffed entirely by non-public servants, it is responsible for making work plans, choosing the key items to be audited and key programs, writing supervisory reports and their releases, etc.46

46

Guangzhou City Charity Service Center, “Guangzhou City Charity Organizations Social Supervision Committee Founded and First Meeting Held”, Guangzhou City People’s Government Net, http://www.gz.gov.cn/publicfiles/business/htmlfiles/gzsmzj/gzdtyw/201411/2784275. html (2013/6/20).

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Industry Supervision

Some charity organizations have joined hands and launched industry-based selfregulatory supervision. For example, they have financed the establishment of an independent portal for the statistical publication of data on charitable donations and assistance and formulated their own self-regulating ordinances to intensify the supervision of charity organizations and standardize their donating, receiving, and assisting behavior, as well as elevate their awareness of self-regulation.

4.4.3.2

Forces Pushing for Self-Regulation of Charitable Organizations

The breaking of the “dual management” barrier has lifted limitations on traditional administrative management and the government has sped up the transfer of its functions to charitable organizations. The introduction of many regulations, rules, and policies contained in such new documents as “Regulations on Foundation Administration” (2004), “Procedures of Publishing Foundation Information” (2006), “Some Rules on Standardizing Foundation Behaviors” (2012), and “Guide for Public Welfare Charity and Donation Information Disclosure (Draft for Comment)” (2011) has step by step provided a basis for requiring charitable organizations’ transparency. At the same time, due to a series of donation scandals, more charity organizations have begun to self-reflect and become aware that only by improving standardized practices in recording their receipt and usage of donated funds and bettering their information disclosure can they reduce the possibility of critical incidents that damage their own credibility and enhance their own “immunity” to donation misconduct.

4.4.3.3

Current Deficiencies and Challenges

Although some information disclosure platforms have been set up, according to the “2014 Report on China Charity Transparency” issued by the China Charity Information Centre in October 2014, only 28% of 1,071 respondents were satisfied with information disclosure by Chinese charity organizations.47 These has been a gap between the initial efforts of some charity organizations’ web portals dedicated to information disclosure and their continued efforts to maintain them, with many delays in information updating. There is still much room for improving the validity, reliability, and interactivity of the information offered on these platforms. At present, the content of the information disclosed by the charity organizations focuses on their organizational charters and annual work reports, while in other aspects only an inadequate amount of information is made public. There is little external constraint for information regarding associated transactions, project implementation, and beneficiaries, resulting in self-discipline lacking in depth and breadth, which is also disadvantageous to effectively conducting administrative supervision and regulation, as well as social supervision. 47

China Foundation Center and Incorruptible Government and Governance Research Center (2014).

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A report by China Charity Information Centre on information disclosure by public foundations indicates that the percentage of foundations which offered annual reports or annual financial reports was rather low.48 Many organizations failed to produce any financial reports that accorded with international standards. They also failed to offer clear information in their annual reports on such issues as the source of their funds, composition of their projects, how they made payments, and whether they had independent auditing.49 The Research Report of China Foundation Transparency Development (2014) jointly put out in 2014 the China Foundation Center and Incorruptible Government and Governance Research Center of Tsinghua University further points out the widespread existence of problems with the information disclosure such as inadequate information and delayed disclosure. In Beijing, 96% of the foundations have made their financial information public, but only 8% have revealed where their funds went.50 These problems are attributed to the lack of a mandatory requirement that these organizations be subject to a rigorous and unified external assessment, and also the absence of a feedback mechanism to provide the results of assessments to non-governmental organizations.

4.4.4 Establishing a Multi-dimensional Supervisory and Regulatory System for Philanthropy Various supervision and regulation mechanisms are highly complementary. How to bring into full play the unique functions and positive influences of different means of supervision while avoiding institutional defects? This is important issue to improve the regulatory and supervisory mechanisms for charitable donations. On the whole, efforts should be made to establish an integrated multi-dimensional system of supervision and regulation. In building that system, the following points should be emphasized: First, the formulation and improvement of charity laws and regulations are a necessary precondition for the supervision and regulation of charities and also an important guarantee for preventing problems in supervision and regulation. Legislation should establish step by step a sound system of relevant laws and regulations to endow the relevant governmental departments with the power to conduct administrative supervision and regulation and to endow the third party supervisory agencies with independent legal status, thus maintaining the legality of those supervising donations. Considering the changed charity donation environment, provisions for charity organizations’ donation information disclosure, associated transactions, avoidance of conflict of interests, and internal governance should be added to the articles of laws and regulations. When formulating or improving the laws and regulations concerned with relevant industries, more definite and detailed articles should 48

China Charity Information Centre (2009). Huang (2003). 50 China Foundation Center and Incorruptible Government and Governance Research Center (2014). 49

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be provided for the industry self-regulation standards as well as media standards for supervising behavior, thus eliminating blind spots in the current supervisory and regulatory process. Second, the interface between various links in the supervisory and regulatory process should be strengthened and the cooperation of supervisory and regulatory bodies should be advanced. First, laws and regulations empower the government to conduct administrative supervision and regulation, with administrative supervision and regulation as the concrete execution of legal supervision and regulation. Second, the governmental departments concerned with administrative supervision and regulation should make public their relevant work and accept both administrative supervision and supervision by the society and the public. Lastly, the self-discipline of an organization requires it to disclose on its own internal information on its donations and accept supervision by the government and society. Governmental supervision and regulation, social supervision, and organizational self-regulation are the three main links of the system to supervise and regulate philanthropy. However, in the future other forms of supervision and regulation may arise and additionally the mutual support and cooperation between different links should not be neglected which is significant to developing a multi-dimensional system of supervising and regulating donations. Third, a system of core indicators for charity donation transparency should be determined and a diversified system of assessment subjects should be fostered. The evaluation of charitable organization transparency lays the groundwork for other supervisory links. The existing three main systems of indicators (CTI, FTI, and GTI) have served as significant tools for the evaluation of charitable donation transparency. However, on this basis, it is necessary to comprehensively consider the purpose of the organization and the needs of society to further filter out relatively uniform and concise “core indicators.” When formulating the criteria for assessing charitable donation transparency, differences in the nature of different charitable foundations should be considered and the criteria oriented towards public foundations should be upgraded. The collection and evaluation of the data needed for assessing charity donation transparency depends on the participation of all relevant subjects, including specialized assessment agencies, accounting firms, employees in charitable organizations, people from the same industry, and beneficiaries. It also depends on various methods such as the records and archives of organizations, on-the-spot observations, and impromptu interviews.

4.5 Community Promotion Mechanism In a community’s donation activities, participation, incentive, constraint and publicity mechanisms all play an important role. In 2006, the present project’s research group, conducted an empirical survey of the charity donation activities held in a village community located in Shandong Province through in-depth interviews, participating in observation and literature collection, among other methods. The interviewees

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included three types: the village CPC branch secretary, the deputy secretary, an accountant, and the cadre in charge of publicity (4 people); villagers (18 people, who engaged in trade or farming work, or were employed in the village enterprise); villagers of other villages (6 people, who were employed in the village enterprise). As shown by the field investigation, the village community members’ roles in the charity donation activities held by the village and their public consciousness thereof are changing and a favorable community mechanism means much to elevating donation consciousness and behavior.

4.5.1 Introduction to the Case In the present case, XZ Village is located in PY County, JN City, SD Province, covering an area of 3.4 km2 , with 3520 villagers in 1054 households (as of 2005) and farming area of 4200 mu (roughly 280 ha). The village’s uniqueness lies in its public welfare undertakings, particularly its distinctive charity donation activities, making it a widely known “star village” and a famous “charitable village.” The villagers of XZ Village have organized charity donation activities on a significant scale since 1992. Up to March 2006, this village of 1000-odd households has donated RMB 3.04 million to itself and some other villages. The highest number of households involved in a donation activity was 903,51 meaning that over 90% of its households joined in. Economically speaking, XZ Village is not a wealthy rural community. The annual per capita output value of the village in the four years from 1992 to 1995 was only a little more than 1000 yuan; by 1996, the figure had increased to 2300 yuan. From 1997 to 2004, its annual per capita output value was 3000-odd yuan and the year 2005 saw it rise to 4217 yuan. A village at an intermediate level of economic growth in SD Province, it ranks among the top in size and volume of charitable donations. Concerning the orientation of its donations, 83.18% of XZ Village’s donated resources have gone to related beneficiaries such as its villagers and the public goods and public welfare activities of the village. 6.95% have been given to unrelated beneficiaries, for example the Southeast Asian tsunami in 2004 and China’s program to develop its western regions, and 6% has been spent in common spheres where there is a benefit for both its villagers and the villagers of other villages, for example, the township high school, where some children go for schooling. Regarding the forces driving donation, there are two types: those based on internal plans and those based on external influence. A donation made for any purpose spontaneously, or through organizing efforts by a community or a department and that is concerned with the community or department itself is driven by an internal plan. If the reason for donation comes from outside of a community or department and it is brought about by publicity from government, charity organizations, or the mass

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Summary Report of XZ Village Committee, May 2006.

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media, then the donation is driven by external influence. 90% of the donations in XZ Village are driven by internal plans, with only 10% driven by external influence.52 In terms of the mode of donation, we can divide the donations of XZ Village into three types: purely spontaneous, organizational, and a combination of the two. Villagers making spontaneous donations based on their own judgment to other villagers or households in need of assistance fall under the first type. Donations made for various reasons through appeals and mobilization by the village’s administrative organization are of the second type. Donations which are made when villagers are willing to donate and the village makes corresponding arrangements belong to the third type. Of all XZ Village’s donations, the number of the purely spontaneous donations accounts for a very small percentage. Only those made on some special occasions such as Teachers’ Day and Seniors’ Day and certain cases such as households hit by disasters or serious diseases are of this type. A large number of donations belong to the other two types, with over 90% of the total being organizational, including those made to the public welfare undertakings of other villages, in particular to the public welfare (public goods) undertakings of the village itself and its neighboring villages. Voluntary donation activities that engage the people have played a considerable role in alleviating the difficulties of some families in difficult circumstances, closing the rich-poor gap, and in making up for the deficiencies in the current social security system. They have also had multi-dimensional significance for enhancing the village’s image, reconstructing the social order of the village, nourishing the villagers’ common values, promoting community solidarity and integration, and elevating community cohesion.

4.5.2 Dynamics and Dimensions of Community Promotion Mechanism The study of charitable donation behaviors is usually conduced from two theoretical perspectives. One of them emphasizes individual demand, regarding donation as active behavior of an individual driven by internal motivation. The difference among the scholars studying from this perspective lies in that some of them place more emphasis on the self-care motivation, i.e. “for the satisfaction of their own mind,” while some others tend to stress the altruistic motivation, i.e. “for helping others.”53 The other perspective gives salience to “relationships,” holding that since an individual lives in a society, their behavior must be under the influence of social factors and other people. For example, Alan Radley and Marie Kennedy (1995) are of the opinion that whether an individual donates depends on their motivation, the social norms which control their behaviors, and certain situational conditions. As found in their study, the features characterizing an individual are not a significant 52 53

Summary Report of XZ Village Committee, May 2006. Ge (2003).

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factor, while their “involvement in the society,” that is, their relationship with the society, is the most significant.54 Results from a study of residents of four cities in Mainland China support the above theory, that is, that the charity donation behaviors of Chinese people are strongly passive, having little to do with individuals’ internal demand, but depending highly on the donation raising activities organized by their work units or communities.55 On the rural side, the village community is the main area where villagers live and move and the occurrence and development of their donating behaviors are both closely related to their community. On the basis of our survey of XZ Village, we find that though ethics and consciousness can offer some explanation of the villagers’ donating behaviors, more important are the existence of four major mechanisms in the village which have exerted a tremendous impact on the villagers’ donation activities.

4.5.2.1

Participation Mechanism

Charity is a shared social undertaking for public welfare that includes both the wealthy and all members of society who are capable of offering financial assistance to others. That both the wealthy and also other members of society participate in charity is the intrinsic requirement and necessary condition upon which charity grows and flourishes.56 Since the inception of its charity donation activities, XZ Village has advocated universal participation by villagers, which it has made into both the base and a prerequisite for these activities. Any villager, whether man or woman, old or young, rich or poor, high or low in their position or power, will get as much support as possible from the village so long as they are willing to donate. This broad participation is shown not only in the construction of the village’s public goods and the assistance to families in difficult situations, but also in participation in social public affairs. For example, when the village needed to build its public facilities such as its kindergarten, Hall of Righteousness, and Street Plaza, over 80% of its households donated. When the Indian Ocean tsunami in 2004 and the catastrophic floods in South China occurred, more than 80% of households donated. This level of participation and the volume of donations were both extremely rare among villages in SD Province. According to the previous theories, when it comes to community participation, the behavior of participants follows a clear law. The upper-middle strata of community members are relatively more enthusiastic about community affairs, for they are more empowered to engage in them and to participate in the decision-making process. The lower strata are less empowered to engage and participate in the decision-making process concerning community affairs, so they show less enthusiasm. Of course, when an affair greatly concerns all groups of community members, each one of them will be more enthusiastic to engage and participate in. The large scale of participation, 54

He (2004: 49). He (2004). 56 Zheng et al. (1999: 120). 55

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large number of participants, and high extent of participation that are characteristic of the charity activities held by XZ Village have much to do with the village’s unique participation mechanism. The survey found three salient aspects of XZ Village’s participation mechanism. First is voluntary participation. Differing from the administrative and forced donations activities (such as deductions of salaries) in some places, XZ Village emphasizes the voluntary principle when organizing its donation activities. On the basis of its own actual conditions, a family decides how much it will give. Every time the village committee mobilizes villagers to donate, it repeatedly emphasizes the participation of volunteers and that the participation is more important than the amount given. The voluntary mechanism stimulates the ardency of the villagers, who see donation as a way of helping others and joining in public activities, rather than a forced burden they have to passively carry. Second is convenient participation. To participate in donations, one has to pay an economic cost, but when there is no convenient and effective platform available, donors’ giving behaviors are further restricted. That is why XZ Village has built a whole set of donation raising mechanisms that facilitate villagers participating, collecting their donations in a concentrated way, and reporting them in timely fashion. Every time a donating initiative starts, the Hall of Devotion, a village center with educational significance and frequented by the villagers, is designated as the donation site. Whenever the villagers get information on the donation program, they will arrive at the site within the required time. We have found in our surveys of other communities that, actually, there is popular demand among the people to participate in charity, but there is no convenient and reliable platform accessible to them. This results in difficulties in carrying out donation activities. Third is meritorious participation. In XZ Village, the villagers take their participating in donations as a way of joining public activities and see donations to public welfare undertakings or to distressed groups of people as an opportunity to show their loving heart. This is the direct result of the culture of giving which encourages donation and regards participating in donation as meritorious that has been long-nourished in the village, as well as an atmosphere of providing assistance. Many villagers said, “Through our meager donations either to our fellow villagers or to those people in other provinces or even other countries who need them, we can give a hand so that they can tide over their difficulties, for which we feel happy. At the same time, it purifies people’s minds and reinforces the value of their existence. If we donated little or nothing, then we would have psychological uneasiness.”57 It is through the voluntary (not forced) participation mechanism, convenience of participation (no need to go out of the village), and meritorious participation (receiving praised) that the number and level of donations have been higher in XZ Village than other villages.

57

“Records of XZ Village Interviews”, May 8, 2006.

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Motivation Mechanism

Charity is an undertaking imbued with love, maintained by morality, and the willingness to give without any expectation of taking. These are the prerequisites and basic requirements for donor participation. However, different incentive mechanisms directly influence donors’ giving behaviors. To remain anonymous represents a supremely lofty realm of philanthropy, yet this should not be required of all donors. Actually, in the contemporary society, it is hardly possible for many to give that way. Appropriate spiritual rewards and material incentives are not just allowable, but also necessary, for the effect they produce is usually inestimable. The village committee of XZ Village has attached importance to donation incentives and established step by step an operating system which incorporates both spiritual and material incentives that are mutually penetrating and supporting. There has been a saying among the villagers, “Fame brings benefit and benefit brings fame.” When a villager does something good and contributes to the villagers as a whole, the village not only has their merits broadcast or put on the TV and made known to other villagers, but also rewards them so that they will not suffer a loss. To carry forward what is righteous, commend model villagers, and encourage healthy trends, XZ Village has constructed a Hall of Righteousness, where village deeds such as righteous and courageous actions, respecting the elderly, caring for the collective, and taking pleasure in helping people are exhibited through objects, pictures, and texts, vigorously advocating a new cultural trend. All public facilities constructed by donated funds are matched with tablets inscribed with the names of the donors erected beside them for the purpose of honoring and remembering those donors. The most illustrative case of XZ Village blending spiritual and material stimulation effectively is its activity to appraise and select a “five-virtue family.” In carrying out it, the village adopts the method of each household recommending the names of a certain number of candidates. If any of the members of a recommended household is found to have violated the village agreement and rules, the household will be disqualified for the appraisal and, beyond that, two votes will be taken away from the household that recommended them. This means has been used to prevent any votes based on favor or special relations and has not only enhanced the villagers’ sense of responsibility and fairness, but also ensured that the winning households are truly elevated. To encourage efforts to win the honor of “five-virtue family,” the village has invested 750,000 yuan to set up its award fund for the “five-virtue family” program. Each year it also hangs glorious plaques for the “five-virtue family” households and presents them with prizes and certificates. If a household wins the honor of “fivevirtue family” for four consecutive years, it will be rewarded amply. The prize the “five-virtue family” wins is not cash, but rather stock in the collective enterprise of the village, which they then receive dividends from annually. Moreover, according to the rules of the village, when a “five-virtue family” household builds new rooms it will get an award of 40 thousand bricks (worth 4000 yuan). Corresponding to new social and economic developments, the village has kept readjusted the conditions for evaluating and selecting “five-virtue family” households. For example, in the early years, the conditions emphasized of social morality and family ethics such as abiding by laws

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and disciplines, respecting elders, harmony among neighbors, being industrious and thrifty in household management, birth control, and transforming outmoded social customs. Later, it prioritized enhancing the quality of family members, pursuing wealth through scientific and technological means, and developing the collective economy, regarding the contributions to the collective and altruistic merits as the principal conditions. If a villager donates money to those in difficulty or to public welfare undertakings, he or she will be awarded a certain sum as a prize, which is also be given in the form of the enterprise stock that is entitled to receive dividends. The director of the village committee briefly sums up the incentive mechanism this way: “Let those caring for the collective and taking pleasure in contributions be awarded in spirit and material and let those disregarding the overall situation and harming others to benefit themselves receive no benefit at all.”58 The charitable donation mechanism of a society should turn the spontaneous donation behavior of donors into the normal state of affairs. The emphasis on donor behavior and incentives for donation (including keeping standardized records, conferring certificates, and donors having the right to be informed of the results of their donations), as well as effective spiritual encouragement and suitable material rewards, are all important, for they can ensure that the donors, obtain satisfactory returns after they donate, an important mechanism for the growth of charity.

4.5.2.3

Constraint Mechanism

Given that charity belongs to a social domain defined by morality and voluntary action, a sound supervision and constraint mechanism with symbiotic self-discipline, mutual discipline, and external discipline is a basic guarantee for the healthy development of charitable undertakings.59 In spite of the common features of charities, different cultural backgrounds, degrees of development of public welfare undertakings, and economic and political environments call for different development patterns for different countries and regions’ systems of supervision and constraint system. The sustained practice of charitable donation in XZ Village can to an extent be attributed to a long-established institutionalized and public opinion-based social constraint mechanism. Regarding institutional supervision and constraint, XZ Village adopts completely transparent and institutionalized practices. First, donation activities are managed strictly. Each time the village launches a donation initiative, the village committee forms a special work group responsible for strictly managing the entire process and making sure that the accounts are clear, and the records are accurate. After the donation activity, statistical reports are made known to the public in a timely fashion so that they can be monitored by everyone. Second, financial information is regularly made public. The information subject to disclosure involves the balance of payment position of the village’s enterprise, the situation of the public welfare facilities funded by villagers that are under construction, voluntary labor 58 59

“Records of XZ Village Interviews”, March 16, 2006. Lu (2004: 190).

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services work, village awards to volunteers, application for and approval of status as a “household enjoying five guarantees,” and impoverished households’ applications for assistance and the approval of those applications. All of these are made known to the villagers through the village bulletin board. Third, a supervision mechanism is set up for mass participation in public affairs management. In XZ Village, both the criteria for evaluating and selecting “five-virtue family” households and the results are determined by all the villagers. The process of handling neighborhood disputes and immoral conduct is audio-recorded and broadcast, with calls for villagers’ discussion and comment. Villagers are engage in full discussion of village rules and agreements to be introduced and various issues of the village-level “legislation” to be decided. They must reach consensus before rules, agreements, and issues are implemented under their supervision. Village forums and question-and-answer meetings of village cadres are held for repeated discussions and extensive collection of the villagers’ opinions on the major issues concerning the rights and interests of all villagers. Thanks to such series of measures and practices, a new pattern of self-governance and democratic management has been developed in the village— every one of the villagers is both a practitioner and a receiver of management and supervision. Fourth, the system of “villagers evaluating cadres” has been established. Public activities such as donation in rural areas have much to do with the thought and behavior of the community leaders. When judging whether a cadre is competent or not, what should be considered is not only their capability of performing their duties, but more importantly their attitude towards accepting public supervision and their own self-discipline. Thus, XZ Village has established an entire set of systems for “villagers to evaluate cadres.” The villagers are empowered to: first, decide the criteria for evaluating the village cadres; second, evaluate their performance; third, assess their treatment, and, fourth, determine their award grade. The outcome of this “voting for trust” is that the villagers are willing to respond to the village’s call for donations, and believe in the righteousness and value of the donation activity. Seen from an organizational angle, the open and transparent operation of the institutionalized and standardized mechanism for supervision and constraint boosts the operational efficiency of community based public activities by removing the information barrier between the village cadres and ordinary villagers and at the same time deterring behaviors which harm public standards and public welfare undertakings. At the level of public opinion supervision, the mutual constraint between acquaintances and the public pressure existing within the village have also contributed greatly to donation activities. A rural community is a small society of familiar relationships. Blood relations, marriage-based relations, and clan relations cause close connection and interactivity among the community members. In the narrow space of the community, any behavior is under the supervision of others’ views. The donation activity is also under the influence of these relations and space. XZ Village has advocated for the transparency and openness of donation information. The names of the donating families and the donated sums are made public on a notice posted on the village’s bulletin board and in the media. Additionally, they are printed as detailed reports and sent to all households so that the donation information of every household is clear to all. This high information transparency and mutual informing among the

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households constitute by themselves social supervision or a realm of public opinion. Even when one is unenthusiastic and unwilling to join in the donation activity, they have to give up that idea under the pressure from inside the village as part of a face-to-face society. This point provides evidence for Milton Friedman’s view that “I am distressed by the sight of poverty; I am benefited by its alleviation; But I am benefited equally whether I or someone else pays for its alleviation; The benefits of other people’s charity therefore partly accrue to me. To put it differently, we might all of us be willing to contribute to the relief of poverty, provided everyone else did. We might not be willing to contribute the same amount without such assurance. In small communities, public pressure can suffice to realize the proviso even with private charity. In the large impersonal communities that are increasingly coming to dominate our society, it is much more difficult for it to do so.”60 In our survey, we heard the villagers say “What I am afraid of is not the village cadres but the three thousand people (i.e. my three thousand fellow villagers).61

4.5.2.4

Publicity Mechanism

Regardless of the era, mutual assistance and spontaneous donation has never stopped, yet donation activities with considerable results and scale have usually been related to organizational mobilization. In fact, both large-scale social donations to disasterstricken areas and people and also small-scale donations within a work unit or a community have much to do with mobilization strength and means of publicity. As the organizer of XZ Village’s donation activities, the village committee is responsible for the work of publicizing the village’s donations. All committee members ranging from the director to the cadre in charge of the village publicity center have treated the publicizing donations as the basis of donation activities. Taking into comprehensive consideration the village’s tradition and the current conditions of state, society, and the village itself, they have probed guiding the public opinions in a multi-directional manner, sought diversified means of publicity, and highlighted the contents of paradigmatic cases, so as to elevate the villagers’ conception of charity and commend their charitable behavior. Firstly, tapping the resources of traditional morality. XZ Village boasts a timehonored charity history and has cherished the traditional virtue of mutual aid and taking pleasure in donating. According to historical records, “XZ Village is the ridge supporting the mountain, the bank preserving the water, and the native place of the divine bird. The residents in it are filial and sincere and their children carry forward charity and inherit the virtue, leading a self-less life”62 is inscribed on the Li Yun Tablet erected in the third year of the Xianheng reign period under Emperor Gaozong of Tang (672 CE). XZ Village has inherited the virtue of charity and moreover it has 60

Friedmann (1962: 190). “Records of XZ Village Interviews”, March 16, 2006. 62 Minglan Zhang, “Governance Imbued with Filial Piety and Sincerity”, inside edition of the Publicity Department, Pingyin County Committee of CPC, 1999: 1. 61

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extended it to “alleviating poverty and giving financial help, accumulating merits and pursuing goodness.” To educate the villagers and carry forward the XZ charity culture, the village has built a bronze statue symbolizing filial piety and sincerity in its central square that aims at fortifying the villagers’ inheritance and identification with charity tradition. To set charity examples for the villagers to know and follow, as well as to nourish their charity participation consciousness, a Hall of Righteousness and Hall of Devotion have been constructed from the funds invested by the village and donated by the villagers. It has many pictures of many domestic and international philanthropists such as Rulun Huang and Bill Gates, as well as written records of their merits. Charitable deeds that villagers have conducted in the village or other areas and contributions that people from other places have made to the village can both serve as the “entrance tickets” to the two halls of honor. Secondly, transmission through community media. XZ Village has attached importance to using various kinds of community media to publicize donations. Since late 1980s, the village has had the speeches of village cadres, the meetings of village representatives, and village cadres’ dialogues with villagers in their home visits audio-recorded and broadcast repeatedly. In 1992, the village built a closed circuit television system and began to broadcast village news mainly including village cadres’ speeches, villagers’ suggestions, and readings of letters from villagers for ten minutes each day. We found in the survey that most villagers have developed the habit of watching the village news TV program. Every time a donation activity is held, all the warm-up publicity, activity process, the donation results, and the activity summary are broadcast on the village media and villagers are informed of them as soon as possible. Through these efforts, an effective information platform is built for villagers joining in the donation activities, and a reliable window also is provided for all villagers to know everything concerning the village’s donation work. Thirdly, soliciting writing from the villagers. To encourage the villagers to participate in public activities, care for the construction and development of the village, and enhance their own quality, XZ Village launches regular activities of soliciting writing or letters from the villagers. Writes must point out the real names of both those who bring credit the village and those who bring shame to it. All writing is read aloud by the writer on the village’s TV station and good writing receives considerable reward. The process of writing, reading, and evaluating them is actually a vivid and concrete process of publicity and education. Fourth, minding the art of good publicity. The effort to raise charitable donation is a beautiful public welfare undertaking. However, in the present age where material civilization has advanced substantially, it is not popular in many places. This is directly caused by inadequate efforts at charitable publicity. Some charitable publicity programs are not started on the right occasions, fail to provide proper reasons for donation, and do not stress the direct relationship of the art of publicity. However, in the case of XZ Village, in its publicity activities, it has laid emphasis on timing of publicity and the art of mobilization. First, it avoids empty talk, big talk, and such slogan-like things. Second, it gives detailed clarifications of the purpose, aim, content, use, catchphrase, and date of a donation initiative. Third, it tries to seize the opportunities to conduct charitable publicity during typical disaster relief or

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poverty alleviation events with major impact. Fourth, it reports in timely fashion typical cases of good deeds and merits, fortifying the climate of respecting the good and benevolent and remembering meritorious deeds. To quote some words from a TV speech delivered by the deputy director of the village committee in March 2016 when calling for the villagers to make contributions to found the village charity fund, “The CPC Central Committee and State Council have put forward constructing a harmonious society of China and, to construct a harmonious society, various regions across our country have founded their charity foundations. In our village, through donation activities across years, all our villagers are strongly conscious of devotion and have reached a consensus. Each year, among the families of our village, several dozens of villagers fall victim to some serious diseases and their families therefore fall into financial difficulty. Additionally, there are also some families suffering from natural or man-made disasters. These families need the warmth from the big family of our village and all of us should take a positive part in helping them. As considered and decided by the village’s CPC branch committee and the village committee, we will conduct an activity of showing loving heart and making selfless donations. … In the past, our donations for public welfare undertakings and our erecting the monument carved with the meritorious deeds were of both realistic and economic significance, as well as historic significance, which would be passed down to the future generations and written into history. This proposed activity of showing loving heart and making selfless donations will be more of value of life, for the value of life is also in devotion.”63 In only two days after that activity was launched, RMB 177,000 was raised in contributions to the fund for assisting families in difficulty. The efficient and effective charitable publicity removes the villagers’ misgivings regarding their donations and elevates their conception of philanthropy. Thus the village has gradually developed its own charitable culture featuring all the villagers engaging in donating behavior with the self-consciousness of serving others.

4.5.3 Features of Community Charity Donation In a society, charitable donation occurs concurrently both in its urban and rural areas which are different in many aspects. As far as the current situation of charities in China is concerned, regarding the diversity of charity organizations, the availability of charity resources, or the pervasiveness of charitable behavior, the charity activities organized in rural communities are different from those in the urban communities. The charity activities held in XZ Village reflect to some extent the features of the charitable donation in rural communities.

63

XZ Village Committee, “Filial Piety and Sincerity Village Brief” (4), April 12, 2006.

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Unification of Mutual Benefit and Public Interest

In terms of the orientation of benefits, charitable donation is non-profit or altruistic, and in a broad sense aimed at public benefit. However, as found in the survey, the public welfare orientation of the rural donation activities is, due to the limitation of boundaries, different in degree. If the beneficiaries of a village’s donations are mainly its own villagers, such behavior can be termed as a mutually beneficial behavior, while if the beneficiaries are the people from society at large, it can be termed as public welfare behavior. In terms of such a distinction, the donation behaviors of XZ Village actually reflect the unity of mutual benefit and public welfare. The charitable activities of XZ Village were at first held among relatives, friends, and acquaintances in the village, in other words it was mutual assistance by the villagers. Donors were more inclined to donate to their own relatives and friends or their fellow villagers. This practice is referred to by academics as the “neighborhood effect” of charity. Gongcheng Zheng mentioned when studying Chinese donation activities that in traditional Chinese ethics, charity behaviors follow a circular law, that is, there is a far or near, close or distant relationship with the donor. As the traditional Chinese mentality prioritizes the close before the distant and the near before the far, if one, regardless of relatives, aided those other than his blood and marital relations, he would be considered abnormal. Also, if one did not help the impoverished or struggling people close to him, but rather gave his hand to impoverished or struggling people from other places, he would also be considered as abnormal. This way of thinking may be backward, but is conventional to the Chinese.64 For a long time, XZ Village’s own villagers were the main beneficiaries, with donations targeted at assisting struggling families in the village and funding construction of its public facilities and services. However, as indicated by the use of donations since mid-1990s, its charitable activities no longer aim to benefit the own community itself, but rather go beyond that and, within their own means, provide help to the victims of catastrophic disasters domestically and even abroad. These behaviors are more in accordance with the philanthropic concept advocated in modern society, for the transcendence of modern charity over traditional charity is embodied in that charity does not mean the alms given by the wealthy to the poor, but rather the citizens of the entire society autonomously organizing themselves and doing what they can for others. That charity is not limited only to poverty alleviation and help for the handicapped, but rather expanding the various undertakings aimed at enhancing the quality of people’s livelihood and bettering the living environment. In pursuit of charity, one should not be limited by their own narrow space, but, keeping society at large in mind, embrace the world with universal love.

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Zheng et al. (1999: 101).

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High Degree of Dependence on Village Grassroots Political Power

Differing from traditional charitable ethics, modern charitable behavior does not mean an individual doing good for another individual, but rather a socialized and organized form of behavior. In urban communities, various foundations, charitable organizations, and other NPOs provide the operational vectors and platforms for donation activities. However, on the rural side, organizations serving as the third sector are rather undeveloped. The village committee, which functions as the most important social organization in a rural community, is not only the most fundamental administrative tool by which the state mobilizes farmers for social purposes, but also the most important organizational condition for influencing an individual of a rural community to make donations. Take XZ Village’s donation activities as an example. Its village committee has played an important role in organizing donation activities, indicating that high dependence o grassroots political power at the village level is a main feature of donation activities in a rural community. On one hand, the villagers participate in the donation activities as a result of the village committee’s mobilization. In our survey, we asked, “If you know from the newspaper, TV, or other media that donation activities are underway, will you join in and donate?” All the answers we got were “No.” When asked about the reason, the respondents answered, “We do not know whether these appeals for donations are real or fake, and we do not have time to inquire about them. By contrast, when our village committee mobilizes us to donate, it is for something real and that it would be good to donate, so naturally we are willing to join in.” When asked whether they would donate if the village committee did not hold any donation activity, the answers given were completely negative. When we got to know that some people from other villages who worked in the enterprise of XZ Village also joined in the donation activities held by the village, we interviewed them, who said, “As we work in this village’s enterprise, we are also members of the village, and when the village committee calls on the villagers to donate, we feel that we are also duty-bound. We usually do not donate in our own villages, for they do not do such a thing.”65 On the other hand, the village committee makes a great effort to organize the donation activity, so that the villagers trust it and join the ranks of donors autonomously and voluntarily. The promotion function of the village committee in the donation programs is not only in offering information, as it also does much practical work in publicizing, organizing, and transferring donations. In the past ten years, through the course of its many donation activities, XZ Village has formed a whole set of working procedures for organizing donation activities: making its decision on mobilizing a donation activity according to the arrangements of superior departments or the actual needs of the village itself; announcing relevant information on its radio station or TV station; designating some special workers for collecting and recording donations at a specific site (usually the Hall of Devotion); assigning workers in charge of publicity 65

“Records of XZ Village Interviews”, March 18, 2006.

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to record the whole process, and make statistical data of the donations known to the villagers in a timely fashion; Reporting paradigmatic cases which can serve as examples and models found in the donation process; assigning special workers to transfer the donated funds to relevant charity agency or organization designated by the government after receiving them at a scheduled time; or sending it directly to recipients’ homes, or adding to funds for building public facilities. Here, the village committee actually serves as the medium and bridge connecting the charitable undertaking and the villagers. From the above, it can be concluded that XZ Village’s means of organizing donation activities is similar to that adopted in China for “organized mobilization” in the earlier planned economy period. It is characterized by, “Everyone who is mobilized is closely related with the one who mobilizes, or more accurately there exists between the two sides a bond of organizational subordination, the basis of which is that, to those who are mobilized, the one who mobilizes them usually controls the utterly important rare resources.”66

4.5.3.3

“Influence Effect” of Social Elites

The widespread participation of members of society constitutes the basis for the growth of the charity undertaking. When ordinary people take active part in charity, then a kind of “all for one and one for all” ambience can form, but wealthy people, socialites, and those with special backgrounds, showing enthusiasm for charity, plays an incomparable role for donation activities. This is not only because of their financial means, which can serve as an important and steady economic basis for charity, but more importantly because of the social influence of their charitable deeds.67 Though XZ village has no moneybags, no famous upstarts, and not even a socialite or individual with a special background, sustained donation activities depend on exemplary deeds of the rural community elites, i.e. the village cadres. The village cadres of XZ Village mainly include the members of the two committees (the village CPC party branch and the village committee). The current core figure is Mr. Yin, who concurrently serves as secretary of the village’s CPC committee and director of the village committee. He has played a leading and exemplary role in constructing the village’s flourishing economy and rich charitable culture. In our interviews, the villagers told us that Mr. Yin, their leader, was characterized by “one more and one less” that is, he contributed more than others to the village, while he took less, as his monthly 2000-odd yuan salary was only one fifth of that of village enterprise managers. Some managers thought that his salary was less than he deserved for his contributions and suggested that he take more, but he refused resolutely. His family is not wealthy, but when other villagers are faced with difficulties, he has always managed to offer help. In every donation activity, he took the lead and up to now he has given a total of 124,860 yuan. 1998 saw him named as a 66 67

Sun et al. (2004). Zheng et al. (1999: 120).

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model provincial worker. He donated the award of 1000 yuan to the Hope Project, which subsidizes two impoverished students in a mountainous area of Linyi, a city of Shandong Province. To encourage the students of the village to study hard, Mr. Yin created a “Fund Agreement,” establishing a fund by donating to the village thirty thousand yuan awarded to him by the township to support the impoverished students of the village and inspire them to work hard. Under the regulations that he repeatedly asked for, in the rules on the awards for raising donations, it is stipulated that the village committee director is not to be awarded dividends, the deputy directors or secretaries each are to be awarded 50% of the amounts they donate, and the villagers each get 100% of the amounts they give. Thus, it is due to village cadres’ role as models and their exemplary deeds, their taking the lead in donating, and their organization and coordination of donation activities that they won the general trust of villagers and improved the authority and appeal of charitable activities.

4.5.4 Brief Summary The donation activities held by the object of the present case study, i.e. XZ Village, show: (1) The amount donated by a community does not necessarily, as has usually been claimed, depend on the economic development level of the area it belongs to. Rather, the advocacy efforts made by its leadership and its humanistic tradition tend to occupy a more important position. (2) A community’s mechanisms for developing charity, including its participation, incentive, constraint, and publicity mechanisms, play an important role in its donation activities. (3) In China’s rural communities, unlike urban communities, the collection of charitable donations does not depend on specialized charity organizations, particularly foundations, nor does it depend on religious groups or those people who are enthusiastic about charity, but rather it closely depends on the grassroots political organizations. (4) Community leaders serve as the core and play an exemplary role in community based donation programs and just as a community’s cultural undertakings must be first initiated by its leader, the development of its charitable undertakings must be started the same way.

4.6 Summary and Discussion The donation behavior of the subjects of charitable undertakings are subject to the comprehensive influence of multiple factors such as social culture and awareness, the economy, taxation, governmental supervision and regulation, and social supervision. With regards to culture and ideology, the values of traditional culture exert an indepth and complex influence on charitable donation, while diversified internal mechanisms and multiple structures of awareness are also direct influences. Contemporary Chinese awareness of charity, though having grown to some extent, is, on the whole, troubled by lagging behind, passivity, and a low degree of development. Probing

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from a policy angle, it is suggested that basic paths to enhancing charity awareness in China include removing the obstacles hindering organizations and individuals from participating in charity, strengthening the supervision and regulation of the donation process, improving the incentive mechanism, and stimulating modern Chinese awareness of charity by means of institutional reform. Meanwhile, favorable cultural environments should be created for advocating charity, and media and public opinion should be rationally guided in reporting and spreading information on charity organizations and donation activities, so as to elevate the public’s capability to distinguish between true and the false information on charity. The level of charitable donation is under the influence of economic strength. On the whole, the economic development of China is beneficial to the growth of charity in the country, yet due to the considerable gap between different regions, development levels across the country are uneven. Under concrete conditions, other economic factors pushing charitable donation should also be considered, of which the return in terms of benefits is particularly noteworthy. Continually improving taxation policies promote enterprises and individuals to actively participate in donating, and China has achieved impressive progress in this regard. However, the influence of the actual outcomes of the preferential tax policies on enterprises and individuals is still limited, reasons for which include the difficulty in obtaining the proof required to apply for tax deductions and exemptions, the complex procedure for handling tax refunds, and the absence of a proper “antidriving” mechanism. The Chinese government has attached increasing importance to developing charity undertakings, the laws, regulations, and rules of the country regarding charity are better and better, and China’s society and people pay more and more attention to the supervision and accountability of charity undertakings. All these factors are positive for the growth of charities. At the same time, we should also look at the delayed process of bringing the supervision of charitable donation under the rule of law, and there is a lack of organic integration of charitable organizations’ administrative supervision, social supervision, and organizational self-discipline. The mechanisms of a community for developing charities, such as the participation, incentive, constraint, and publicity mechanisms, play an important role in its donation activities. The advocacy efforts made by its leadership and its humanistic tradition tend to occupy a more important position. In China’s rural communities, unlike the urban communities, the collection of charitable donations does not depend on the many specialized charity organizations, particularly foundations, nor does it depend on those religious groups or those people who are enthusiastic for charity, as in traditional charity activities, but rather closely depends on the grassroots organization of political power at the village level. The community leaders serve as the core and play an exemplary role in community-based donating programs. An internal and external environment that is beneficial to avoiding harm and engendering healthy development for charitable donations needs to start from the following aspects. First, improving the current laws, regulations, and rules. As shown by the development of charities in other countries, the well-aligned development of the charity

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undertakings must be guaranteed by legislation. The existing laws, regulations, and policies concerned with public donations and the charity undertakings in China are relatively dispersed, so a comprehensive charity law should be formulated on the basis of integrating them. By drawing on the experience of other countries, efforts should be made to clearly define the features and relevant concepts of the Chinese philanthropy. An overall and definite program for the future development of philanthropy, the configuration of a systematic structure, and relevant favorable policies should be clarified. Particularly, the operation of preferential tax policies should be made easier, detailed procedures and rules for handling tax exemptions on donations should be introduced, the process of enterprises and individuals applying for tax refunds on donations should be simplified, the tax proportion should be increased, and the range of charity organizations qualified for tax exemptions should be enlarged, gradually eliminating the differential treatment of officially run NPOs and non-governmental charity organizations. Second, promoting the coordinated development of philanthropy and economy. As the economic development level is a basic factor influencing the growth of charitable donation, so all-out efforts should be made to develop the economy and, as the economy flourishes, philanthropy will also thrive. On the other hand, the regional gap in developing charity should be narrowed and economic means can be used more fully to adjust the beneficial relationship between subjects including enterprises, individuals, and charity organizations. Third, carrying forward charity culture. More efforts should be made to advocate vigorously the socialist core values of alleviating poverty and assisting the needy, mutual aid, and devotion to society and also to push charity close to the grassroots and bring it into communities, villages, enterprises, schools, and other social organizations that the public live with. Charity knowledge should be spread through publicization and education and charity culture should be disseminated, expanding the impact and appeal of the charity undertakings. Enterprises’ sense of social responsibility should be strengthened, encouraging them to better shoulder their public welfare duties. The news media should better guide public opinion by making use of new media technology, fostering positive images of exemplary figures in a timely manner, and reporting more positive information on charity, thus driving broader social trends to turn for the better.68 Fourth, establishing a comprehensive mechanism integrating governmental supervision and regulation, social supervision, and organizations’ self-discipline. A system for supervising charity organizations should be set up to solve to the greatest possible extent the problems that have kept occurring in recent years, such as scandals in donations, false charity information, and low efficiency of charitable funds used, and to restore the confidence of the donors. This will involve the joint participation of the government, the public, and the media. Strict supervision of the allocation of funds should be conducted according to the definite requirements of specific laws and regulations, the operation of charity projects, the decision-making management for connected transactions, and the disclosure of charity information, among 68

PRC Ministry of Civil Affairs (2005).

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other issues. Charity organizations themselves should establish well-functioning selfdiscipline mechanisms, make timely disclosures of charity information, and accept the supervision of the government and all of society, so as to rebuild their credibility.

References Bao, Y. (2014, March 10). It is time to break the ‘glass door’ of the taxation on public welfare donations. China Social News. Barnes, N. G., & Fitzgibbons, D. A. (1991) Business charity links: Is cause related marketing in your future? Business Forum, 16(4), 20–23. China Charity Information Centre (2009, August 14). Report on the results of discussions on the forum of ‘transparency, credibility, and protection of donors’ rights and interests’. http://www. juanzhu.gov.cn China Foundation Center and Incorruptible Government and Governance Research Center, Tsinghua University, (eds.). (2014). Research report of China foundation transparency development (2014). Social Sciences Academic Press. Cliff, L. (1995, June) The voluntary provision of public goods. Doctoral Dissertation, Princeton University. http://perspicuity.net/sd/vpopg/vpopg.html. December 6, 2014. Cornes, R. C., & Sandler, T. (1994). Joint production and public goods. Economic Journal, 580–598. CPR Ministry of Civil Affairs. (2013). 2013 China’s Civil Affairs Yearbook, 478. Friedmann, M. (1962). Capitalism and freedom (p. 190). University of Chicago Press. Ge, D. (2003). A review of the forum ‘enterprises’ social responsibility. China Sociology Net. http:// www.sociology.cass.cn. October 25, 2010. Han, B. (2014, October 30). State council: Putting into practice the donation tax reduction and exemption policy and enhancing charitable organizations’ credibility. National Business Daily. He, G. (2004). The passive voluntary: A multi-factor analysis of charitable donation behaviors of individuals in four cities. In S. Liping (Ed.), Selected MA Theses in sociology from peking university (p. 49). Shandong People’s Publishing House. Huang, H., Effective paths to strengthening the construction of non-governmental organizations’ capabilities. Journal of Hangzhou Teachers College, 5. Jiang, Y. (2005, November 21) Civil affairs system receives 1.7 billion yuan individual donation in total this year, with individual tax refund rate zero. Xinhuanet. http://www.xinhuanet.com Liu, M. (2007). A study of reasons for and solutions of deficiency of charity donation in China. Public Administration and Law, 3. Lu, H. (ed.). 2004. Charity: Care and harmony (p. 190). Shanghai Academy of Social Sciences Press. Meng, Z., Peng, J., & Liu, Y. (eds.) (2012). 2011 report of charity donations in China. China Society Press. Mitchell, R. C. (1979). National environmental lobbies and the apparent illogic of collective action. In R. Clifford, (ed.), Collective decision-making. Johns Hopkins University Press. Moe, T. M. (1980). The organization of interests: Incentives and the internal dynamics of political interest groups. Chicago University Press. PRC Ministry of Civil Affairs. (2005). Guiding outline for the development of the charity undertakings in China (2006–2010). China Civil Affairs, 12. PRC Ministry of Finance, State Administration of Taxation, and General Administration of Customs. (2001). Interim procedures for import tax exemption on materials donated for poverty relief and charity (FT (2000) No. 152), effective since January 1, 2001. PRC Ministry of Finance. (2003). Circular on strengthening the financial management of enterprises’ external donation (FE (2003) No. 95), put into force since May 1, 2003.

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PRC State Council. (2008). Rules for the implementation of the interim regulations of the People’s Republic of China on value-added tax (FT (2008) No. 50), effective since January 1, 2009. PRC State Council. (2011). Regulations for the implementation of the law of the People’s Republic of China on individual income tax, effective since September 1, 2011. PRC State Statistics Bureau. (2014, April 16). Major economic indicators of large and medium sized industrial enterprises. http://data.stats.gov.cn/workspace/index?m=fsnd Sargeant, A., & Woodliffe, L. (2007). Individual giving behaviour: A multidisciplinary review. The Routledge Companion to Nonprofit Marketing. Shi, G. (2014). Chinese residents’ charity awareness and relevant influencing factors: A survey of five major cities of China. Theoretical Investigation, 1, 157–161. Shu, D. (2009, January 1). Interpreting the report of the survey ‘citizens and charity’ in 2008. CPPCC Daily. Standing Committee of NPC of PRC. (1999). Contract law of the People’s Republic of China, effective since October 1, 1999. Standing Committee of NPC of PRC. (1999). Law of the People’s Republic of China on donation for public welfare undertakings, effective since September 1, 1999. Standing Committee of NPC of PRC. (2008). Law of the People’s Republic of China on enterprise income tax, effective since January 1, 2008. Standing Committee of NPC of PRC. (2011). Law of the People’s Republic of China on individual income tax, effective since June 1, 2011. Stevens, J. B. (1988). The economics of collective choice. Westview Press. Sun, L., Jin, J., & Jiang, H. (2004, August 2) ‘Hope project’ and Non-governmental organizations. www.cc.org.cn Tian, L., & Chen, X. (2007). A study on dealing of corporate strategic philanthropy. Journal of Central University of Finance and Economics, 2. Wang, W. (1999). On the ideological basis of ancient Chinese philanthropy. Jiangsu Social Sciences, 2. Wang, Z. (ed.) (2014). Modern philanthropy and social governance (pp. 188–189). Social Sciences Academic Press. Xu, L., & Zhang, H. (2004). A survey of the charitable donation awareness of Chinese citizens. Social Sciences in Nanjing, 5, 89–94. Yang, F. (2009). Philanthropic culture and comparison between China and the United States in charities. Shandong Social Sciences, 1. Yang, T., & Ge, D. (2003). Companies and public welfare (II) (p. 54). Social Sciences Academic Press. Yuan, L. (2006, July 21). Donation tax exemption calls for more operable systems. Shenzhen Economic Daily. Zhan, Z. (2003). Heterogenized NPOs and the orientation and option of relevant taxation policies. Contemporary Finance and Economics, 11. Zhang, M. (2014, April 15). Many a foundation raised over 500 million charitable funds in 2013. China Philanthropy Times, 4. Zhang, M., Marc, H., Hu, X., & Dong, K. (eds.). (2004). Opportunities and challenges: A review of the public management in China (p. 205). Sun Yat-sen University Press. Zhao, S. (2006). Charity: Several questions awaiting urgent clarification. China Civil Affairs, 2. Zhao, X. (2008). An analysis of the cultivation of deep concepts in constructing charity culture. Journal of Social Work, 11-II. Zheng, G., Zhang, Q., & Xu, F. (1999). Chinese philanthropy (p. 120). Guangdong Economic Press. Zhong, H. (2007). Understand right the value and function of social donation to an enterprise. Economic Herald, 7. Zhou, Z. (2013). The value and theoretical construction of charity ethics in contemporary China. Qilu Journal, 1.

Chapter 5

Modes of Charitable Fundraising and Innovation Jianguo Gao, Xueping Ren, and Qin Li

“Charitable fundraising” refers to legally qualified charitable organizations soliciting donations openly from society for the purpose of helping people. The “charitable fundraising” to be discussed in the present chapter refers to the activities of raising charitable donations organized by charity organizations as qualified legal persons. As stipulated by the Chinese laws and regulations, there are three forms of organizations that engage in charitable undertakings in China. They are social organizations, foundations, and non-governmental non-enterprise organizations. These charity organizations, which serve as the subjects of the activity of raising charitable donations, are also the agencies receiving social donations and connecting the donors and the recipients. Exploring fundraising methods from the perspective of charity organizations is an important part of the study of charitable donation mechanism.

5.1 Modern Modes of Charitable Fundraising With the continuous development of the Chinese society, philanthropy in China has made substantial progress and more and more ordinary people and organizations have gotten into charity. The state has introduced many measures to encourage the growth of philanthropy, eased its control of charitable behavior on a step by step basis and shifted from administration to governance. An increasing number of charitable organizations have engaged in philanthropy, which has intensified the competition for social charitable resources. The current practice of charity organizations receiving social donations passively has begun to fail the needs for further development under competitive pressures. J. Gao (B) · X. Ren · Q. Li Shandong University, Jinan, China e-mail: [email protected] © Social Sciences Academic Press 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_5

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Fig. 5.1 Fundraising means experienced by interviewees. Source China Foundation for Poverty Alleviation (2014)

Generally speaking, in the work of charitable fundraising, there is direct contact between the recipient and donor. Such face-to-face discussion regarding contributing makes for a relatively effective way of raising donations and also is an important interpersonal form of fundraising. Marketing-based fundraising is the use of letters, mail, and express delivery, to send public welfare materials to members the public who can make donations in the hope that they will be impressed and donate. Membershipbased fundraising means that the members of the organization are motivated by the organizational system. Members are asked to provide regular funding for the organization or organize fundraising activities as part of events during specific periods. Telephone donation, that is, the request for fundraising from potential donors by telephone, generally makes use of the role of volunteers of charitable organizations. They receive advanced training and are aided by basic information on donors and historical donation records. According to Mixer and Dunlop, et al., the means and methods of charitable fundraising can be divided into fifteen types, which include: annual campaigns; private solicitation; club based fundraising; membership based fundraising; phone calls for donations; direct mail; special events; TV fundraising programs; donation-receiving phone numbers; on-street fundraising; fundraising oriented towards small and medium sized enterprises (SMEs); joint fundraising; project-based fundraising; capital fundraising; large-sum fundraising; and planned gifts.1 As shown by the “Survey Report of the Status Quo of the Public Welfare Donations Made by the Chinese Public” by the China Foundation for Poverty Alleviation, the public’s attitudes towards the different means of charitable fundraising differ (see Fig. 5.1). Therefore, to obtain more donation resources, charitable organizations should facilitate donor behavior according to the different tendencies of donors. 1

Mixer (1993: 63), Dunlop (1993: 12).

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Modern charity fundraising methods can be divided into different types according to the current development of charity in China and charity organizations’ use of fundraising methods.

5.1.1 Joint Fundraising, Cooperative Fundraising, and Independent Fundraising Starting from the cooperation between charity organizations involved, fundraising can be classified into types as joint, cooperative, and independent. Joint fundraising is the cooperation among a number of charitable organizations that have legal fundraising qualifications. It effectively pools social resources through a dedicated fundraising agency and allocates the resources it raises to qualified public welfare organizations on the basis of their actual needs. This approach can effectively avoid the current phenomenon of many organizations engaging simultaneously in raising funds or in repetitive efforts to raise funds for the same purpose, thus helping resolve dilemmas faced by potential donors. Its positive functions include: (1) preventing fundraising competition among charitable organizations and lightening the energy and time burdens on fundraisers and the donors, (2) collecting scattered social contributions to manage and use them in an integrated manner and thus increase the efficiency of the use of funds; (3) facilitating the mobilization of a large number of small donors.2 Joint financing has the operational efficiency and rationality of resource integration, which helps increase the credibility of charitable organizations’ fundraising and improves the integrity and authority of unified management and public supervision. Owing to the situation for the development of charity in China and the mutually trusting relationship between charities, the joint fundraising approach was introduced into China to form a model with Chinese characteristics. Currently, domestic joint fundraising is mainly reflected in the provision of public offerings and tax-free invoices. Joint fundraising in the true sense is not very common. However, the current form of joint fundraising has also had good results and it has increasingly demonstrated its advantages in the promotion of fundraising and charity concepts. For example, there is the “Tongyuan Fundraising Program” launched by the China Charities Aid Foundation for Children in 2013 as an effort to provide support and services for NGOs by means of joint fundraising. It has achieved the purpose of collecting charitable funds and motivating more people to join in public welfare activities. Cooperative fundraising is usually a fundraising activity conducted by two charitable organizations that have fundraising qualifications. Generally, they sign a written contract in advance, agree on the rights and obligations for the distribution of the donated funds, and cooperate in fundraising. Cooperative fundraising is easier than joint fundraising and involves fewer stakeholders. At present, independent fundraising activities of charitable organizations still have a dominant position. 2

Gao (2010: 118).

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These are fundraising activities launched by a single charity organization qualified for charitable fundraising. Their activity plan and fundraising form are decided by the organization that undertakes responsibility for them. It is most commonly used by charitable organizations, however, it easily leads to poor communication between charity organizations, and often duplicates incentives for some fundraising targets, which is not conducive to fostering the enthusiasm of the overall donation market.

5.1.2 Charitable Foundation Fundraising and Project-Based Fundraising When classified on the basis of how donations are attracted, there is charitable foundation fundraising and project-based fundraising. When a charitable organization initiates a fundraising campaign, it often clarifies the planned use of the funds to motivate the potential donors. Some large-volume donations will enter into the charitable domain through the form of a special charity fund and ultimately serve society. However, the threshold for setting up a special charitable fund is so high as to dampen the enthusiasm to give of small-volume donors, so many charity organizations lower the standard for entry by introducing micro-funds to attract small-sum donations. Project-based fundraising is also a means commonly used by charity organizations. It helps charitable relief work directly by using charity service projects on different scales and in different fields.

5.1.2.1

Special Charitable Funds

Setting up a special fund is a commonly used model among the domestic charity organizations. It has proved effective for their cooperation and fundraising efforts. In such a model, the donors donate to a special fund, for which the public welfare organization concerned opens a separate financial account and forms a joint management committee. Both the donating party and the organization participate in formulating the rules of managing the special fund, aiding public welfare projects agreed to by both sides, deciding on the budget for the management cost of operating the project, and arranging annual financial audits for the fund.3 Generally, donations to a special fund come from enterprises, work units, or individuals, and there is usually a lower threshold on the donated amount, for example, “the principal of a special fund shall not be lower than 500,000 yuan.”4 Donors to special funds are entitled to having the funds named after them, which can attract enterprises or individuals to donate to them. Examples of special funds donated to by enterprises are the “State Grid Loving Fund” set up by China Youth Development Foundation and “Central Enterprise Aid 3

Liu (2011). Shandong Charity Federation, “Article 3”, in “Shandong Province Charity Federation Rules of Special Project Fund Management”, May 27, 2013.

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Fund” by the Chinese Red Cross Foundation. Of the individual special funds, many are donated to by famous persons, for example, China Children and Teenagers Foundation’s “Special Fund for Assisting Orphaned and Disabled Children in Wenchuan Earthquake” donated to by Lan Yang, the “Huang Xiaoming Special Fund for Happy and Healthy Home of Children” by Xiaoming Huang, and the China Youth Development Foundation’s “Yao Fund” by Ming Yao.5 The mechanism of cooperative special funds is prevalent among the Chinese public fundraising foundations and their cooperation with famous persons or enterprises is conducive to boosting their social popularity and giving play to branding effects.

5.1.2.2

Charitable Micro-Funds

Charitable micro-funds are used by charity organizations to encourage more SMEs, individuals, families, or groups to participate in charity. The required donation amount is low and can be given piece by piece in installments. Typically, a donor signs an agreement with a charity organization, gives the agreed amounts in installments, and can participate in the entire process of using the donated funds. Compared with a specialized fund, the micro-fund, which is oriented towards the grassroots, is flexible to operate and easy to manage, serving as an open and transparent charity channel and platform. It is characterized mainly by the features of a low starting point and small size. For example, the minimum threshold usually is 10 thousand yuan, which may be paid in installments over a period of five years as agreed to by the two sides. The donor can choose to have the donation used with or without a specific orientation and contact the recipient face-to-face, while all relevant information is kept open and transparent, with ensuring the ease of shedding light on information for supervision and regulation. At present, there are five types of micro-funds for charities. One type is named by an enterprise. A charity organization may enter into an agreement with an SME with regards to the naming of the micro-fund. The principal may be given entirely or, retained in the enterprise, with only the added value given, for which the given proportion can be based on the corresponding bank deposit rates, generally 3–7%. A second type is organizational, with the organization’s members signing an agreement on behalf of the overall body. For example, there are the “Today Fund” and “897 Fund” set up based on a joint agreement by Qingdao City Charity Federation of Shandong Province, Qingdao TV Station, and Qingdao Broadcasting Station. The latter two organizations raise micro-funds for projects that they decide on themselves, under the supervision of the charity federation. The third type is community, which are founded by self-donations and self-assistance at the grassroots level of a national charity network. Such a micro-fund, based on a specific community, is oriented towards charities in the community, operating in an open and transparent manner and subject to supervision by relevant charity organization that charges no fee. The fourth is named by the individual or family that serves as its basic unit. This 5

Zhang (2013: 154).

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form is particularly suitable for the purposes of self-employed entrepreneurs, private entrepreneurs, and individuals or families who set up a fund in order to enhance their children’s morality and charitable consciousness. The last type has “special features” and is usually set up for assisting special groups of people such as victims of special diseases like autism, hemophilia, and leukemia. Such funds are donated to life with a specific orientation by people from all walks of and they are spent from special accounts for a fixed purpose. Currently over 2000 charitable micro-funds have been set up in Qingdao and the total principal of those named by enterprises has reached 3.26 billion yuan, those named by individuals have reached 12 million yuan, with an annual donations of over 60 million yuan, benefiting more than thirty thousand people.6

5.1.2.3

Project-Based Fundraising

Charitable organizations’ public welfare projects involve many fields such as education, social welfare, disaster relief and poverty alleviation, health and medical care, environmental protection, laws, academic study, culture, and sports. Such projects are an important fundraising channel for charitable organizations. The business model of most charitable organizations is to design public welfare projects based on the most urgent social requirement for charity and then look for enterprises and people who are willing to donate before transmitting the raised funds or materials to those in need. This means has undergone a long period of development in Chinese charitable organizations and is relatively mature. For example, Chinese Red Cross Foundation has set up the “Red Cross Angel Program” and “Leukemia and Congenital Heart Disease Public Welfare Fund Lottery” and China Foundation for Disabled Persons has launched seven campaigns, including goodness-collecting festivals, providing sight, hearing, or travel aids, helping poor students, assisting the impoverished, and barrier-free access to information, which center on the “Collecting Goodness Program,” spanning multiple domains.7 The development of a new public welfare project requires a detailed plan involving its specific budget, operation plan, participating personnel, implementing measures, expected result, assessment mode, and subsequent tracking. To do a good job on a charitable project calls for not just enthusiasm and good idea but also practical implementation efforts, in particular, to attract enthusiastic enterprises or individuals through media publicity. Currently, the means of project-based fundraising has become more and more popular among charitable organizations and donors. A charitable organization’s successful charitable project can help strengthen its brand in society and boost its social influence. This can bring about more donations, thus starting a virtuous cycle of “raising funds—gaining funds—using funds—raising funds.”

6 7

Dai (2013). Xu and Liao (2013: 110).

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5.1.3 Participatory and Non-participatory Fundraising In terms of the participation of donors in fundraising activities, two fundraising types are distinguished, which are the participatory type and the non-participatory type. Modern public welfare calls for the extensive participation of the public, and, in developed countries, public welfare charities have become an integral part of daily life. At present, the Chinese public’s participation in charities has still been mainly based on event-driven motivation, and the latent non-governmental public welfare resources have been underdeveloped, with the proportion of individual donations remaining rather low. Walkathons, charitable “loving pots,” and charitable evenings are events that can attract many ordinary people to join in donating, stimulating potential donors’ enthusiasm for charity. This can bring about a doubly beneficial outcome: constructing charitable channels and facilitating the public’s expression of loving heart. 1.

Walkathon

A walkathon, or walk-a-thon, refers to a fundraising activity of the fundraisers who walk along a designated course for the purpose of collecting funds in the public interest. Currently, its forms have become more numerous, for example, officially held marathons and organized fundraising walks. It is internationally popular, and in China it is a new form increasingly preferred by charitable organizations. In such an activity, fundraisers or members of a charitable organization attempt to collect charitable funds from their family members, friends, acquaintances, or other groups of people, and at the same time disseminate public welfare concepts to the public by walking alone or collectively, or by joining in sports events such as marathons. With the development of charities for the public interest, such new means of encouraging participation in donation will play a still greater role in the field, in addition to traditional fundraising methods. For example, the “Passing-on-Love Run”8 launched by Guangzhou Huiling Agency Serving the Mentally Handicapped9 is a walkathon aiming to seek donors to join in walking along a course. Fundraising is an important purpose of the activity, yet is not its only purpose. It is more intended to spread public welfare and charity culture. 2.

Charitable “Loving Pot”

2013 saw the “loving pot” fundraising initiative launched jointly by the Yantai City Charity Federation and the city’s Jiaodong Online Website. In the activity, the charity 8

In a “Passing-on-Love Run”, the passing-on-love messengers have to seek for the donors. They challenge themselves through jogging and meanwhile attempt to persuade their friends to witness and support themselves in the form of donating. This activity for the public good is based on the promise among friends, which also functions as a disseminator of the public welfare actions, in that, in the magnanimous action, an enthusiastic participant will motivate dozens of or even more friends and acquaintances to join in it and donate, and will turn a charitable activity involving hundreds of people into one backed by thousands. 9 Guangzhou Huiling Agency Serving the Mentally Handicapped is an NPO, which was founded in Guangzhou in February 1990 by the parents of some mentally handicapped children with the purpose of mutually helping among themselves.

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federation made saving pots with a variety of shapes and colors and sent them to some work units, hotels, families, and individuals, thus mobilizing voluntary donations— a case of “many a little making a mickle.” The charity federation would get back the loving pots at regular intervals and collect the donations. The significance of the activity is mainly in disseminating charitable culture and developing the habit of enjoying donating, which is particularly meaningful for its influence on young family members, who feel charity both close at hand and all around them. 3.

Charitable Evening

In recent years, the traditional fundraising means of holding charitable evenings has continued attracting donors through increasingly diversified forms such as concerts, dancing parties, or simply banquets. In such campaigns, issuing posters, selling admission tickets and souvenirs, and auctioning works of art, all these encourage participants to make charitable donations, while they can also make on-the-spot donations. Meanwhile, they are occasions for exchanges of ideas over public welfare undertakings and discussions on creating platforms for better public welfare projects. For example, the annual balls and other charitable evenings of the Canada-based Yee Hong Community Wellness Foundation engage many charity enthusiasts to join in. In 2014, a peace and love themed charitable evening party hosted by Jackie Chan raised 70.5 million yuan, which has served as an exemplar of charitable evenings. The non-participatory fundraising usually refers to donors, when informed of a fundraising activity, making donations directly via some medium or channel, with little contact with the charitable organizations. Generally speaking, the fundraising modes which use modern media belong to the category of the non-participatory fundraising. Of course, in various other fundraising processes, the modern techniques are also applied as their fundraising media, including the following forms in common practice. 1.

Electronic (E-) Public Welfare

The rapidly developing internet has lifted in an unprecedented manner the efficiency of charitable fundraising, which has brought about some important fundraising means and channels available to charitable organizations. They can benefit greatly from these electronic means, which have expanded the function of donation and enabled them to spread charity information more broadly, so as to win donors’ understanding and support. 2.

Donation Hotline

A charitable organization can cooperate with media such as TV and newspapers, as well as telecommunications operators, and open a charitable donation hotline to stimulate common people’s enthusiasm for charity. For example, the donation hotline set up in Yantai, Shandong Province, uses “Save one yuan each year for a charitable phone call” in its publicity. A participating donor can choose a donation sum by pressing numbered keys on the cell-phone and the sum will be charged from the phone fees. Compared with visiting a designated site for donation, this reduces the cost of time and traffic, making it an easy donation channel.

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SMS Fundraising

Cell-phone SMS can be used as a convenient and simple method to operate fundraising with. Anyone who knows how to use a cell-phone and send a short e-message can easily donate and receive a confirmatory reply within one minute. An SMS donor’s donation is accurately recorded and the relevant information can be inquired at any time. This is highly open and transparent, offering a clear path that is accessible to social supervision and auditing. A charitable organization can offer feedback to the donors regarding the use of funds at regular intervals through both cell-phones and its official website, arousing the donors’ sustained enthusiasm to give. This method combines easy and convenient charitable behavior with daily cellphone use, which can help more people develop the habit of living with charity and foster a new style of living. Many charitable organizations have begun to adopt this new fundraising method and they have cooperated with telecommunications operators in developing a special system of codes for donations, simplifying the donation procedure and improving its efficiency. 4.

Bank Card Fundraising

Charitable organizations can cooperate with banks to open fundraising channels. A donor carrying valid certificates can go through the required procedures, which are easy at a bank branch or online, and decide on or make donations. They may give a one-time donation or have the banking institution transfer a set amount for donation from their banking cards automatically at regular intervals. All such donations go into a charitable organization’s bank account. With this means of donating, the donor can also at any time check the total amount they have donated and what it has been used for. This facilitates donors participating in a “Monthly Donation Project” or “Easy Giving Project.”10 5.

Database / Direct Mail Fundraising

Database (Direct mail) fundraising is a long-acting means of raising funds from the general public. It is a low-cost and highly efficient fundraising manner of collecting small donations, particularly from new donors, and is widely used by charitable organizations. The process of public welfare undertakings going increasingly mature is actually a process of transition from “blind trust” to “fully-informed trust” for donors supporting charitable organizations. Direct mail fundraising represents such a model of individualized fundraising as based on the long-acting trust fostered over a long period of communication.11 The Red Cross Society of Australia has used a database (direct mail) fundraising method. Members of its special work team mail publicity materials and charitable 10

“Easy Giving Project” is China’s first micro-public welfare model of “the bank authorized by the donor transferring a fixed amount for donation from his saving account on a monthly basis”, which is oriented to the individuals with fixed incomes. The donors joining in this project can decide on their own monthly donated amounts on the basis of their economic conditions, ranging from 10 yuan to 1000 yuan. (See “Easy Giving Project Launched for Citizens Donating by Bank Cards at Regular Intervals”, Beijing Evening News, on May 28, 2012). 11 Gao (2012: 67).

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donation information leaflets to individuals with track records of donating. If a potential donor responds or makes a direct donation, the organization will list him as an effective donor and then make more efforts to send to him promotional pages and fundraising letters or to solicit funds for a specific charity project in the hope of getting fixed amounts from him at regular intervals. The relevant donors’ data and donation records constitute the basis for a well-functioning direct mail program, so a charitable organization needs to continue recording donors’ giving behaviors and improving its databases of them. Thus, when deciding on the list of potential donors, it will have solid grounding in separating out more donation-wise ones and making later stage assessments.

5.1.4 Decreed Fundraising and “Guanxi” Fundraising Considering the basic features of various fundraising means, one more classification criterion is the means of mobilization. This results in two types, one of which is the government-decreed fundraising and the other, the related “guanxi” fundraising.

5.1.4.1

Decreed Fundraising

Charitable organizations with governmental backgrounds in China, particularly charitable foundations, are usually attached to government departments or the CPC party system. Their leaders are mostly senior officials who work in relevant CPC or government departments. Therefore, early on, their work style tended to follow that of governmental agencies and they usually mobilized donation by issuing official documents or departmental circulars. Some other charitable organizations, abiding by the requirements in the official documents issued by the government agencies in charge of their administration, conduct fundraising activities within the sector they belong to. For example, the Hope Project launched by China Youth Development Foundation, the “One Day Charity” and “One Day Loving Donation” programs held by various local charity federations and Red Cross Society branches are obviously conducted by the requirements of government orders. This type of fundraising goes against the pre-condition of voluntary donation and thus has been called into question by the public.

5.1.4.2

“Guanxi” Fundraising

Fundraising based on personal relations or, guanxi, is a means known well for its high success rate, which is often adopted by the board members of an NPO or its senior management, who, when raising funds, turn directly to potential donors. Private invitation to donate places a high demand on a fundraiser, yet it also has a higher success rate. Some charitable organizations take such stimulatory measures as

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engaging donors who have donated a certain fixed large amount as honorary directors, vice-chairmen, or vice-presidents, and inviting leaders in political or business circles to attend their activities or to write inscriptions for these activities. All of these are common forms of guanxi-oriented fundraising. In fact, guanxi-oriented fundraising represents a traditional model that is also widely adopted by charitable organizations in China and abroad. In terms of efficiency, it is low in cost, has long cycles and produces large gains, making it the most efficient of traditional fundraising means. Decreed fundraising and guanxi-oriented fundraising still occupy a relative large share of the work of Chinese charitable organizations. In the initial phase of the Chinese charity undertaking, they played an important role in pushing the charitable organizations to obtain more charity resources. The distinctive characteristic of social fundraising is that a donor does not give his donation directly to the recipient, but rather to the organizer, who delivers the donation to the recipient by following a certain procedure. To qualify as a fundraiser, a charitable organization must first of all meet the basic conditions required for carrying out non-profit activities in the public interest and be registered and recorded with the relevant government department. For example, as stipulated in Article 5 of the Guangzhou City Regulations on Fundraising that was put into effect since May 1, 2012, “In addition to the Red Cross Society of China, China Charity Federation, and public fundraising foundations, the social organizations, private non-enterprise units, and non-profit public institutions founded for the purpose of the common good and charity, can also raise funds, with permission from the city bureau of civil affairs and under the condition that the fundraising is intended to assist the old, help the handicapped or orphaned, or alleviate the plight of the poor or victims of disasters.”12 The Hunan Province Regulations on Fundraising provides that Red Cross Society of China, China Charity Federation, and public fundraising foundations can raise funds in the province according to the law, and non-profit public institutions and other public welfare social organizations can raise funds in a range with permission from the civil affairs departments.”13 There are still some disputes at present regarding the qualification of different types of charitable organizations for fundraising, but the development of the charity undertakings is advancing the efforts to remove control over the right of charitable organizations to raise funds. Concerning the qualification of natural persons for raising funds, the current law does not stipulate that a natural person has the right to be a subject qualified to organize and launch fundraising, but at the same time it does not contain any article banning any individual from fundraising. Thus, private fundraising is still placed in an awkward position.

12 13

Standing Committee of Guangzhou City People’s Congress (2012). Standing Committee of Hunan Province People’s Congress (2011).

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5.2 Improvement of Fundraising Modes China’s charity organizations have played an important role in promoting its social stability and progress, but they also face various outstanding issues. As indicated by analysis of the results of the nationwide questionnaire carried out by Tsinghua University NPO Research Center on the current situation of China’s social organizations, 41.4% charitable organizations say that the main problem they face is a shortage of funds. This is the most given answer, while other problems such as lacking space, office equipment, and specialized talent, are directly or indirectly related to it as well.14 As an important part of NPOs, the charity organizations must attach great importance to fundraising and keep making efforts to improve and upgrade their fundraising models if they are to fulfill their missions.

5.2.1 Changes in the Fundraising Market Significant changes have taken place in the philanthropic environment and the fundraising market, which have brought to charity organizations both opportunities for growth and also challenges for their fundraising efforts.

5.2.1.1

Charitable Resources Continue to Increase

In the more than 30 years since China began to pursue the policy of reform and opening up, its tremendous economic achievements have drawn worldwide attention. According to statistics issued by China National Bureau of Statistics, in January 2014 the total per capita income of urban residents in 2013 was 29,547 yuan, while their per capita disposable income reached 26,955 yuan.15 As Chinese citizens’ income has continued to go up, many urban white-collar workers and new middle-class have generated strong demand for philanthropy, participating in volunteering and to whom donating to victims of disasters or the disadvantaged groups of people as part of the pursuit of a new concept for living. As found by the survey conducted online by China Foundation for Poverty Alleviation, over 60% of the respondents say they belong to the group pursuing charity and the common good that is willing to contribute to the philanthropy in China.

5.2.1.2

More Convenient Donation Channels

The rapid growth of the modern information technology has had an extensive impact on people’s ways of living and working. In ICT, transportation, mass media, and 14 15

Deng (2011), Wang (2001). China National Bureau of Statistics (2014).

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financial payments, new techniques and models have continually appeared. Thanks to the new media and techniques, the cost of making charitable donations has been lowered and donation channels have become more convenient. At the same time, new requirements have also been imposed on charitable donation. The charity organizations need to hitch a ride on technology bandwagon and apply new techniques and models to creating new modes of donation which have more new scientific and technological content.

5.2.1.3

Introducing Modern Marketing Concepts

Modern marketing concepts have been introduced into fundraising work for charity and public welfare. Transparency, credibility, and brand impact have become goals that charitable organizations aim for, signifying that Chinese charitable undertakings have entered a new historical period.16 In other countries, more and more charity organizations incorporate modern marketing concepts into their charitable efforts. For example, as early as 1980s, America’s Young Men’s Christian Association (YMCA) began to apply marketing principles to developing new services, as to obtain more charitable resources. In operating his One Foundation, Jet Li, has made use of his fame as a movie star to attract the participation of many people. Many charity organizations have disseminated their philanthropic beliefs and won widespread support by using online publicity.

5.2.1.4

More Intense Competition in the Fundraising Market

2013 saw the adoption of the new “State Council Institutional Reform and Function Transformation Scheme,” which required that the registration threshold for social organizations be lowered and the previous policy of “restraining competition” be changed.17 On March 26, 2014, the Office of Legislative Affairs of Shenzhen Municipal Government issued the “Notice for Soliciting Opinions on ‘Shenzhen Special Economic Zone Regulations for Promoting Charitable Undertakings’” on its official website. The notice stipulated that charity organizations which were not been qualified for public fundraising could only obtain such qualification simply by submitting three documents for recording.18 The new national policy of lifting controls on fundraising and Shenzhen’s announcement of its regulations on charity indicate the two basic threads of thought concerning legislation on charity. One is that access to the qualification to fundraise is a basic right of charity organizations, and the other is streamlining administration and delegating power to the lower levels, shifting from entry limitation to process control. On the national level, control over the charity

16

Lin and Wei (2011). Zhang (2014: 208). 18 Zhang (2014). 17

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organization registration management has been relaxed and the competition among charity organizations for resources in the donation market has become increasingly intense. Modern charitable fundraising represents a complicated operational system with multiple planning, marketing, and implementing procedures for fundraising and then operating the raised funds, assessing their use, and giving relevant feedback. The entire process is becoming steadily more specialized and professionalized. How to innovate and introduce new fundraising modes has direct significance to a charity organization in gaining funding and how to adopt different fundraising modes that are suitable for different target groups has a considerable influence on a charity organization’s attempts to better its fundraising efficiency. According to the Japanese scholar Sano Nobuhisa, a charity organization’s innovation of its fundraising strategies will have the following three effects on itself: (1) making its funding sources stable; (2) improving the standardization and efficiency of its public welfare initiatives; (3) increasing opportunities for citizens to participate in third sector activities. Thus, a charity organization improving its fundraising modes relates closely to its fundraising efficiency and moreover has a far-reaching influence on philanthropy as a whole. As the objects of charity organizations’ fundraising efforts, or the targeted donors, are variegated in forms and have different sources, involving enterprises and individuals of different groups and at different levels, adopting an undifferentiated fundraising strategy, it would inevitably affect the responses. As evidenced by international experience, diversifying targeted donors and treating them differently is conducive to improving an organization’s fundraising efficiency.

5.2.2 Enterprise-Oriented Fundraising Usually, charitable organizations find it easier to get grants or large-volume donations from an enterprise, as such funding is often paid by the enterprise as an advertising or public relations expenditure, which means that it can be folded into business costs, rather than counted as a separate purely charitable investment and thus such donations are often large.19 Alongside societal progress, enterprises have been gradually transforming from their past role as purely economic actors into corporate citizens, which are beginning to more and more fulfill the social responsibilities incumbent upon them.

19

Lu (2014: 188).

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Emphasizing Fostering Relation with an Enterprise to Meet Charitable Donation Needs and Conform to Its Marketing Purposes

The enterprise is a complex structure. Fundraising from enterprises must heed the development of relationships with corporate leaders, business leaders, or charity project managers. Because the ultimate decision to donate is made by individuals, there is no essential difference between collecting donations from companies and from individuals. Generally, enterprise charitable donation resources include cash, materials, knowledge, technology, services, and stocks, among others. The object is a recipient in need of help that does not have a direct interested relationship with the company. When donating, enterprises emphasize the economic and social benefits more, and thus when choosing beneficiaries they tend to consider whether their donation behavior can realize the purpose for their enterprise’s donations. Therefore, when a charity organization turns to an enterprise to raise donations, it should meet the requirements of the enterprise as a donor to as great an extent as possible, as to make the interaction win–win. When selecting and designing a charity project it should broaden its views and display flexibility and variety by providing multiple project or cooperation choices to the target enterprise that are in line with that enterprise’s marketing objectives as much as possible. Thus both the charity organization as the fundraiser and the enterprise as the donor benefit.

5.2.2.2

Staged Fundraising, the Development of Charity Projects, and Realizing Enterprise-Charity Win–Win

A charity organization’s fundraising efforts oriented toward enterprises usually call for a process of research, cultivation, and collection. The research phase involves getting information on the potential corporate donors. It may begin with gathering information from public media, such as on the rapid development of the industry an enterprise belongs to or on a company winning a leading position within its industry. The target enterprise can also be chosen through the charity organization’s internal information on previous enterprise donors. The second phase is cultivating a good relationship regarding charitable donation and, by establishing such a relationship with the target enterprise and designing a suitable charitable project informed by its donation needs. Usually, the target enterprises for the organization can be divided into the following types: corporate members of the charity organization’s board of directors, the enterprises that are performing strongly, and enterprises that have a track record of making donations, especially large-volume donations. In the third phase, the charity organization decides on the team to carry out fundraising activities that include setting appointments and meetings, exchanging information, and displaying documents, as well as signing donation agreements, payment of donations, and postdonation feedback.

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In cooperation between a charity organization and an enterprise, the former’s credibility and social reputation are at the core of its competitiveness and attractiveness and are also its most important bargaining chips, as they are what enterprises desire to receive in return for their investment of resources. Secondly, to attract corporate donations, it is necessary to design charitable projects that meet the needs of the enterprises. Charitable organizations can promote charity projects through influential media and similar means or they can directly “sell” charitable projects to potential donors. The domestic enterprises have made inadequate efforts in their corporate social responsibility planning and SMEs tend to donate passively. A charity organization helping an enterprise with its charitable programs and project design is beneficial to the enterprise enhancing its recognition and enlarging its social influence. At the same time, it can reduce the enterprise’s cost of donation and elevate its understanding of charity. Through operating its charitable projects, an enterprise can also fortify its social image and attain a dual social and economic win.20

5.2.3 Individual-Oriented Fundraising Diversification of the sources of charitable resources and a diversity of donors are conducive to charitable organizations maintaining their independence and being less affected by a few large donors. Individual donations provide charity organizations with funds that have the most long-term stability and flexibility21 . In the United States, the total volume of individual donations outweighs that given by enterprises and foundations, giving it the largest share in the donation market. Though economically China is drawing near to the United States, the gap in total donation volume and the proportion of that volume’s components is still very large. According to American statistics on the sources of charitable donations, individual donations have an overwhelming lead, accounting for 72% of America’s total donation volume in 2012, far higher than other sources like enterprises and foundations.22 By contrast, in China the amount given by individuals (including those abroad) was 26.7 billion yuan in 2011, accounting for 31.62% of all social donations. 89.46% of the donations were from entrepreneurs or enterprise owners, with individual donors from the wage-earning class making up only around 10% of the total.23 In the field of charity, the public plays an important part in charitable donations.24 Fundraising strategies oriented toward individuals should be formulated on the basis of investigating the potential needs of individual donors. As different groups of people have different focuses of attention and points of appeal, fundraisers should adjust their work modes correspondingly. As demonstrated by relevant empirical studies, 20

Zhao (2013: 143). Lu (2014: 147). 22 American Association of Fundraising Counsel (2014). 23 Meng et al. (2012: 30). 24 Tian (2003), Zhou (1999). 21

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using differentiated fundraising strategies oriented towards segments of potential individual donors is more effective and efficient than the undifferentiated strategies.25 The segmentation of donors is based on two features, one of which is social and demographic characteristics, such as age, sex, education, and income. The other is the basic feature of donating behavior, concerning the donors’ historical donated sums, donation frequencies, and motivation for donation.26 In recent years, the proportion of individual donations in China has gone up markedly and charity organizations have begun to pay more attention to individual donors. By drawing on marketing principles, diversifying the target markets, and segmenting target groups of individuals, organizations aim for more effective access to the charitable resources of the potential donors. According to the social and demographic characteristics and the donating behaviors of current individual donors in China, we propose here a model of segmented individual donors, which divides potential donors into four categories, and through which fundraising principles and methods that give returns corresponding to their demands can be determined on the basis of their different features and behavioral inclinations. (See Table 5.1).

5.2.3.1

“Chinese Style Elite Fundraising” Oriented Toward Entrepreneurs, Famous People, and Stars

Elite fundraising is mainly oriented towards a wealthy group of people who, though small in number, own a large share of China’s fortunes. It aims to give play to their role in leading charities. In July 2012, the Hurun Institute and GroupM Knowledge released jointly “Group M Knowledge—Hurun Wealth Report 2012”, indicating that for the first time there were more than 1 million Chinese worth more than RMB 10 million (equivalent to US$1.6 million). More precisely, there were 1.02 million such individuals, an increase of 6.3% over the previous year. Furthermore, China is home to 63,500 super-rich, defined as individuals worth over RMB 100 million (equivalent to US$16 million), an increase of 5.8% from that of last year, to 7,500 worth over RMB 1 billion (equivalent to US$160 million), and to 260 worth over RMB 10 billion (equivalent to US$1.6 billion). According to Hurun Institute’s “Hurun Global Rich List 2013,” China surpassed the United States to be the country with the largest group of RMB billionaires. Fortunes in China were skyrocketing and concentrating heavily on the rich. According to a story reported in the US on January 1, 2014, large-volume donations given by the American rich in 2013 reached US$ 3.4 billion and Mark Zuckerberg, the founder of Facebook, and his wife donated a total of about US$1 billion.27 After the Wenchuan earthquake in 2008, many entrepreneurs, socialites, and ordinary people donated large quantities of funds and materials, directly raising the proportion of individual donations in that year (see Table 5.2). As indicated by the 25

Srnka (2003). Scherhag and Boenigk (2013). 27 Dong (2014). 26

Having Relatively fixed jobs, wealth, high ideological and cultural accomplishments, and accepting mainstream social values

Used to using the internet, with Give full play to the high adherence and loyalty to advantages of the internet and it, able to make timely online media communications online and operate online payments with ease

Relatively dispersed, showing no explicit regularity in terms of either the donated amount or time

Middle-class group

Network group

Dispersed group

Constructing a mutually beneficial mechanism driven by benefits

Constructing a regularized, routinized and sustainable fundraising chain mechanism

Prioritized objects of fundraising work, with social responsibility awareness and charitable conception as the key points of promotion oriented towards them

Generally high in reputation or social position, with top level incomes relative to society, paying attention to personal or family image

Elite group

Fundraising principle

Group feature

Variable donating subject

Table 5.1 A fundraising model of segmented individual donors

“Incentivized fundraising” or “fundraising with awards”

Online fundraising, such as online monthly donations, donations to special online charitable projects

Fundraising through organizational channels, monthly donation programs, etc.

“Chinese style fundraising oriented towards elites” strategy; proposing setting up special founds to famous persons, who will serve as exemplars and have their social circles broadened

Fundraising method

Benefit compensations

Enhancing social prestige, such as by naming the special fund projects after the names of their donors, being added to lists of honors and charity rankings

Way of providing return

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Table 5.2 A view of individual donations from 2007 to 2011. Unit: RMB 100 million, % Year

2007

2008

2009

2010

2011

Total amount

32

458

154

296

267

Proportion of the national whole

10.36

54

24.44

28.68

31.62

Source Meng et al. (2012)

2011 survey and statistics from the China Charity & Donation Information Center, there were 9 individual donors who gave over RMB 100 million, with their contributions totaling RMB 5.86 billion, accounting for roughly 6.93% of all donations that year.28 Fundraising oriented towards elites has a solid social basis. A sound society has an inbuilt mechanism for redistributing its wealth and also a self-assisting mechanism to bring about the distribution of the wealth created by all of its members. At the same time, people are pursuing honor and the respect of others. Helping others and using one’s wealth, energy, and creativity to provide public goods free of charge is a basic way to gain honor and respect.29 As a group of social elites, the wealthy in China are those who own relatively large amounts of wealth or enjoy social prestige, such as entrepreneurs, famous people, and stars. With their social position and popularity, income, and strong awareness of their own and their families’ images, they constitute an important target for fundraising efforts. At present, there are some special initiatives and fundraising projects, which are designed to be oriented toward them by highlighting them as exemplars of charity. Fundraising oriented towards elites is large-volume and high profile, emphasizing the cultivation of interpersonal and public relationships and can reap high yields in a short period of time. It can easily become a stable source of high-volume funding for charities. Entrepreneurs’ personal donations and corporate donations are often unclearly demarcated in the donation process as a result of the state of China’s national wealth. They will be separated gradually along with efforts being made to improve China’s financial system. As an important component of the group of Chinese elites, entrepreneurs’ donation behaviors affect the composition of all social donations. As shown by relevant statistics, large-sum donations from business owners and managers in China account for a very large proportion of China’s individual donations.

5.2.3.2

The Sustainable “Fundraising Chain” Model Oriented Towards the Middle-Class

The sustainable “fundraising chain” model refers to the regular and routinized fundraising model of charitable organizations, which encourages individual donors to donate regularly or periodically to form a sustainable chain mechanism. From China’s reform and opening up in the 1980s on, Chinese society has experienced a rapid social transformation and a group with relatively high and stable incomes has appeared. 28 29

Meng et al. (2012: 31). Qiu (2014).

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The middle class is defined as the group of people who “are comparatively well off economically with high quality in ideological and cultural accomplishment,”30 mainly including private enterprise owners, members of the middle management of large enterprises, managers of SMEs, specialized personnel and professionals, self-employed business operators, lower-level leaders in the government and clerks in government departments. These people tend to accept mainstream social values and their income level affects their donation level considerably.31 They are the major players charity organizations can depend on for long term and sustainable fundraising. As the middle class are liable to show higher desire for charitable donation and have more ability to give, providing them with transparent, reasonable, streamlined, and concise donation channels will promote the formation of a “fundraising chain” mechanism for regular, routine, and sustained donations. The popular “monthly donation” model32 aims to turn public welfare donations into a habit and an integral part of life. In operating this model, a charity organization issues donation invoices to donors participating in its monthly donation program and at the same time offers feedback concerning the latest use of their donations and keeps encouraging them to make more donations by SMS, EMS, and registered mail, among other means. The China Foundation for Poverty Alleviation has offered a “Monthly Donation for Poverty Alleviation Program” and Tencent Charity has set up a “Monthly Donation Project,” both of which are fundraising modes intended to mobilize the public to make regular and routine donations. Wenwen Xu proposes “public fundraising by organizational channels,”33 which aims to make full use of charity organizations’ good relations with organizations such as enterprises, the government, and labor unions, and to mobilize enthusiasm for the organizational system for donation on the part of organization members. By building both smooth channels from fundraising to fund-disbursing and also databases of donors, this model can be used for conducting sustained and regular fundraising campaigns aimed at the middle class.

5.2.3.3

Netizen-Oriented Online Fundraising

Online fundraising is the process, mediated by the internet, of managing charitable donation activities that include accessing and spreading relevant charitable fundraising information, forming fundraising plans and supervising their implementation, interacting with donors and other aspects of coordination. As indicated by statistical data from Oxfam on UK fundraising, the internet has become an important 30

Li (2002). Nan and Wang (2013). 32 The “monthly donation” here refers to a new donative model of a donor making automatic, fixed small amount, and continued donation on a monthly basis, via a bank which collects the fixed fund once a month from the donor and transfers it to the special fund account of the charity organization or foundation concerned. 33 Xu (2013). 31

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Fig. 5.2 Sizes of Chinese netizens and popularizing rates of internet (2005–2012). Source China Internet Network Information Center (2014)

fundraising tool. With the development and popularization of internet technology, an internet basis for China’s online fundraising has been fostered and its advantages have been given fuller play. The large number of netizens shows the abundant resources for online fundraising. In March 2014, the 33rd “Statistical Report on Internet Development in China” issued by China Internet Network Information Center (CINIC) demonstrated that, up to 2012, the number of Chinese netizens reached 564 million, a usage rate of 42.1%, and they spent average 20.5 h a week on the internet (see Fig. 5.2). The percentage of netizens with monthly incomes ranging from RMB 2000 to 5000 is the highest and, compared with 2011, the number of netizens with incomes ranging from RMB 3000 to 5000 increased.34 Thanks to the advances in network technology, online fundraising is lower in cost and higher in efficiency. The development of the internet has made some new means of publicity available for online fundraising and brought about a greater possibility of practicing it. Advanced and efficient methods such as website announcements, e-mails, and microblogs provide technical support for charitable organizations’ fundraisers to increase their fundraising efficiency. Besides its rapid speed and convenience, the advantages of online fundraising are demonstrated in other aspects such as website information with rich illustrations that provide the donors with more options in an interesting and lively way. Regarding input and output, the cost of fundraising online is very low, if not zero. By using IT, network technology, and database technology, the transparency of charitable donations can be raised. Search technology, IT, and third party certification organizations (such as payment agencies and the audit agencies) are already completely capable of supporting the practices of online fundraising. Freerice, a foreign micro-charity website, is such a platform.35 It uses network resources to cultivate and inspire the public’s love and sense of social responsibility. 34 35

China Internet Network Information Center (2014). Zhang (2011).

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There are various means of operating online fundraising. A charity organization can set up a series of columns on its website with titles like donating online, voluntary services, information disclosure, public welfare interaction, and charity forum to publicize its public welfare philosophy, make fundraising information known to the public, and supply well-functioning channels to donating netizens. For example, the Tencent Foundation, founded in 2007, operates on the model of “donating online + donating time + counseling + charity sale.”36 By channels such as e-mail, Tencent QQ (a Chinese instant messaging program developed by Tencent) and the related QQ Group and QQ Space, and online games, it plots out and releases charitable donation information, keeping netizens instantly abreast of public welfare programs, fundraising projects, and quantity and volume of donations. Thus, the transparency and autonomy of donating have been raised and meanwhile the fundraising activities have become more convenient and interactive. In China, there is presently a geographical limitation on open fundraising according to the relevant regulations. The subject of a fundraising activity must be a charity organization founded and registered according to the law and qualified to fundraise, and the fundraising must be permitted by relevant civil affairs department. Therefore, issues such as how to supervise and regulate extensive and regionally unbound online fundraising on a unified basis have become the focus of heated discussion. Rising online fundraising has become one of the impetuses for opening up the right of charity organizations to publicly raise funds.

5.2.3.4

Incentivized Fundraising or “Fundraising with Awards” Oriented Toward Dispersed Groups

“Incentivized fundraising” or “fundraising with awards” is meant to let the donor benefit from his donation behavior, so as to realize two-way benefits for both the donor and the recipient. This is also referred to as compensating the donor for their donation through a benefit-driven mechanism.37 According to social exchange theory, person to person social interaction is an exchange of resources based on reason and calculation of gains and losses. The main principled of which is mutual benefit and fair distribution. Harod Seymour divides the fundraising market into three equal parts: one third of the market is voluntary donors who give because of their pure willingness to do so rather than their desire for any return; another third give as a response to such a request or inducement from the fundraiser who promises a return in the form of insurance or awards; the other third are obliged or forced by the state to pay, as in for example, taxes.38 As stipulated by Article 8 in Chap. 1 of the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings”: “The State encourages natural persons, legal persons, and other organizations to make donations to public 36

Hou et al. (2010: 86–89). Li and Wang (2002). 38 Wu (2003: 240). 37

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Fig. 5.3 Statistic data of China welfare lottery (2004–2013). Source Ministry of Civil Affairs (2014)

welfare undertakings. Natural persons, legal persons, and other organizations making outstanding contributions to donation for public welfare undertakings are to be given commendation by the people’s governments or the relevant departments.”39 The national government not only encourages donations but also recognizes the legitimacy of profit-driven donations. True charitable charity is built on a sustainable basis. “Two-way benefit” is an effective way to motivate donations and build such a basis. As recorded in the section “Understand Things Far Off” in the ancient Chinese Confucian book Lü’s Spring and Autumn Annals, “Zilu who had accepted a reward for his good deed was praised by Confucius as virtuous, while Zigong who had declined such reward despite his good deed was criticized by Confucius as against goodness,”40 which conveys that principle. Since 1987, China has put into effect a welfare lottery, a typical form of raising funds using awards.41 (Fig. 5.3) .

5.2.4 Fundraising Strategies In the process of charitable fundraising, beyond the improvement of fundraising means, the strategies used also have influence on the results. The working principles, the emotional factor in raising funds, the paths of publicizing the fundraising activities, and the means of giving a return to donors are all strategies that fundraisers should pay attention to.

39

Standing Committee of China NPC, “Law of the People’s Republic of China on Donation for Public Welfare Undertakings”, effective since September 1, 1999. 40 “Understand Things Far Off” in Lü’s Spring and Autumn Annals, Shanghai Ancient Chinese Classics Publishing House, 1996. Translator’s note: Zilu and Zigong are both disciples of Confucius. 41 Shi et al. (2001).

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Correct Psychological Positioning

Fundraising is essentially a process of seeking progress, promoting understanding, winning support, entering into cooperation, and expanding the undertaking. It increases the participants in public welfare undertakings and attracts a large number of devoted supporters for the organization itself.42 The purpose of fundraising is not the funding in and of itself, but to fortify and enhance the charity organization’s capability to offer public welfare services. Fundraising is a path towards cooperation and exchange, as well as offering the donors or other members of the public the opportunity of taking part in charitable undertakings for the public good. Thus, the fundraisers’ positive and correct psychological positioning will be conveyed through their fundraising process, which also represents the basic principles underlying fundraising work.

5.2.4.2

The Indispensable Emotional Factor

It is found in psychological studies that people will pay more attention to vivid information and have a stronger emotional response to it as well, while the brain responds not to absolute value but to proportion. Rescuing 10 of 100 people will cause stronger emotional response than rescuing 10 from 1 million people.43 As shown in relevant experiments, donors will be more generous if they are donating to a specific beneficiary.44 In their fundraising process, when charity organizations put across simple information that produces emotional resonance they are raising funds through emotional means. The commonly used emotional ways of raising funds include nourishing long lasting and sustainable emotional relationships with donors, maintaining contact by telephone calls or mail at regular intervals, and informing donors of the activities of the organization so as to keep them involved and feeling valued.

5.2.4.3

Interpersonal Communication

Effective communication is the basis of successful fundraising. One-on-one conversation is the most effective way of communicating. Getting existing donors to invest in charitable donation is a very important task and is also the best way to expand the effect produced. As shown in Table 5.3, one-on-one conversation ranks as the most effective means of communication.

42

Lu (2014: 40). Li (2013). 44 Small et al. (2007: 143–153). 43

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Table 5.3 Stairs of communication in terms of effectiveness Effectiveness

One-on-one conversation Small group discussion Large group discussion Telephone conversation Handwritten letter Typewriter Mass-produced letter Newsletter Brochure News items Advertisement Handout

Source Zheng (2003).

5.2.4.4

Appropriate Compensation and Return for Donors

As provided in Article 14 of Chap. 2 in the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings”: “A donor may head the donated project with his name for commemoration; for a project wholly donated by a donor or a project constructed with the capital mainly donated by the donor, the donor may propose the title of the project, and then submit to the people’s government at or above the county level for approval.” When an organization conducts social assistance using the funds donated by an enterprise in its name, it can offer a reputational return to the enterprise. There are various ways of offering compensation and returns to donors that can satisfy their emotional needs and further fortify a cooperative partnership with them. Specifically, the charity organization can give a donor political credit, economic benefit, or social position, such as the right of naming or entering a list of honors. On the basis of the donor’s emotional needs, it can design a donation ceremony, project listing ceremony, or donation project naming ceremony that gives salience to personal traits; have inscriptions carved on tablets for commemoration and meritorious deeds reported in the media; confer honors and awards; arrange access to leaders; participate in the activities together with the image spokesperson who is usually a star; and face-to-face interaction with the recipient. Additionally, the donor will receive a letter of thanks from the recipient and can visit the project under construction supported by his donated fund.

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5.3 Innovation Mechanism for New Fundraising Modes Establishing a sound charitable donation mechanism starts from donors, charitable organizations, and beneficiaries. Improvement of charitable fundraising methods advances charitable donation mechanism from the perspective of charity organizations. Specifically, efforts can be made to promote the development of the aspects of philanthropy below.

5.3.1 Diverse Ways of Managing Charitable Funds Charitable funds are the basis of charity organizations’ sustenance and development and also the material guarantee for realizing the purpose of charity. To some extent, the way of managing charitable funds relates to whether the charitable purpose can be realized. Currently, funds donated for the purpose of charity mainly enter the field of social service via charity organizations qualified for public fundraising, including mainly the China Charity Federation, Red Cross Society of China, and foundations at various levels, with foundations playing a more and more prominent role. The progress and development of charity undertakings need more people joining in and more efforts to improve the management of charitable funds. More attention should be paid to the charitable trust as a new way of managing charitable funds to be probed for future development. First of all, the “trust”, originated in Britain, referring to property held and managed by one party (the trustee) for the benefit of others. A charitable trust is a trust held for the purpose of charity benefiting the public, rather than any specific beneficiary. It is set up for a purpose rather than for a person and the beneficiaries among the public do not enjoy the ownership of the trusted property.45 As public interests lie at the core of the charitable trust, it is also referred to as a public welfare trust or public trust. Its public welfare attributes are embodied in the following two aspects: an undefined beneficiary and supervision and control by a specially formed committee. Charitable trusts can be divided into three forms: the charitable trust set up by its principal, by public fundraising, and by non-public fundraising, of which the second type is oriented towards the public. In practice, for a public fundraising trust, usually a trust company manages the property for the trustee and, compared with a foundation, it is more specialized in operating the raised funds. This ensures that the value of the charitable funds can be maintained and increased. Examples of public fundraising trusts are the “Public Welfare Trust Program for May 12 Earthquake Disaster Relief” introduced by Xian Trust Co. Ltd. In June 2008 and the

45

Xie (2011: 35).

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“Zhengzhou Charity Public Welfare Trust Program” introduced by the Bridge Trust Co. Ltd. in October 2008. Though the number of the public trusts established in China is still small, with the improvement of relevant laws and regulations and the progress of charity undertakings, this means of managing charitable funds will be adopted more extensively.

5.3.2 Diversification of Donated Assets To broaden the range of sources of charity assets and instill more vigor into the charity market, charitable organizations should pursue diversified types of donated assets. Charitable donations in the past were generally in the forms of tangible assets, usually funds and materials. In addition to these, other charity resources should be tapped to increase the number of types of donations. First, with the development of society and the economy, large-volume equity donations have continued to grow. In 2009, the Ministry of Finance promulgated the “Circular on Financial Issues of Enterprises Giving Equity Donations for Public Welfare,” allowing enterprises to give equity donations for public welfare, indicating the legalization of corporate equity donations. However, as making equity donations involves many policy-related issues, such as the circulation of the stocks, relevant supervision and regulation, and preferential taxation on donations, there have been many difficulties concerning equity donation. These have hindered it from growing rapidly and widely. This is also the reason for the many problems and difficulties Dewang Cao, chairman of Fuyao Glass Industry Group, met when he attempted to make equity donations in 2009. At present, with rising equity donations, the state and charitable organizations should not only get ready to accept the practice of equity donation, but also take the initiative in accepting equity as a type of donation and call on the enterprises with a strong sense of social responsibility to give equity donations, particularly large-volume donations. When conducting such fundraising, charity organizations may choose the form of preferred stock, accepting dividends but not participating in enterprise management. Thus, a charity organization will not turn into an “investor” in a donating enterprise, nor does it need to assign any specialists to the work of managing and operating the shares. Additionally, efforts should be made to conduct specialized management of charity resources in the form of equity and to build a corporate model for the governance of equity donations, aiming to increase the value of the donated assets through reasonably investing them. Second, volunteering services for charity has become a significant object of fundraising. Volunteering has increasingly become an important form of public philanthropy. Public donations are no longer confined to tangible assets. Many people voluntarily contribute their time, knowledge, skills, or strength. The diversification of charitable organizations’ fundraising not only enriches the sources of

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charitable resources, but also enables charity organizations to no longer concentrate solely on economic relief and poverty alleviation. They can better help vulnerable groups emerging from rapid social development, such as those with mental health or psychological needs.

5.3.3 Making Fundraising Information Known to the Public Openness and transparency with information are the lifelines of a charity organization. Transparent information disclosure and pursuit of transparent charity are important means for a charity organization to elevate its social credibility. According to the “2014 Report of China Charity Transparency,” the average value of China Charity Transparency Index was 44.10 (100 as the full score).46 The disclosure of charity information must be truthful, accurate, complete, and timely, and there should be no false information, misleading statements or omissions. The information that a charity organization should disclose includes (1) basic information of the organization, such as its organizational constitution and setup, its personnel composition, duties and authorities, annual work reports, etc.; (2) information on fundraising and receiving donations, including the procedures for fundraising and receiving donations, the use of the donated funds and materials, the preservation and increase of its property, agreements the donors agree to disclose, and relationships with the interested parties and related transactions, as well as the forms, plans, and results of its fundraising; (3) information on its offering assistance, including various types of charitable projects carried out using donated funds, implementation plans for charitable activities, aid plans, beneficiaries’ funding standards, funding procedures, and the use of aid funds from beneficiary organizations; (4) the information on the financial affairs, including financial accounting reports, audit reports issued by relevant accounting firms, the sources, amounts, and uses of donations, the receiving of donated funds and materials and the offering of proof and other documents, as well as the related annual audit reports. Charity organizations should make full use of the advantages of the internet, such as instant messaging, easy inquiry, and always being open, which can provide an institutional guarantee and technological support for maintaining transparent information disclosure. The China Charity Information Platform, which has been developed by China Charity and Donation Information Centre entrusted by PRC Ministry of Civil Affairs, has been equipped with the functions of releasing information, including reports and statistical data, offering information inquiry and sharing, monitoring public opinion, managing its databases, and publicity and promotion. In 2013, the platform was launched as a pilot in Jiangsu Province and Zhengzhou, the capital of Henan Province. More than 1,000 charitable organizations entered and began to use the portal.47

46 47

China Charity and Donation Information Centre (2014). Dou (2014).

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5.3.4 Modernization of Managing Donor Records Charity organizations should keep detailed information files on individual donors and distinguish different individual donors, so as to employ different methods of fundraising skills suited to different donors. Terry Schaff and Doug Schaff, two American scholars, classify donors into three categories, which are (1) impulsive donors, who will take action and donate the moment they get fundraising information on charitable donation. However, their giving behaviors are hardly governed by any regular pattern and the continuation of their donations are uncertain; (2) Thoughtful donors, who take into consideration the charitable principles advocated or the charitable programs implemented by a charity organization and will join in if they accept them. After weighing relevant aspects, they will decide on an amount to give; (3) Habitual donors, who make donations regularly or at regular intervals such as every two or more years.48 Additionally, in fundraising practices, we also have found other types of donors, such as (1) crowd-following donors, who seek the feeling of joining in the fun or are under influence of others around them. They tend to join in large-scale charity sales or fundraising campaigns, yet have little interest in less publicized welfare fundraising activities; (2) friendly donors, who set store by friendship with charity organizations or their members, taking pleasure in fostering friendship and maintaining or deepening the friendship through their donation behavior; (3) worshipful donors, who admire and even adore a particular leader of a charity organization or cherish or even worship the philanthropic philosophy upheld by the organization so much that they try their best to join in whatever fundraising activities are organized by the organization (Table 5.4). When planning its fundraising, a charity organization should begin by recognizing the type of target donors, for example, impulsive donors, and then attract the donations of that type. It should attempt to turn them into thoughtful donors or habitual donors by specially designed later activities, further developing their loyalty to charity and the organization. Generally, the process of such development involves the following process: onlookers—potential donors—donors—donors who donate regularly—donors responding to special donation requirements—large-sum donors—leading contributors—bequest givers.49 In fundraising work, the charity organization must first obtain the donor information correctly, generally through the public media, internal member relations of the organization, and the existing large-sum donors. It can decide on its specific fundraising mode on the basis of analyzing such indicators as the big donors’ social demographic characteristics (age, sex, education, income, etc.) and their behavioral characteristics (donation history, amount, regularity or frequency, motivation, and giving inclination), and their interests in public welfare programs (graded as very

48 49

Schaff and Schaff (1999). Lin and Jiang (1999: 23).

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Table 5.4 Types of donors Types of donors

Loyalty to charity Possible reason for ceasing donation

Impulsive donors

Low

Public welfare project Add more projects or unattractive; uninformed introduce new concepts so on relevant information as to trigger motivation to donate; keep the donors informed of relevant donation information and invite them to take part in relevant activities

Thoughtful donors

Middle

Public welfare principles By analyzing the are unacceptable charitable principles the donors set store by, meet their requirements; keep contact at regular intervals and informing them of the activities held by the organization; encourage them to join the organization as members

Habitual donors

High

Organization’s Maintain the credibility is downgraded organization’s credibility; keep contacts with donors at regular intervals and send them the organization’s periodicals, fundraising plans, etc., invite them to join relevant activities; invite them to join the organization as its members

Crowdfollowing donors

Low

No fundraising activity suitable

Invite the donors to join in relevant fundraising activities

Friendly donors

Middle

Friendship stops

Invite the donors to join in the organization as members, deepen friendship with them; invite them to join in the relevant activities at regular intervals

The reason for adoration disappears

Shift from personal worship to organizational worship; invite them to join in the organization as its members

Worshiping donors High

Measures for charity organizations

Source Adapted from the classification proposed by Schaff and Schaff (1999)

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interested, interested, somewhat interested, and uninterested). Based on the information on different donors, a record for a specific donor can be made as illustrated by Table 5.5. This will facilitate the classification management of donors.

5.3.5 Fundraising Workforce Specialization The development of philanthropy calls for specialized fundraising strategies and campaigns and also for specialized fundraisers, who are to charity organizations what sales personnel are to business enterprises. Just as a company, can not necessarily get its products sold, no matter how good they are, without effective sales, so a charity organization cannot necessarily achieve success in raising funds without good fundraisers. Traditional fundraising attaches importance to resorting to emotion or citing cases of the beneficiaries to move donors to give, while modern fundraising tends to employ marketing means and regard the donors as consumers. Therefore, to have well-performing fundraisers, a charity organization should have its fundraising team well trained and turn its members into specialized fundraisers or solicitors, thus elevating its fundraising capability. In Western countries where the charity undertakings are relatively developed, the fundraising business has grown to be a specialized industry with very high degree of division of labor. American charity organizations usually have fundraising counsel, solicitors, and others for commercial ventures.50 Taking into account actual conditions, Chinese charity organizations should use the available resources to upgrade the expertise of their fundraisers. First, they can give full play to their advantages as non-governmental public welfare agencies and grassroots organizations and make their own efforts to turn themselves from operational organizations to fund-disbursing organizations. Officially-run largescale charity organizations can combine with smaller ones to better resolve shortages of staff and ineffective fundraising. Second, they need to regularly train their personnel so as to improve their theoretical knowledge, practical competence and skill at fundraising. Commonly used forms of training include various short-term training courses or academic seminars mainly organized by the government and various marketized training programs offered competitively.51 Charity organizations can also cultivate loyalty to their organizations and enhance expertise in fundraising by employing specialists to teach lessons to their workers or through sending workers abroad for further study. Third, they must give full play to the advantages of professional degrees or non-degree education based on subject construction in institutions such as universities and attract high-level fundraising talents for charitable organizations, so to lay the foundation for the sustainable development of philanthropy. In the end of the twentieth century, with the rise of civil society, NGOs and related research institutions appeared one after another in universities. From 1998 to 2011, more than 40 research institutes that have NGOs or civil society as their main research interest 50 51

Chu (2012). Xu (2010).

Vocation

Board director

Artist

Artist

Contact (cell phone)

186 × ×

156 × ×

189 × ×

Target donor

A

B

C

MA

Ph.D

Bachelor (under-graduate)

Education

Table 5.5 Records of donor information

× ×

× ×

× ×

Yearly income

Total volume of historical donations

Media

Interper-sonal

Historical ways of donation

200 0.5 million Interper-sonal thousand in 2011

800 1 million thousand in 2012

1 million in 5 million 2011

Time and amount of last donation

Interested

Interested

Very interested

Interest in public welfare

A friend of director Wang

Relation with organization

Zhang × ×

Li × ×

Wang × ×

Responsible person

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and are affiliated with colleges or universities formally opened.52 Many institutions of higher learning also began to enroll students majoring in public management, NPO management, or social work. Charity organizations should seize this opportunity and enlist more graduates that have been trained well at the university level into their fundraising teams, thus fortifying their fundraising and assistance giving capabilities.

5.4 Summary and Discussion The continuous development of society has promoted the maturing of philanthropy. Both the number of charities and the role they play have increased greatly. Charitable fundraising is faced with both opportunities for further development and challenges brought about by changing environments. The fundraising market is highly competitive and technological advances in such fields as modern media and mobile internet, as well as the changes in the human environment have engendered the inadequacy of traditional charitable fundraising modes in meeting the development requirements of the times. Charity organizations should not wait passively opportunities to arrive, but rather take the initiative and organize available resources to effect systematic reform and innovation. They should regard the changing external resource environment as an opportunity to bring about organizational reform and innovation and also make efforts to build a strategic mechanism from the inside out, so as to cope with the change. Innovative developments of fundraising have shown the following features.

5.4.1 Shifting from the organization as the center to the donor as the center The improvement of charitable fundraising is, first of all, a transformation of the center of work from the organization itself to the donor. As charity was always regarded as a lofty undertaking in which donors participate of their own accord, yet do not benefit themselves, when donors’ voluntary behaviors were emphasized, the initiative and agency of the charity organizations were ignored to some extent. Thus, the improvement of fundraising means first requires a charity organization to shift its central task. By starting from the donors’ viewpoint and, analyzing the potential different types of donors and appeals to them, they can take the initiative in fundraising strategies to satisfy charitable donation needs and thus strengthen the organization’s capability to access resources. The targets can be segmented into different categories and a corresponding fundraising strategy can be made for each of them based on the difference between the social foundations and donation behaviors of enterprises and individuals. 52

Wang and Li (2013: 149).

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5.4.2 Diversified Orientation of Fundraising Means Fundraising ways can be divided in terms of modes of cooperation between charity organizations into joint fundraising, cooperative fundraising, and independent fundraising. From the forms of attracting donations, there are those for charitable funds and those for projects. From the donors’ degree of participation in the fundraising activities, there are participatory fundraising and non-participatory fundraising (the former includes, for example, walkathons, “loving heart pots”, and charity evenings, while the latter includes, e-public welfare, donating hotlines, bank card donations, and short message donations). From the means of mobilization, fundraising can be divided into the two major categories of government-ordered and relationship-based forms. These two kinds of fundraising models are used by large-scale government-run charities in China.

5.4.3 Undifferentiated fundraising shifting towards segmented fundraising On the basis of marketing principles to be introduced, donors can be segmented into different types, each of which a different type of fundraising can be used for. Charity donors are like a market. They need to be treated separately, provided with different services, and have corresponding marketing plans formulated. That calls for targeted fundraising. The definition of the target donors enables a charity organization to raise funds in ways corresponding to its own features and the requirements of its mission. Selection and focus in fundraising efforts can save fundraising costs and raise fundraising efficiency.

5.4.4 More attention paid to fundraising strategies Fundraising in modern society pays closer attention to strategies that are concerned with fundraisers’ work principles, the emotional factors active in the fundraising process, the means of publicizing fundraising activities, proper compensation and returns, and a system of offering transparent information on where charitable resources go. Only by continually improving its fundraising strategy can a charity organization achieve successful fundraising results. Additionally, charitable organizations must provide sufficient logistical support for charitable fundraising work, improve the innovation management mechanism for fundraising, and promote the construction of charitable donation mechanisms at the level of information disclosure and fundraiser professionalization, so as to promote donation through fundraising. In the face of changes in the donation

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market, charitable organizations should use their own innovative capabilities to seek out fundraising strategies inside and outside the organization to respond to changes in social development and the fundraising environment. This is an inevitable requirement for the development of charitable organizations and the progress of charity.

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Mixer, J. R. (1993). Principles of professional fundraising: Useful foundations for successful practice (Vol. 63). Jossey-Bass Publishers. Nan, R., & Wang, D. (2013). An empirical study of the influence of charity environment on the chinese citizens’ charitable donations: With special reference to the 1997–2011 data. Contemporary Finance and Economics, 6. PRC National Bureau of Statistics. (2014, April 20). Total per capita income of urban residents in 2013 Is RMB¥ 29,547. China News Net. Retrieved from http://www.chinanews.com/gn. Qiu, F. (2014, February 2). The need of charities for mobilizing and organizing efforts brings about ‘charity entrepreneur’. China News Service. http://www.chinanews.com. Schaff, T., & Schaff, D. (1999). The fundraising planner: a working model for raising the dollars you need. Wiley. Scherhag, C., & Boenigk, S. (2013, Summer). Different or equal treatment? Donor priority strategy and fundraising performance assessed by a propensity score matching study. Nonprofit Management & Leadership, 23(4). Shi, Z., Chen, R., & Ren, Z. (2001). Welfare lottery: A social fundraising form with Chinese characteristics. China Civil Affairs, 1. Small, D. A. et al. (2007). Sympathy and callousness: The impact of deliberative thought on donations to identifiable and statistical victims. Organizational Behavior and Human Decision Processes, 2, 143–153. Srnka, K. J., Grohs, R., & Eckler, I. (2003). Increasing fundraising efficiency by segmenting donors. Australasian Marketing Journal, 11(1). Standing Committee of Guangzhou City People’s Congress, “Guangzhou City Regulations on Fundraising”, effective since May 1, 2012. Standing Committee of Hunan Province People’s Congress, “Hunan Province Regulations on Fundraising”, effective since May 1, 2011. Tian, K. (2003). Opportunity and constraint: An analysis of the conditions for the development of the Chinese non-profit sector in the transformation of China’s welfare system. Sociological Studies, 2. Wang, M. (Ed.). Case study on China’s NGOs. United Nations Centre for Regional Development. Wang, M., & Li, C. (2013). On the construction of China NGO capability: Status quo, problems, and solutions. China NPO Review, 10, 149. (Social Sciences Academic Press). Wu, G. (2003). NPO marketing. China Renmin University Press. Xie, K. (2011). A study of the British charitable trust system. Legal Press China, 35. Xu, J., Liao, H. (Eds.). 2013 report of the development of social organizations in China (Vol. 110). Social Sciences Academic Press. Xu, W. (2013). Public fundraising by organizational channels: Inspiration of American NGP public fundraising to China. Lanzhou Academic Journal, 6. Xu, Y. (2010). Structural innovation of social organizations: The growth of supportive organizations. Research of Administration of NPOs, 8. Zhang, B. (2011). The itch of public welfare: How to do public welfare in a commercial society. Peking University Press. Zhang, G. (2014, March 31). Fundraising is the basic right of public welfare charity organizations. Beijing Times. Zhang, J. (2014). On the institutional environment for developing social organizations in China. Social Sciences in Guangdong, 2, 208. Zhang, X. (2013). Exploring the cooperative model of famous persons’ special funds set up by public-raising foundations in China. China Non-Profit Review, 12, 154. (Social Science Academic Press). Zhao, H. (2013). From administrative dominance to pluralism: A study of the operation of charity organizations (Vol. 143). China Social Sciences Publishing House. Zhou, Q. (1999). On several questions on Chinese charities. Seeker, 5. Zheng, Y. (2003, July). Analysis of the market of individual donors and their donating behaviors. Lecture note for a fundraising strategy seminar (p. 19), Taizhong, Taiwan, China.

Chapter 6

Modes of Providing Charitable Assistance and Innovations Jianguo Gao and Yunhua Wu

Charitable assistance refers to the social behavior of a charitable organization to provide gratis assistance to the social groups that are in difficult circumstances yet incapable of helping themselves. It can be given in the form of materials or of services for spiritual support and belongs to the third distribution of social wealth. Charitable assistance and the government’s public assistance are the two pillars of social assistance and the former is an important supplement to the latter. On one hand, it can mobilize non-governmental resources and raise funds from various channels to make up for the insufficiency of government resources. On the other, it can use various means of assistance to meet the needs of distressed groups and is characterized by such salient features as being flexible, autonomous, and non-governmental, playing not only the role of aiding the elderly and orphans and alleviating poverty, but also of improving interpersonal relations in society, easing social contradictions, and promoting social harmony.

6.1 A General Survey of the Modes of Providing Charitable Assistance As an important component of the mechanism for conducting charity, charitable assistance is a terminal link and a main objective that directly bears on the efficiency of charitable donations and the performance of their functions. The core issue for the charitable assistance mechanism is how to choose the proper mode of offering charitable assistance, which reflects, to some extent, the management level of the charity undertaking. This section will introduce the agents for and modes of offering J. Gao (B) · Y. Wu Shandong University, Jinan, China e-mail: [email protected] © Social Sciences Academic Press 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_6

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charitable assistance, as well as their relevant domains, describe the current situation for carrying out charitable programs in China, and clarify the main features characterizing the flow of funds for the purpose of charitable assistance.

6.1.1 Agents for and Channels of Offering Charitable Assistance 6.1.1.1

Agents for Offering Charitable Assistance

As important agents for providing charitable assistance, charitable organizations are a type of NPO that specializes in charitable activities. At present, the laws and regulations of China have not provided rigorous definitions of charitable organizations. Blending the opinions of scholars, we understand charitable organizations as a type of NPO which is founded by being registered according to the law and offers to carry out activities such as aiding the elderly, the handicapped, and orphans and alleviating difficulties and disasters, with the aim of helping distressed groups and individuals by means such as donating property and voluntary services, as well as activities for promoting social public welfare undertakings such as education, science, culture, public health, sports, and environment protection. American scholar Salamon summarizes the features of NPOs as the following. (1) Organizational, for they have clear and definite system and structure; (2) Nongovernmental, for when the organizations set up their systems they have their clear and definite purposes and, independent of the governmental departments, their systems are separate from the state in regard to their attribution of rights; (3) Nonprofit, for the expenses and profits the organizations incur do not belong to the operators of them; (4) Autonomous, for the organizations can handle affairs with complete independence; (5) Voluntary, for the organization members organize themselves according to the principle of voluntariness and make donations of funds and goods to a certain extent.1 Besides these common features of NPOs, charitable organizations have some distinctive features separating them from other NPOs: they are (1) public-welfare-oriented, for when they carry out activities their aim is to help those in danger, relieve those in need, and contribute to society; (2) non-political, for they are not allowed to participate in some activities organized by political parties; (3) non-religious, for they are not allowed to engage in activities for religious transmission.2 Charitable organizations can be classified by their different modes of operation into operational and assisting organizations. The operational type offers charitable assistance by raising funds, carrying out charity programs, and managing and operating funds. Most of these organizations are set up with government support to fund other social organizations and operate special public welfare programs. One 1 2

Salamon (2004). Yang (2002).

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Table 6.1 Classification of charitable organizations Type

Relevant laws and regulations

Definition

Social association

“Regulations for Registration and Management of Social Associations” issued in 1998

Referring to voluntary groups formed by Chinese citizens in order to realize a shared objective in accordance with their charter and to develop nonprofit making activities

Foundation

“Regulation on the Referring to non-profit legal Administration of Foundations” persons incorporated for the issued in 2004 purpose of serving the public good through the use of assets donated by natural persons, legal persons or other organizations in compliance with these regulations

Non-governmental and non-corporate unit

“Provisional Regulations for the Registration and Administration of Civil-Run non-Enterprise Units” issued in 1998

Referring to non-enterprise institutions, social groups, and other social forces as well as social organizations established with non-state-owned assets by individual citizens to provide non-profit social services

Source Standing Committee of NPC of PRC, “Law of the People’s Republic of China on Donation for Public Welfare Undertakings” (effective as of September 1, 1999); The State Council of PRC, “Regulation on the Administration of Foundations” (effective as of June 1, 2004); The State Council of PRC, “Provisional Regulations for the Registration Administration of People-Run non-Enterprise Units” (effective as of October 25, 1998)

example is the Narada Foundation, founded in 2007, which aims to collect funds and support public welfare programs, or provide funds and technological assistance for social organizations to establish themselves. Charitable organizations can be divided by organizational type into social associations, foundations, and civilian-run nonenterprise units. As stipulated by relevant laws and regulations, they all should have their own articles of association and business scope, with a main purpose of carrying out public welfare undertakings and promoting social development (see Table 6.1). According to the relevant stipulations in the “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” charitable organizations belong to the non-profit sector and the scope of their operations covers the following: (1) relieving disasters, helping the poor, and assisting the disabled, as well as other social groups and individuals in difficulty; (2) education, science, culture, public health, and sports; (3) environmental protection, construction of public facilities; (4) other social and public welfare undertakings that promote societal development.3 Considering the needs of social development at present, the main objectives of charitable organizations include guaranteeing and improving the basic livelihood of such social groups as the aged, the disabled, low-income citizens, people hit by disasters, and children 3

Standing Committee of NPC of PRC (1999).

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Table 6.2 Types of charitable assistance Means of assistance

Mode of assistance

Form of assistance

Cash

Giving currency Exchanging by documents

Assistance fund; educational aid fund Charity assistance card; assistance voucher

Materials

Giving goods Donating goods Building facilities

Charity supermarket Articles for daily use, articles for study Construction of projects; installation of equipment

Services

Offering medical treatment Offering psychological treatment Giving voluntary service Fostering capability

Charity clinics; aid for special diseases; giving medical insurance Psychological consultation; behavioral modification Community service; volunteer’s teaching; Teacher training; employment skill training

in distress, as well as providing more and better services to such social groups as the rural workers hired for temporary jobs in cities, and left-behind elderly, women, and children in rural areas.4

6.1.1.2

Paths for Offering Charitable Assistance

Charitable assistance can mean cash, materials, or services according to the different modes of offering assistance used by charitable organizations (see Table 6.2). 1.

Cash

Cash assistance is one of the most common means of providing assistance in modern society. It refers to the process of charitable organizations’ offering monetary assistance to disadvantaged social groups in distress, yet incapable of getting out, in the form of giving cash and exchanging cash via vouchers. For charitable assistance in present-day China, cash assistance mainly includes special funds for students, medical aid, and assistance cards, as well as various types of temporary subsidies. For example, the Song Ching Ling Foundation’s poor college student grants provide cash assistance to college students from impoverished families. As early as the beginning of 1999, China Charity Federation, through cooperation with the American charitable organization “The Smile Train,” offered early-stage corrective surgical operations for children from impoverished families with cleft lips and palates. The program started 4

Civil Affairs Ministry of PRC, “Guiding Outline for Development of Charities in China (2011– 2015)”, on July 15, 2011.

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with four hospitals in four provinces and now has been expanded to 140-odd hospitals in 30 of China’s provinces, municipalities, and autonomous regions, while the range of recipients has broadened from poor children to patients under 40 with cleft lips and palates. Shanghai Charity Foundation has provided medical assistance by giving charity medical cards to the city’s over-60 population who are covered by a basic living allowance, but not by any medical insurance. These are some typical cases of providing cash assistance to disadvantaged groups. 2.

Material

Like cash assistance, material assistance is one of the most basic and most common means of offering charitable assistance. In this mode, charitable organizations buy basic necessities for recipients or give goods donated by society to beneficiaries directly, as dictated by actual needs. It can take the forms of, for example, opening charity supermarkets, giving articles for daily use, and building infrastructure for impoverished regions and disaster-hit areas. It mainly supplies materials to meet the basic life needs of recipients. For example, the China Welfare Fund for the Handicapped has conducted a “I Give Books to the Blind” program that assists poor blind students through donations. The program chose blind students from certain provinces attending schools for the blind or special schools and offered them school materials, with the aim being to encourage the students to exert themselves in their studies. The third phase of the program provided school materials worth RMB 240,000 to 552 blind students from schools for the blind and special schools in provinces including Guangxi and Jiangxi. 3.

Services

Providing services to disadvantaged groups is another basic type of charitable assistance. It is wide-ranging, diverse, and long-term oriented. It can, to an extent, meet the diverse needs of disadvantaged groups, promote recipients’ capacity to grow, and enrich their cultural and spiritual lives. In a broad sense, this type of charitable assistance not only includes services that are beneficial to the recipients, such as free physical examinations and charity clinics, but also aid that fosters their ability to live and capability to develop, such as psychological counseling and vocational training. Since its founding in 2009, China Charities Aid Foundation for Children has committed itself to carrying out service programs oriented towards development and conducted activities such as psychological assistance, skills training, and growth assistance. For example, its “Blue Bird Seed” program is meant to care for the growth of children and, to provide one-to-one psychological guidance and care to children in periods of uncertainty. The foundation’s “Jimei Skill Training for Poverty Alleviation” program offers free skills training services to students from impoverished families to enhance their self-help abilities so they can subsist and obtain employment.

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6.1.2 Main Domains of Charitable Assistance Charitable assistance covers many domains, including education, poverty relief, disaster relief, environment protection, science, and culture. Among these, education, poverty relief, medical aid, and disaster mitigation and relief have always attracted the most charitable assistance, both in terms of the proportion of the funds spent and the level of social attention.

6.1.2.1

Educational Assistance

For many years, education has been a focus of attention for public welfare charitable activities, attracting over half of China’s charitable funds.5 Educational assistance refers to material or service aid provided by charitable organizations to disadvantaged groups of specific ages to help those groups obtain equal opportunities for education and improve their living conditions. It aims to offer items and funds to impoverished students in different stages of school, improve educational facilities, provide teacher training, and provide psychological guidance. Compared with the government’s educational assistance, the assistance provided by charitable organizations is more flexible and oriented towards a wider range of beneficiaries. The “Love Package” program is a national public welfare activity launched by the China Foundation for Poverty Alleviation. It opened 36,000 love package donation stations based on China Post’s countrywide business network. By offering one-to-one help, the program uses three forms, i.e. love package donations, training teachers in music, sports, and the arts, and volunteer teaching to help teach music, sports, and the arts to pupils in impoverished regions. From 2009 to 2011, the program provided assistance to 2.73 million pupils in 478 impoverished counties of 29 of China’s provinces,6 playing an important role in promoting the comprehensive development of pupils in the impoverished regions.

6.1.2.2

Poverty Relief

In a broad sense, poverty means the phenomenon that some social groups having little or no money and few or no material possessions, so that they cannot obtain necessities. Poverty relief refers to the activities of charitable organizations giving cash, materials, or services to impoverished people or impoverished areas to help them escape straitened circumstances and realize self-development. It concerns aspects such as beneficiaries’ clothing, food, housing, and medical treatment. For example,

5

Liu and Li (2012: 37). China Foundation for Poverty Alleviation, “2003 Love Package Program Work Summary”, http:// baoguo.cfpa.org.cn/project.action (2014/10/20).

6

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local people in some old revolutionary base areas, areas inhabited by minority nationalities, frontier areas, and poor areas, are incapable of building bridges. The China Foundation for Poverty Alleviation introduced a stream bridge building program, helping people in those areas to build bridges they need urgently, yet are incapable of building and thus helping them with infrastructure construction.

6.1.2.3

Medical Aid

Medical treatment is an important realm of charitable assistance. It refers to support in the forms of funds, medicines, techniques, and services provided by charitable organizations to treat patients who cannot get medical treatment due to their poverty. It includes charitable assistance oriented towards special diseases and daily outpatient services. For example, the “9958 Children Emergency Assistance” program conducted by China Charities Aid Foundation for Children, which, by setting up the 9958 emergency assistance hotline, provides medical aid to impoverished children who suffer from serious diseases across the country. China Song Ching Ling Foundation’s “Maternal and Infant Health Project” gives medical aid to local pregnant women by donating medical equipment and training medical workers in impoverished areas in China’s west.

6.1.2.4

Disaster Mitigation and Relief

Disaster relief is rescuing and giving assistance to disaster victims who are in difficult circumstances. The assistance offered is characterized by urgency, various means of aid, and time uncertainty. Its main objective is to help disaster victims escape survival crises and restore normal order to their lives. For example, in the wake of the 2008 Wenchuan earthquake, the Narada Foundation’s Sichuan Branch set up a “Post-Quake Ecological Civilization Rebuilding Center,” program, offering funds to a Species Observations Sharing on China Nature Watch Platform of Shan Shui Conservation Center, Haidian District, Beijing, which constructed a “PostQuake Community Ecological Civilization Rebuilding Center” in Anxian County, Sichuan, conducted post-quake rebuilding training meetings, and designed a selfhelp production plan for the area, thus providing disaster relief assistance to local people after the earthquake.

6.1.3 Charitable Assistance Programs Charitable assistance programs refer to public welfare programs conducted by official or non-official charitable organizations to offer assistance of a certain scope within a specific term of service to social groups experiencing difficulties. In China, chari-

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table assistance is provided mainly by charitable organizations conducting assistance programs. These programs involve medical and educational aid, disaster relief, and support for the disabled, among other concerns. For example, the China Medical Foundation has offered medical aid by implementing such programs as “China Entrepreneur Health Project” and “Diabetes Prevention and Cure Program”. The Shandong Youth Development Foundation’s “Hope Project 365” program provides educational aid to students in impoverished areas and children of migrant workers in Shandong. With the development of philanthropy in China, the scope of services and beneficiaries of charitable programs have continued to broaden, covering not only giving material assistance to disadvantaged groups, but also fostering work skills and improving spiritual and cultural life.

6.1.3.1

Current Situation for the Development of Charitable Programs

Charitable programs conducted by China’s charitable organizations cover many domains including education, social welfare, disaster mitigation and relief, poverty alleviation, public health and medical care, environment protection, law, academic studies, culture, and sports. Up to the end of 2011, 70% of the funds provided by charitable foundations’ programs have been used for disaster relief and poverty alleviation, social welfare, education, and medical care, the four areas closest to people’s livelihood. Their beneficiaries include impoverished mothers, children, students, the unemployed, the handicapped, and diseased patients, among others.7 Regarding the status quo for these programs, we will mainly make statistical analyses of their quantity, objects of service, and domains. As indicated by the numbers of charitable programs by domain, China’s charitable programs are mainly concentrated in education, helping disadvantaged groups, and medical care. By analyzing the data of programs applying for the China Charity Prize from 2009 to 2011 and the results of the annual charity questionnaire survey, we find that in 2009, 2010, and 2011 there were 302, 437, and 311 valid charity programs respectively. These programs were concentrated in education, aiding disadvantaged groups, and medical careFig. 6.1.8 Judging from the service targets of charitable projects, there are certain differences in the amount of resources invested into charitable projects for different social groups. This shows that the society pays amounts of different attention to different types of social groups. The charitable programs for youth and children receive the most attention, followed by those for the handicapped, farmers, the elderly, and ethnic minorities, among others. This differences are evidenced by the number of programs conduced in 2011. The relevant data show that the resources granted to different social groups decreased progressively and that youth and children attracted the greatest amount of charitable service, accounting for 16% and 15% respectively, and that the

7 8

Peng (2012). Yang (2012: 113).

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Fig. 6.1 Proportions of charitable program quantities (2009–2011). Source Feng and Song (2012: 114)

Fig. 6.2 Proportions of resources granted to different type of beneficiaries. Source Feng and Song (2012: 114)

percentages for the handicapped, farmers, the elderly, and ethnic minorities were 13%, 12%, 11% and 10%, respectively (see Fig. 6.2).9 Our analysis of the funds granted by programs to different areas indicates that, from 2009 to 2011, disaster relief received the largest percentage, accounting for 32% of all charitable funds given. The percentages going to education, health and medical treatment, and disadvantaged social groups, were 28%, 17%, and 15% respectively. Less was given to environmental protection, science, culture, and sports, among other areas. The two areas of environmental protection and science, culture, and sports accounted for only for 1%.10

9

Yang (2012: 113). Yang (2012: 114).

10

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Table 6.3 Fund investments and beneficiaries of some nationwide charitable service programs. Unit: 100 million; ten thousand persons Program (group)

Sponsor

Statistic years

Funds

Beneficiaries

Hope Project

China Youth Development Foundation

1989–2010

70

380

The Smile Train

China Charity Federation

1999–2011

12

26

Spring Buds Project

China Children and Teenagers Foundation

1989–2010

10

200

Guanghua Book Donation Project

China Guanghua Foundation

2005–2011

8.5

1.5 (Number of agencies)

Happiness Project

China Population Welfare Foundation

1995–2011

8.29

25

Mother Cellar

China Women Development Foundation

2001–2011

6

180

Little Angel Program

China Red Cross Foundation

2005–2011

1.65

2.07

For Tomorrow Project

Central Committee of the Communist Youth League

2010–2011

0.33

25

Source Feng and Song (2012: 117).

6.1.3.2

Effects of Charitable Programs

The assessment of the effects of charitable programs is a key link for improving the performance of the programs and the efficiency with which funds are spent. A sound system for assessing charitable program effects signifies much for carrying out charitable programs in a sustainable manner. A complete set of procedures for operating a charitable program includes stages for preliminary preparations, followed by operations and management, and assessment of the effects, along with summary of work done. Currently, when assessing a charitable program’s effects, comprehensive consideration is made of relevant aspects, including the program’s duration, funds used, number of beneficiaries, range of assistance, and public feedback. For example, in 1995, the China Population Welfare Foundation, China Family Planning Association, and China Population News Agency jointly launched the program “Happiness Project: Aiding Impoverished Mothers”. According to statistics, up to October 31, 2011, the project set up 463 project stations in 29 provinces, municipalities, and autonomous regions across the country, with a total investment of RMB 829.4 million. It aided 253,396 impoverished mothers and families, benefiting a total of 1.13 million people. To an extent, this example indicates the effects carrying out a program that attracted much attention and participation from all of society (see Table 6.3.)11 11

Yang (2012: 117).

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Our analysis of the data in Table 6.3 indicates that important indicators such as the funding and number of beneficiaries of a charitable program reflect to some extent the actual effect of its performance. This is significant for improving future charitable assistance work and adjusting future plans for program implementation. Nonetheless, the assessment of a charitable program’s effect needs to consider more dimensions, such as whether the beneficiaries’ capabilities have been enhanced, whether its performance affects other members of society and their environment, and whether it can drive the development of relevant sectors. The assessment of such aspects needs to be conducted by designing and then measuring more detailed indicators.

6.1.3.3

Features of Charitable Programs

On the basis of both the above statistics and analysis of the performance of charitable programs that have been conducted or completed, we can summarize the following features of the development of charitable programs in recent years. First, charitable programs cover many types and areas. The main areas are disaster relief, poverty alleviation, aiding the handicapped, funding education, culture, public health, sports undertakings, environmental protection, construction of infrastructure, and other social public welfare undertakings. A high proportion of the total volume of funds flows to disaster relief, poverty alleviation, health and medical treatment, and education, all which are closer to the people’s livelihood. For example, the China Charity Federation’s projects and capital and material inputs are mainly concentrated in the medical field. According to incomplete statistics, in 2010, 56 charity federations conducted 639 programs and activities in five fields including medical treatment (229), poverty relief (198), education (143), disaster relief (40), and community service (29). The 570 programs concentrating on medical treatment, poverty relief, and education account for 89.2% of all programs. Community service, which covers programs such as aid to college students’ start-up initiatives, charity training, and offering hospice care, has a very low share. So, there is a large space in this domain which charity federations can exploit. Additionally, some new charitable domains such as environmental protection and policy research and initiatives call for more efforts for their development.12 Second, more funds provided by charitable programs go to youths and the dominant form of assistance is giving cash to beneficiaries directly. The largest share of charity resources are granted to youth and children with building of schools and subsidies for impoverished students’ attracting a particularly large amount of funds. This form of charitable assistance is mainly based on cash grants such as direct scholarships and medical expense payments. For example, over half of the charitable programs conducted by charity federations offered cash to the beneficiaries. In 2010, of the programs and activities performed by 56 charity federations, 309 provided cash assistance, the largest of any type, and 105 gave medical supplies. 12

Yang (2012: 163–166).

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These two types of programs accounted for 64% of all programs. Additionally, 68 offered volunteer services (including 38 medical services, 17 cultural services, and 13 training services), 67 gave goods for daily use (31 of which also provided some cash), 58 funded infrastructure construction (10 of which also provided some cash), 23 provided medical supplies, and 9 offered articles for cultural activities.13 The proportion of programs intended to foster the beneficiaries’ capabilities such as work skills training, raising labor market competitiveness, giving psychological guidance, and helping maintain active and sound mental states was small.

6.1.4 Analysis of the Flow of Charitable Funds The appropriate use of charitable assistance funds is an issue of major significance to the operation and development of a charitable organization. Therefore, analyzing the flow of charitable funds is important. At present, since the state only has made detailed specifications of the foundations’ proportion of expenditure from the flow of charitable funds by issuing the “Regulation on the Administration of Foundations” and has not stipulated in definite terms for charitable organizations’ other expenditures and use of charitable funds, analysis and evaluation regarding the types of donation recipients and the domains to which charitable funds flow are needed.14

6.1.4.1

Charitable Funds Received by Different Acceptors

The acceptors of the charity donations are the fundraising agents. As stipulated in “Law of the People’s Republic of China on Donation for Public Welfare Undertakings,” the acceptors of the charitable donations are public welfare associations and not-for-profit public welfare institutions, which mainly include civil affairs departments at all levels, social organizations at all levels of party and government agencies, foundations, charitable organizations, and non-profit medical and health institutions, and social welfare agencies.15 To a certain extent, the flow of assistance funds to different acceptors can reflect the donation environment of a country or region, the effectiveness of funds used by acceptors, and public trust. As an important part of charity relief, charitable organizations, including foundations, the Red Cross and the Charity Federation, receive a relatively large proportion of assistance funds. Their use of these funds has a decisive influence on the efficiency of charitable relief (see Fig. 6.3). The total sum and share of funds received by charitable organizations have gone up annually. In 2011, charitable organizations received nearly RMB 57 billion in charitable funds, accounting for 67.5% of the total, while in 2012, the corresponding 13

Yang (2012: 166–167) Song (2012: 25) 15 Standing Committee of NPC of PRC, 1999. 14

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Fig. 6.3 Charitable funds received by different donation acceptors. Source Liu (2011: 138) and Song (2014: 20)

figure and proportion were RMB 66 billion and 75.1% respectively. Charitable organizations are the acceptors that donors trust most, and among them foundations exerted the most significant influence on the use of the charitable assistance funds. In 2011, foundations received 40% of all funds and in 2012 that proportion increased to 42%. In 2012, there were 3029 foundations in China that received a total of RMB 37.6 billion and spent RMB 32.528 billion. The total public welfare expenditure of public foundations was RMB 22.715 billion, accounting for 71.65% of spending by China’s foundations. The total public welfare expenditure of non-public foundations was RMB 8.974 billion, accounting for 28.35%.16 These data show both that China’s foundations constitute the largest acceptor of the charitable funds donated by society and also that they use funds with relatively high efficiency. In terms of overall funding strength, public foundations far exceed non-public foundations. As indicated by the above figure, the CPC and government organs, including civil affairs departments at various levels, received 21.6% of all funds in 2011. In 2012, their percentage fell by 1.8% to 19.8%. This change manifests that, while these governing bodies played a significant role in the country’s charitable assistance work, their proportion of funds, as well as their social influence, are all relatively small. This is indicative of the gradual growth of “non-governmentality” and autonomy of charitable assistance in China.

6.1.4.2

Domains to Which Charitable Funds Flow

The distribution of the charitable funds has had a diversified pattern, including such domains as education, poverty alleviation, medical treatment, disaster relief, and

16

Song (2012: 26).

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human services, among others. Education and poverty alleviation have been the two domains attracting the most attention. (see Figs. 6.4 and 6.5). Figures 6.4 and 6.5 show that in 2011 education and poverty alleviation/social development received over 62% of charitable funds, accounting for 33.68% and

Fig. 6.4 Proportions of donations received by various domains in 2011. Source Youping (2011: 165)

Fig. 6.5 Proportions of donations received by various domains in 2012 Source Song (2014: 22)

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28.99% respectively. The proportions of funds going to these two areas in 2012 significantly decreased to 25% and 23% respectively, though they retained the highest shares. These data indicate that education and poverty alleviation were still the two domains that attracted the most attention from donors. In 2011, the proportion of the funds received for medical treatment was 8.92%, while in 2012 that proportion increased to 20%, representing a growth of 11.08%, showing more attention to this area.17 By contrast, far less funding went to domains like ecology and culture. In sum, it can be concluded that charitable organizations are important acceptors of charitable resources and that they take responsibility for reasonable and effective use of charitable funds. Among these organizations, foundations are an important force pushing for the smooth performance of charitable assistance. Promoting the constant improvement and development of foundations is an important objective of establishing and improving the mechanism of providing charitable assistance. Over the years, education and poverty alleviation have been the two domains attracting the most charitable donations, followed by medical treatment. In other areas such as disaster relief and environmental issues, the share of funding varies with the number of occurrences and the severity of disasters and other problems.

6.2 Improvement of Modes for Providing Charitable Assistance 6.2.1 Non-government Forces Strengthened as Part of the Main Body of Relief At present, China’s charitable assistance mechanism has moved away from an operational model dominated by the government and shows an overall trend of “the government retreats and non-governmental forces advance.” Charitable organizations with an advantage in collecting funds and goods have begun to transfer their collected funds and goods to charitable organizations that operate charity programs and are better at providing services,18 giving rise to the trend of transforming from an operational orientation to an assistance-providing orientation. At the same time, the number and size of non-governmental charitable organizations have continued to increase and the number of volunteers is also growing rapidly. These favorable factors have jointly brought about a mechanism for inter-organizational coordination and promoted the development of non-governmental charitable forces.

17 18

Liu and Yang (2012: 39). State Council of PRC (2014).

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Rapidly Growing Number of Charitable Organizations

With the increasing efforts made by the government to support and guide the development of charities, the environment has become more favorable for the growth of charitable organizations. In recent years, the quantity of charitable organizations including social associations, foundations, and civil non-enterprise organizations has been increasing rapidly. Up to the end of 2013, China had 289,000 social associations, 3549 foundations, and 255,000 civil non-enterprise organizations, representing growth rates of 6.6%, 17%, and 13.1% over the previous year, respectively.19 Among them, many social organizations pursue charity as their main purpose. At the end of 2010, non-public foundations, which tend to be more non-governmental, outnumbered public foundations for the first time, while in 2011 they accounted for 53% of all foundations. By that end of 2014, that percentage had increased to 64%, far surpassing the number of public foundations. Additionally, there are many unregistered non-governmental charitable organizations that provide various charitable services to society.

6.2.1.2

Transformation and Improvement of the Operating Modes of Charitable Organizations

Charitable organizations directly established and supervised by the government have far more capacity to raise funds, experience, and expertise than non-governmental independent charitable organizations. In recent years, the former type of charitable organizations has begun to pursue a transformation, reducing dependence on government and emphasizing cooperation with social forces in providing assistance. Among them, the public foundations’ transformation has attracted the most attention, as they have started to shift from a model depending on government for raising funds to a model of offering funds and programs open to all society. By setting up a just and fair system of competition, they have enhanced their cooperation with grassroots charitable organizations and social associations. For example, the China Foundation for Poverty Alleviation started its “de-administration” reform 10 years ago, by adopting public welfare bidding in 2011 and introduced its programs to NGOs with considerable potential, improving the post-Wenchuan earthquake rebuilding work. China Charities Aid Foundation for Children has had remarkable success in reforming away from its government orientation. Its corporate cooperation program “For Children” (Tongyuan) has funded over 200 grassroots charitable organizations, among which, for example, the Angel Mother Charity Foundation has used the funds from the program and offered various forms of assistance such as money and services to children who are victims of anemia, liver and gall disease, or burns.20 Non-public foundations, which are a new emerging force, have begun to define their position as self-financing organizations, and are cooperating with grassroots 19 20

Ministry of Civil Affairs (2013). Xu (2012: 133).

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organizations, realizing complementary resources, focusing on supporting weaker social organizations, and indirectly fostering new forces for charity assistance.21 A typical example of the development of independent non-governmental foundations is the Narada Foundation. Its funds mainly are used to support schools for children of migrant workers, public welfare forums, and post-disaster rebuilding programs under a model different from traditional direct program operation.22 Smaller rising non-public foundations, by contrast, tend to fortify their own capacity to operate programs and strive to access to larger foundations’ funds and expertise, so as to better perform their work of charitable assistance.

6.2.1.3

Expanding Volunteer Teams

The volunteer spirit embodies traditional Chinese culture in a way that is also endowed with new meaning of the present. With the constant development of philanthropy in China, the teams of volunteers has kept expanding, playing a great role in promoting social progress and development. In 2013, the total number of volunteers in the official statistics of various agencies was about 73.45 million, accounting for 5.65% of the country’s population and their time served reached 830 million hours, equivalent to RMB 8.3 billion.23 From 2011 to the end of 2013, the number of registered volunteers increased by 116% and their service time increased by 530 million hours. Additionally, there were several million volunteers who spontaneously organized to take part in voluntary activities in their spare time. Volunteers have made remarkable progress in both the domains and forms of services. What were once large-scale specialized voluntary activities, pushed by government in a top-down manner have become ever more pluralistic forms of individual and voluntary services. The voluntary activities conducted independently by volunteer groups have also shifted from spontaneous activities to professional voluntary services. The scope of voluntary activities has been expanding to cover many domains including community building, poverty alleviation, and social development, aiding the young and the elderly, emergency relief, and environmental protection. Together they have developed into a voluntary service system characterized by varied forms, rich content, sound mechanisms, and rural and urban coverage.

6.2.2 Optimized Forms of Program Implementation Implementing charitable programs is a major way to provide charitable assistance. Elevating the social influence of charitable programs and the efficiency of fund-utilization have become the important issues bearing on the development and 21

Liu (2013: 158). Xu (2010: 179). 23 Zhu (2015: 9). 22

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improvement of the charitable assistance mechanism. At present, the program operation model that incorporates commercial concepts is in the early stages of growth. Since 2011, public welfare venture investment funds have been set up in many regions of China, and their coverage has expanded. This operating model which blends society and the market and combines charity and commerce has broken through the traditional model of operating charitable programs, providing financial and efficiency guarantees for the smooth progress of charitable assistance. Public welfare venture investment, a new way of investing capital in public welfare, is a process where venture investors fund public welfare organizations in their initial growth stages. In this way, public welfare organizations with real capabilities, but limited funds, design programs that can get financial support, convey their intended goals, and win affirmation from investors. It aims to solve social problems, broaden the influence of charitable assistance, and increase social consciousness of the charity culture. Operationally, it is similar to commercial investment, but the purpose is not for profit. In recent years, the government has strengthened its support for public welfare venture investments. For example, in Nanjing, public welfare venture investment in 2012 was RMB 12 million, funding 57 charitable programs. That figure grew rapidly to 20 million, funding 123 charitable programs in 2013.24 The “China Charity Fair” which has been successfully held in Shenzhen, Guangdong Province, has served as an innovative example for the possible forms of carrying out charitable programs. In its first session, held in July 2012 through diverse cooperation among the government, social organizations, enterprises, and the general public, public welfare charitable organizations exhibited their programs and participating enterprises and foundations chose among the programs. In this way, charity and commerce combined to create opportunities for improving the efficiency of charitable programs and allocating charitable resources more rationally. The second session of the fair, held in September 2013, improved its operational mechanism and attached more importance to the participation of social forces in such links as soliciting candidate themes, making efforts to host exhibitions, and raising funds. This realized close cooperation between enterprises and social organizations and gave a strong impetus to improving the development of new programs and the efficient performance of these programs. Further progress was made in the third session of the fair, held in September 2014, which pursued the concept of “growth, integration, and transparency” and the principles of societal orientation, brand construction, efficiency, and low-carbon. It effectively integrated exhibition participation, joining in competition, and interfacing resources on the basis of carrying out the operating model of the second session. The China Charitable Program Competition held at the fair demonstrated candidate programs in the form of public welfare investments and selected the winners, propelling crossover cooperation between enterprises and society in bettering charitable assistance.25

24

Wang (2014b: 162). Ministry of Civil Affairs, “A Profile of The Third China Charity Fair”, http://fss.mca.gov.cn/art icle/csshjz/tzgg/201409/20140900699422.shtml(2014/9/12).

25

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6.2.3 Diversified Forms of Providing Assistance It can be concluded from the above that the domains attracting charity have increased over the years and that the forms of providing charitable assistance have become more diverse, transforming from supporting subsistence to assisting development of capabilities and fostering values. In recent years, the number of social organizations and public welfare charitable programs that provide development-oriented assistance has been growing, while their assistance structure has been improving. In addition to operating with the traditional charitable assistance model of giving funds and goods to people in difficult situations, charity organizations have begun to steadily increase assistance meant to foster beneficiaries’ capabilities and also to grant more funds for skill training, psychological guidance and counseling, and other services. For example, the China Charity Federation has in recent years both given material support for the direct needs of recipients and provided those recipients with assistance to support their overall development. Since early 1999, its “The Smile Train” program has offered medical assistance to children with cleft lips and palates in many impoverished regions of China through cooperation with hospitals. The regional development program “Children First” (Ertong wei ben) jointly conducted by China Charity Federation and World Vision has offered comprehensive assistance to the recipients by using communities as vectors, covering domains such as education, farming, health and medical services, environment protection, and capacity building. The contents of specific programs depend on the actual needs of differing communities, including assistance for economic development, environmental improvement, medical treatment and public health, and infrastructure construction and, more importantly, training for residents to enhance their capabilities. The program has also set up a community development panel, a rural research institute and training center, conducted activities like “participatory study and action” and “participatory program design,” offered program management training, and organized vision broadening tours.26 The scope of assistance offered by the China Charities Aid Foundation for Children, established in 2010, covers subsistence support, medical service, psychological guidance, and children’s growth, as well as foundation building. The assistance is provided differently than the traditional manner of only offering cash or materials to the poor. The foundation has designed and conducted different programs to meet the differing needs of disadvantaged growing children. For example, it has opened the phone hotline 9958 for children suffering from various diseases, set up the “Star Rain” special fund for psychological guidance oriented towards children with autism, and developed the “Jimei Skill Training for Poverty Alleviation” program for training the skills and strengthening the autonomous living capabilities of poor students.

26

China Charity Federation, “Children First Regional Development Program”, http://cszh.mca. gov.cn (2014/10/22).

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6.2.4 Early Development of Community Charity In most Western countries, community charity is one of the important aspects of philanthropy and about 80% of charitable funds are used within communities.27 Developing community charity is fostering charity in which charitable organizations, operating based on programs, give assistance and support to local communities, offering funds and services for their governance, promoting the formation of a local system of community self-governance. Community foundations are the core force in developing community charity. They can serve communities in two ways. One is to fund the chosen programs, that is, a community foundation evaluates programs proposed or already started by local social organizations, chooses some of them to fund and technically support, and additionally, researches and develops services for the community programs and formulates their strategic development plans. The other way is to carry out programs that community residents participate in. That is to say, a community foundation offers assistance directly in the form of material and services in response to the needs of the community and, by inviting community residents to join in the program, builds a comprehensive service platform. China’s community charity undertaking, though in early stages, has enjoyed a good opportunity to grow vigorously. The third plenum of the 18th CPC Central Committee required more efforts be made to innovate the social governance system, good handling of the government-society relationship, and constantly encourage the participation of social forces, thus stimulating the vitality of social organizations. In 2014, Shenzhen took the lead in setting up and promoting community foundations. It is in the stage of examining the construction of the community foundation system. The community foundations’ scope of activities is limited to communities. As a nonprofit legal person, a community foundation with initial capital of RMB 1 million is entitled to apply for registration.28 The city also has launched a “Thousand Talents for Social Innovation” public welfare incentive program which, acting on a public welfare innovation model, offers community foundation management training. Also in 2014, Beijing began a pilot program to construct charitable communities, setting a good example for the growth of community charity forces across the country. By localizing charitable assistance community charities are subject to the supervision and suggestions of local residents. This is conducive to making full use of the advantages of communities in their regions and cultural conceptions and to conducting charitable programs responding to internal community needs. The community charity model has internal stability, which is beneficial to the supervision of community members and the actual efficiency and credibility of charity assistance.

27 28

Wang (2014a). Xu (2014).

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6.3 Innovation Mechanism for Modes of Providing Charitable Assistance The crucial point for the establishment and improvement of the charitable assistance mechanism lies in optimizing modes of providing assistance, which calls for examination and innovation regarding such aspects as the transformation of assistance concepts, the improvement of assistance implementation, and the optimization of paths of giving assistance. This is an important link in improving the efficiency of funds used and furthering the development of the charitable donation mechanism.

6.3.1 Problems and Challenges Charitable Assistance is Currently Facing The key to improving the efficiency of the use of charitable donations is to establish a scientific and effective charity relief mechanism and to provide a reasonable way to fund the different situations of recipients. Despite some impressive progress China’s charities have made in increasing the non-governmental content and flexibility of assistance offered, there are still some shortcomings with the current modes.

6.3.1.1

Charity Organizations’ Abilities and Social Responsibilities Are Still not Compatible

At present, despite increasing non-governmental content, administrative color is still strongly present in the process of charitable assistance. On the whole, charity organizations still lack autonomy and flexibility. Charitable organizations founded with the support from the government would hardly be able to go on without continued government support and participation, which results in their own capabilities to subsist not matching their social responsibilities. From founding of sections, appointment of personnel, and fundraising to the various links of the process of giving assistance, they depend largely on government decision-making and operation. Thus, the government dominates the performance of charitable activities. This administrative dominance means that the mode of providing assistance is a traditional top-down one. Though these organizations have a considerable advantage in funds and expertise and have been the major force for developing charities in China, they are hindered by bottlenecks in their reform and transformation, making it hardly possible for them to separate themselves from the government and free themselves from cooperating with the government when conducting charitable programs.29

29

Xu (2014a).

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Government workers decide who gets charitable assistance, by what standards, and how to give charitable materials, while charitable organizations only participate in the process in a pro forma manner. Thus there will inevitably be blind spots in defining the target recipients of charitable assistance, as well as significant overlap with recipients of government assistance. Consequently, some people are not included into groups receiving charitable assistance. Thus, it is hard for charitable organizations to give play to their advantages of being close to the grassroots, having diversified forms, and using simple procedures. In operating programs, charitable organizations have carried out charitable programs and activities by cooperating with the government and executing administrative orders from top to bottom. Foundations transfer their charitable funds to relevant governmental departments, which carry out public welfare charitable programs. This engenders foundations’ loss of autonomy in choosing agents to carry out programs, as well as the failure to form a fair mechanism for competition among organizations. At the same time it blurs the demarcation between charitable organizations and government departments, which is detrimental for improving the efficiency of using the funds and the sustainable performance of charitable assistance. For example, the “Spring Buds” program launched by China Charities Aid Foundation for Children is under the leadership of the Women’s Federation of China, which is in charge of its performance. Such top-down management operation with a closed style reduces the program’s management and operation costs, but is not conducive to giving play to the foundation’s autonomy and non-governmental status, or to enhancing the efficiency of charitable fund usage.

6.3.1.2

Modes of Providing Assistance Need to Be Optimized

Currently, though the modes charitable organizations have adopted to provide assistance are more varied than before, giving material assistance still dominates. Modes more oriented toward fostering the recipients’ capabilities are less common. In education and medical treatment, among other domains, China’s charitable programs mainly involve offering funds to support the recipients. This takes the forms such as giving students subsidies, funding construction of schools, and providing medical aid or recovery funds to the handicapped or impoverished. By contrast, programs that offer work skill trainings, raise competitive awareness, and provide psychological guidance are less common. At the same time, efforts to publicize awareness of charity when conducting the programs are inadequate, to the disadvantage of fully mobilizing the enthusiasm of members of society to engage in charitable assistance. According to the analysis in the “Annual Report on China’s Philanthropy Development (2012),” there are four types of charitable programs: infrastructure building (e.g. building schools, libraries, welfare houses) direct funding (e.g. giving subsidies, medical fees) capability fostering (e.g. training), and advocacy (e.g. promotion activities, investigation and research). In 2010, China’s charitable programs spent RMB 9.43 billion directly for such uses as paying student subsidies and medical fees, accounting for 89% of the total invested in charitable programs, while only RMB

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Fig. 6.6 Distribution of quantities and funding types of various charitable programs. Source Yang (2015: 116)

490 million was used for capability fostering activities like training, accounting for only 4.7% of the total. Clearly, an overwhelming majority of China’s charitable funds have gone to recipients in the form of direct funding assistance, while the proportion of the funds spent to develop recipients’ capabilities is still rather low (see Fig. 6.6). Direct financial assistance can genuinely help the recipients escape difficulties and improve their living conditions in a short period of time. However, this quick-impact approach is not conducive to recipients’ long-term development. Receiving outside help every time they encounter difficulties produces psychological dependence and indolence. Furthermore, simple material assistance can only help recipients solve their immediate problems, rather than improve their capability to better their own living conditions. This problem is particularly notable in the domain of poverty alleviation (Table 6.4). The large sum payments made as part of the major programs of China Foundation for Poverty Alleviation in 2013 were mainly material assistance for impoverished regions and disaster-hit areas, mostly for purchasing goods or equipment. No payments for enhancing the recipients’ self-development capabilities were made. Poverty alleviation funds were used mainly to help the recipients better their material conditions, rather than to foster their ability to shake off poverty on their own. Given this, it is necessary to further transform the traditional concept of charitable relief, promote the diversified development of charitable relief methods, increase the proportion of expenditure for improving the skills and qualities of the recipients, thus helping recipients escape their difficulties by relying on their own abilities.

6.3.1.3

Unbalanced Allocation of Charitable Resources

The efficacy of charitable assistance depends on the fair allocation of charitable resources to the groups most in need of them. However, charitable organizations often fail to realize balanced allocations of resources due to a lack of experience and

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Table 6.4 Large payments of major public welfare programs conducted by China Foundation for Poverty Alleviation in 2013 Unit: yuan Program

Donor’s name

Payment in 2013

Remarks

Yushu Market and Production Base Building and Whole Village Construction

Beijing Urban Construction Group Co., Ltd

21,700,000.00

Project fund

Donate One Yuan Nutritious Meal

Kunming City Hongxin Stainless Steel Kitchen Equipment Co., Ltd

14,566,380.00

Purchase of charitable kitchen equipment

Love Package

Beijing Sales Branch of Beifa Group Co., Ltd

10,994,200.00

Purchase of students’ fine arts packages and life packages

Love Package

True Color Stationery Co., Ltd

10,377,077.52

Purchase of students’ fine arts packages

Lushan Earthquake Rescue

COFCO(Chengdu) Oil and Food Industry Co.,Ltd

8,263,106.00

Total

Purchase of oil and food

65,900,763.52

Source “Annual Financial Report of China Foundation for Poverty Alleviation (2013), http://www. cfpa.cns

specialized guidance. This means that some individuals and areas, though eligible for assistance, are located in the blind spots of those assisting. The imbalance of relief resources mainly covers uneven distribution among assisted groups and assisted domains. (1)

30

Uneven allocations among assisted groups. One example in the area of medical treatment is that since some diseases are almost incurable, and also very expensive and difficult to treat, they are neglected by charitable programs. By contrast, for some easy to cure diseases, there is the phenomenon of “lacking not money but patients” with supply of charitable resources exceeding demand. According to a report by Xinhuanet, a patient in Shanxi Province Children’s Hospital received RMB 200,000 charitable assistance funds from a program, even though his treatment required at most RMB 50,000. At the same time, another patient in the same inpatient ward, who was in worse shape and needed more medical fees, received no charitable funds at all.30 The main reasons for this absurd phenomenon are the following. First, regarding the performer of the assistance program, the charitable organization did not conduct an adequate investigation of the actual demand, not get an accurate assessment of the funds needed for treating a certain disease, or not follow a scientific procedure of verifying the group in need of funds. Additionally, it adopted an attitude of shrinking away from funding demands from more costly disease treatments

Gan and Liu (2014).

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(2)

283

and consequently some patients with difficulties that were incapable of selfhelp could not get assistance. Second, on the part of the recipients, some people in need of assistance lack initiative and knowledge of relevant charitable programs. Therefore, when they are in distress, yet not in a position to solve it on their own, they do not turn to charitable organizations, but rather choose to put up with it. Particularly in some impoverished areas which are remote, hard to access, and underinformed, the unbalanced allocation of charitable resources is more serious. Unreasonable distribution of assistance resources in the assisted domains. At present, funds flow mainly to domains the general public pays more attention to, such as education, poverty alleviation, and social progress. However, other relatively serious social issues attract less attention. Therefore, the traditional resource distribution pattern has not been broken. For example, in recent years, charities have not paid adequate attention to issues such as left-behind children and women, empty-nest elderly, elderly who have lost an only child, and some social public undertakings such as science and technology, culture, public health, sports, and environmental protection. With population aging increasingly salient, the issues of the empty-nest elderly and elderly who have lost only child have gotten more serious, yet charitable resources going to these areas are scarce. This unbalanced distribution of resources calls for charitable organizations to make more of an effort to keep readjusting the allocation of resources in different domains and to optimize the distribution structure so that charitable assistance can adapt to ever changing social demands and solve social problems more effectively.

6.3.1.4

Online Donations to Individuals Need to Be Standardized

With the popularization of the internet, cases of assisting individuals by online fundraising have become more common in recent years. Online donation to an individual refers to netizens making donations in response to information someone seeking help has publicized on some form of media via a charitable organization or directly to a recipient on an online platform. This form of providing assistance makes full use of the interactivity and transmission speed of the internet to make charitable donation more convenient so that the recipient can attract widespread social attention and escape difficulties quickly. However, it also has shortcomings. The virtuality of cyberspace makes it hard for donors to see whether the information put out by those seeking help is true or not, which is engenders “scam donations” and “gaining donations by cheating,” which dampen the enthusiasm of the donors. At the same time, when a charitable organization is involved in the process of soliciting donations publicly for a specific individual, it goes against charitable fairness and also against the original intention of carrying out assistance activities in the interest of an unspecified large group, thus leading to unfair use of charitable resources. There has been widespread social controversy and discussion of the phenomenon of online donations to individuals. One opinion is that a public welfare organization should not get involved in assisting an individual, as this would violate the public

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welfare principle of charity, resulting in unfair charitable assistance. Thus it should engage in charitable assistance not oriented towards a specific individual, while not impairing the freedom of an individual to seek help from society and that of the donor to show loving heart. A different opinion is that it is acceptable for a charitable organization to give planned funds to assist individuals seeking help and when these funds are not enough, the organization can organize a second round of fund raising, but it should set a ceiling on the donated sum and sign an agreement with other members of the recipient’s family stating that the remaining portion of the funds donated should return to the organization and be dealt with according to the donors’ intentions. For example, the “Seedling Medical Aid Program” conducted by Beijing Chunmiao Children’s Aid Foundation, supports 200 ailing children (or orphans) suffering from congenital heart disease annually, providing them RMB 30,000 each, meaning that it needs to raise RMB 6 million as a special fund for aiding recipients. If that funding is not enough, it can raise funds again. If there is still money remaining, it will go back to the foundation’s special fund.31 Taiwan’s practice of punishing online individual donations that violate laws and regulations is inspiring. In September 2013, Yu Xian, a hostess of a television station in Taiwan, raised funds for her daughter via a foundation and made public her bank account number and solicited donations online without getting a fundraising permit. As her behavior was suspected of violating the relevant provisions of Taiwan’s public welfare fundraising regulations, the authorities required her to remove the fundraising information and bank account number. They also required her to return to the donors the over NTD 10 million raised.32 On the whole, though the online donation to an individual displays a donor’s loving heart and also can help the recipient escape distress, using public resources to solicit donations oriented towards a specific beneficiary violates the charitable principle of fairness, while the occurrence of “scam donations” and “gaining donations by cheating” have a negative influence on the charity order. Thus, the practice of making online donations to individuals needs to be standardized by means of legislation, policy, and the planning of charitable organizations.

6.3.2 Tasks and Direction of Charity Assistance Innovation 6.3.2.1

Enhancing Awareness of Charitable Assistance

The development of philanthropy has much to do with the thought and awareness of the public. Correct charity concepts constitute a precondition and important guide for citizens to conduct charitable assistance. In developing charity culture undertakings, the optimization of charity assistance modes and innovation in this regard require efforts to foster citizens’ correct charity awareness and to examine the channels for enhancing their charity awareness. The “Outline of the Twelfth Five-Year Plan 31 32

Zhang (2014). Cairang (2013).

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for National Economic and Social Development of the People’s Republic of China” states clearly that China “will accelerate the development of philanthropy increase the awareness of charity for all of society, proactively foster charitable organizations, and implement and improve preferential tax policies for public donations.” This has made clear the orientation of China’s charity culture and awareness and strengthened the dynamics for nourishing them. Thus, the practice of providing charitable assistance necessitates prioritizing the enhancement of citizens’ charity awareness and fostering citizens’ sense of morality and responsibility through publicity and instruction so that they can be fully aware that charitable assistance, as a non-governmental behavior, needs participation from everyone, thus bringing about the prospect of “everyone donating.” 1.

Strengthen the promotion of charity culture and foster a strong charity atmosphere

With the development of the modern economy and the progress of charities, charity culture has become increasingly abundant and grown broadly, calling for citizens to have a modern awareness of charity featuring equality, fraternity, mutual aid, and sharing. Philanthropy is non-governmental and its activities assisting disadvantaged groups need the extensive participation of all citizens. First, the government should function as a standard maker, advocate for charity culture, and create a favorable legal environment for the growth of the charity culture by making more of an effort to introduce laws and regulations concerned with philanthropy. It should let charitable organizations enjoy more space and freedom to incorporate, develop, and be imbued with non-governmental vitality. Additionally, news media, networks, and other channels should conduct more promotion of charity knowledge and advanced charity workers and their merits, so as to create a charitable atmosphere in civil society. Second, enterprises should enhance their sense of social responsibility, merge charity culture into their development concepts, and strengthen their workers’ awareness of charity participation. At the same time, entrepreneurs should make more efforts, while having a stronger sense of social responsibility, to actively participate in the development of philanthropy and introduce commercial concepts and advanced management expertise to the charitable realm, promoting the innovation and development of charitable assistance modes. Lastly, all citizens’ awareness of charity culture should be elevated by further promotion of charity culture through networks, broadcasting, newspapers, and other media, while more charity activities should be conducted with communities as vectors, so that community members can get a better understanding of charity and take the initiative in participating in charitable assistance, thus developing sound moral and philanthropic views. 2.

Strengthening charity culture education

Nurturing charity culture requires a process and strengthening charity culture education in schools and other educational institutions can help students develop awareness and a sense of social responsibility since childhood. On the one hand, the disciplinary construction of charity studies should be solidified further and content for developing students’ charity awareness should be introduced into courses on ideology and morality, while education on traditional Chinese culture should be blended with

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charity education so that students can accept the concepts of philanthropy gradually. At the same time, students can be organized to join in charitable activities and display their loving hearts in serving disadvantaged groups so that they can feel the pleasure of helping others and develop personal understandings of the meaning of mutual help in society. On the other hand, establishing charity-related majors in colleges and universities, strengthening the cultivation of charitable education talent and the study of charitable theory, and providing a platform for the creation of a charitable cultural atmosphere are all doable.

6.3.2.2

Optimizing the Structure of Charitable Assistance

The optimization of the structure of charitable assistance involves rational allocation of charity resources, improvement of charitable assistance modes, and the establishment of mechanisms for inter- and intra-organizational coordination, with emphasis on promoting a more rational allocation of charitable resources and setting up a multi-level and diversified model for implementing charitable assistance. 1.

More rational allocation of resources among recipients and domains

The effective and rational allocation of charitable resources is the main goal of charitable donation. Donors offering funds, goods, or services to those truly in need through intermediary agencies such as charitable organizations is an important means of implementing social assistance. To solve current problems like the unbalanced distribution and wastage of charitable resources, more efforts should be made to build better information platforms on one hand and adjust the distribution of resources in different domains on the other by taking effective measures to let resources go to those in need, but incapable of self-help and help them out of their difficulties. By improving their websites, charitable organizations allow the public to concretely know how to apply for assistance provided by certain charitable programs. This will facilitate applicants’ access and consultation. At the same time, concrete content and application procedures can be published on platforms citizens are familiar with, such as local newspapers and community bulletin boards. With sufficient information, citizens will find it easy to understand charitable programs and those truly in need of help can apply for assistance. The charitable programs conducted by charitable organizations and their funding flows indicate a diversified distribution of charity resources, but on the whole more attention has been paid to the domains of education, medical treatment, poverty alleviation and disaster relief, while inadequate funds have gone to human services, culture, and environmental protection. This unbalanced distribution calls for charitable organizations to continue to adjust and optimize the allocation of charitable resources in response to the main current social problems.

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Promoting the implementation of multi-level and diversified charitable assistance

The two main tasks of charitable assistance are to provide relief following emergencies and disasters and to offer daily assistance to disadvantaged groups. In fulfilling these two tasks, philanthropy has completed a breakthrough and innovation in the conception of charity from “voluntary giving” to “citizen responsibility,”33 and a shift from giving funds and goods to simply help recipients subsist to assisting their comprehensive improvement in material condition, spirit, psychological state, and development capability. The modes of providing charitable assistance have developed from early spontaneous emergency assistance oriented toward individuals in distress to current assistance for disadvantaged groups mediated through charitable organizations. With the development of modern charity concepts, the content and form of charitable assistance will continue broadening and deepening. The growth of philanthropy requires charitable organizations to make more scientific use of limited resources to offer assistance to beneficiaries based on organizations’ own clearly specified roles and functions and also to meet the differing needs of different groups by performing multi-level assistance. The ultimate objective of charitable assistance is to build a system of “guaranteeing charity,” so as to provide recipients with broader and more comprehensive assistance, thus better making up for the deficiencies in resources and standards of government assistance. An example is Shantou Cunxin Foundation, which has continued to examine its mode of assistance over its long history. It has proposed that, on the basis of promoting recipients’ self-help, more effort should be made to upgrade comprehensive guarantees and to attempt to build a new mutual help and benefit charity model. Aside from offering personal accident insurance, accidental death insurance, and free physical examinations to the recipients, it has also provided more welfare benefits. For instance, in cooperation with Tai’an Hospital, it has introduced the “Rehabilitation Physiotherapy” program. With their membership cards, recipients can get a physiotherapy card worth RMB 300 that allows them to have free physiotherapy in a hospital 10 times.34

6.3.2.3

Improving the Mechanism of Community Based Charitable Assistance

Currently, though community charity has been practiced in China, it is still in its initial stage of growth and needs further development and improvement. The development of community-based charity can be designed and promoted in a comprehensive way based on the problems of communities such as services for the elderly and children, social rectification, and cultural and artistic issues. The assistance and service should be provided in response to the actual needs of community residents, so as to enhance the efficiency of using the charitable funds and promote the community self-governance. 33 34

Liu (2009). Li (2014).

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First, more efforts should be made to promote the development of community foundations. In countries where NPOs have flourished vigorously, such as America, Canada, and Britain, a community foundation is usually defined as a non-taxable and independent charitable foundation supported by the public and serving as a permanent collector of donated funds. It is dedicated to the long-term interest of a specific domain and operates as an endowment agency for the production of donated funds.35 At present, since the development of community foundations in China is in its early stages, different regions can choose different organizational and activity forms suited to their own conditions. They can build small-scale community foundation and help them interface with large-scale foundations. By participating in competing for charitable programs offered by the latter, they can conduct community-based charitable assistance. Alternatively, by attracting public welfare venture investment and getting support from investors, they can conduct charitable programs such as aiding the elderly, handicapped, and poor families, as well as funding community development. They can also build large community foundations with sufficient funds and strength and create sufficient conditions for them to carry out various forms of community service by raising funds and providing funding and technical support to grassroots charity foundations within communities. Since it is easy for the donors to see the effects of charitable donations, this is more conducive to promoting the development of community-based charitable assistance programs. Additionally, community foundations can also serve as managerial and executive agencies for public welfare trust funds,36 which manage and fund according to the intentions of the entrusting party. Second, the community-based charity supermarket system should be established. The earliest charity supermarket in China was founded in Shanghai in 2003 and, following that, charity supermarkets were set up one after the other in such cities as Wuhan, Guangzhou, Jinan, Suzhou, and Qingdao. Charity supermarkets represent a managerial and operational model based on the supermarket. They accept voluntary donations given by the general public without compensation in return and are social service agencies designed to provide material aid and voluntary services to people experiencing difficulties. As pointed out in “Opinion on Strengthening and Improving the Construction of Charity Supermarkets” issued by China’s Ministry of Civil Affairs, the main task for strengthening and improving the construction of charity supermarkets includes bettering their operational mechanism and introducing social agents as their operators.37 Thus, operating charity supermarkets through community charitable organizations is at present an important aspect of developing communitybased charity. To this end, it is necessary, taking into consideration the actual conditions and basic features of developing the charity undertaking in communities, to choose a suitable form of charity supermarkets that directly serves the local people experiencing difficulties, with offering material assistance (mainly living necessities) as main function. The charity supermarkets should be operated strictly according 35

Xu (2011). Y. Xu, “Eight Types of Foundations in China”, http://news.foundationcenter.org.cn (2014/11/28). 37 Ministry of Civil Affairs of China, “Opinion on Strengthening and Improving the Construction of Charity Supermarkets”, on December 31, 2014. 36

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to their charitable purpose. It is important for them to adhere to their operational orientation to socialization. They should advance their work of processing and recycling donated goods, including used clothes and articles for daily use. Additionally, regarding the current lack of working funds, community charity supermarkets should, making full use of support from government fiscal funds, carry out fundraising activities and set up charity volunteer stations to mobilize local community residents to actively participate in charitable donation, thus supplying sufficient funding sources for their operations.

6.3.2.4

Raising the Specialization of Charitable Assistance

The training of public welfare specialists is an important condition for the development of charities and a prerequisite charitable assistance modes continuing to advance with the times. Specialized workers are always important to the development of a sector and charity is no exception. Fundraising specialists, service specialists, planning specialists, and volunteer specialists are critical to all aspects of philanthropy. 1.

Fortifying specialized teams of charity workers

Charitable organizations should gradually put a personnel appointment system into practice by deepening the reform of their personnel management system and forming internal competitive mechanisms to stimulate workers’ consciousness of competition and enthusiasm to compete. They should emphasize personnel training at regular intervals and help staff build professional concepts and awareness, deep knowledge of charity, and competence in conducting charity. The training should make full use of available techniques and resources, while being oriented toward the demands of the charitable domain, and aim to elevate the trainees’ professional expertise. For example, with the introduction of commercial concepts into the charity sector, more effort should be made to nurture high-end talents. In 2013, China Foundation Center Network and the American “Give2Asia” jointly offered a training program entitled “Secretary-Generals’ Required Curriculum,” which aimed to interface between charity and high-end professionals. With the theme of “effectiveness and innovation,” the program opened a series of management training courses for those at the foundation secretary general level and above, as to meet the needs of foundations for high-level management specialists.38 In the long run, relevant majors for high-level training in public welfare charity management should be introduced to universities in order to nurture specialists in the charity undertaking and reserve follow-up talent for the charity sector. For example, in 2013 Sun Yat-sen University held a professional master’s degree course for a class of students specializing in public welfare charity that systematically trained them in charity management.

38

Wang (2014b: 90).

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Promoting the professionalization of charity work

The professionalization of charity work refers to turning charitable services into full-time posts. This requires using a certain method to gradually enable charitable professionals to have a common knowledge structure for professional social service and a unique charitable way of thinking, with a strong sense of social justice and service beliefs, as well as professional traditions and a professional temperament belonging only to the group.39 As pointed out by “Survey Report on the Status Quo of Talents in the Public Welfare Sector of China (2014),” at present, it is a common for workers in charity organizations to face the problem of a heavy workload with low remuneration, while ratio of those quitting their jobs is relatively high. Of the reasons for leaving, opposition from family members accounts for 31.4% and low wages for 20%.40 Given this, constant effort should be made to improve the internal human resource systems of charitable organizations, strengthen professional training, and, by raising charity workers’ remuneration and enhancing their level of social identification, lift charity workers’ professional status and sense of belonging, thus both enlarging and fortifying the philanthropic team.

6.3.3 Charitable Assistance in Three Foreign Countries — Experience and Lessons 6.3.3.1

The American Model of Non-Governmental Domination of Charitable Assistance

The United States of America is relatively developed in philanthropy and the earliest American charitable organizations were set up before the country was founded. The development of American charities depends mainly on non-governmental forces and country’s charitable mode is one of non-government domination. First, the philanthropic atmosphere of the American society is dense and American religious culture constitutes the important ideological basis for the flourishing of the charitable assistance in America, where individuals are keen on daily charitable donations. This has developed a favorable environment for participation in charity by all Americans. As indicated by a survey, as early as 2006, America’s charitable donations amounted to USD 295 billion, or USD 1620 per capita.41 According to former American President Franklin Roosevelt, the rich offering assistance to the poor is not a matter of charity but rather of social duty, for the rich also benefit from a stable society.42 His idea has become an important guiding principle of American entrepreneurs who make charitable donations. Many philanthropists in the United 39

Yang (2012: 37). PRC Ministry of Civil Affairs Research Institution (2014). 41 Wan (2008). 42 Zi (2006). 40

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States have attached great importance to the development of community foundations and promoted the performance of community-based charity programs through charitable funds. Establishing foundations has become one of the main ways to operate charities in America and foundations have served as the major intermediary agency by which American citizens pump their individual funds into public welfare charities. In 2007, America had 560,000 foundations, with total assets of USD 500 billion, of which private foundations and corporate foundations, both of which are non-public, accounted for 85% and 5% respectively. The total percentage of public community foundations and operational foundations is less than 1%.43 The American government pursues preferential tax policies for charitable organizations by enforcing special and independent charity laws. Second, the American “Food Bank,” which appeared in late 1960s, has become an important mode of providing charitable assistance. It offers assistance to Americans with difficulties in life by adjusting the use of food resources. Drawing on the concept of a bank, companies and individuals with abundant resources donate food products to the food storage center of a food bank and the government and the food bank itself also bolster the materials stored by buying resources. Then, the donated food products are given to the recipients via a charitable organization, thus adjusting the use of resources.44 America also has set up a network system center to manage food banks and, through the interaction among food banks, mobilizes the entire nation to join charitable activities. “Feeding America” (FA) is a national network center which manages over 200 food banks that supply over 3 billion pounds of food to 37million low-income Americans, of whom children and the elderly account for 38% and 8% respectively.45 Additionally, America has a large team of volunteers, with over one million volunteer organizations who work in parks, hospitals, service centers for the elderly, and homeless shelters. According to the statistics issued by US Department of Labor, around 64.5 million Americans, accounting for 28.8% of the population, volunteered from September 2003 to September 2004. In both time and social value provided, American citizens’ contribution to the country’s charities is inestimable.46

6.3.3.2

British Model of Charitable Assistance – Official Non-Official Cooperation

Charitable organizations have a long history in Britain. British charitable foundations cooperate with the government on an equal footing. Charitable assistance is operated through a model based on official and non-official cooperation, and, by enforcing laws and pursuing preferential tax policies, the government supervises 43

Mo et al. (2010: 251). Xu (2009). 45 Author unknown, “Feeding America: American National Center of Food Banks”, China Development Brief , on August 13, 2012. 46 Xu (2005: 311). 44

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and guides the operations of charitable organizations. However, charitable organizations have maintained their independence and non-governmental status. British charitable organizations have a broad scope of operations, covering many domains such as poverty relief, education, religion, public health and medical care, community and social welfare, environmental protection, amateur sports, and housing for the homeless. They can be divided according to their different domains into humanitarian, social association, specialized, and animal protection types. Additionally, British social enterprises introduce their development concepts into the development of communities and the society at large by forming and developing charitable organizations. This has promoted the growth of community-based charitable organizations. “Charity shop” embodies the main operational model and fundraising means of modern British philanthropy. Britain’s charity shops, a type of non-profit retail agency organized, operated, and managed by governmental or non-governmental charitable organizations, came into being in a modern sense during the 1940s. They sell food, clothes, and books, among other items, at a low price to help disadvantaged groups and maintain social stability. At present, Britain has over 9000 charity shops and has set up the Charity Retail Association (CRA) which provides information on the country’s charitable shops.47 Oxfam, one of the biggest charitable organizations in Britain, has built up a complete network system and opened 750 domestic charity shops, with branch agencies in other countries. Over time, British charity shops have developed from simply providing material assistance to conducting social assistance while incorporating business and environmental protection concepts. Thus, they can mobilize social forces to assist disadvantaged groups and at the same time save resources and reduce pollution, enhancing the social benefits from their charitable assistance.

6.3.3.3

Inspiration to China

Analyzing the dominant charitable assistance models of the United States and Britain provides the following insights. First, it is important to create a favorable philanthropic atmosphere and foster awareness of charitable assistance. Traditional religious culture is the foundation developing charity in both the United States and Britain and in both countries citizens participate in charitable activities under the guidance of a philanthropic doctrine advocated by religion. The doctrine serves as the internal dynamic behind charitable behavior. Thus, China needs to carry forward the traditional charity culture of Chinese nation and enhance its citizens’ awareness of charity. Second, legislation on charity supplies important guarantees for carrying out charitable assistance. Despite different charity development models, the United States and Britain both clearly define charitable organizations and their activities through laws, supplying legal guarantees for the performance of charitable assistance. China should, as soon as possible, introduce laws that define charitable organizations and their activities clearly and that stimulate and standardize charitable assistance by 47

Wikipedia (2014).

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enforcing preferential tax policies. Lastly, the relationship between the government and charitable organizations should be handled properly. Britain defines charitable organizations through laws that provide for their public welfare purpose and their non-governmentality and independence. This is a cooperative relationship with the government and the charitable organizations on an equal footing. In America, which has made great effort to develop non-governmental charity, non-governmental foundations are the main force driving charities ahead. China should, taking into account its actual conditions, gradually guide the autonomous development of its charitable organizations so they can better display their non-governmental status and independence. In this process the government should be a supervisor and guide, striving to introduce new commercial concepts into philanthropy, elevate the social benefit from charitable assistance, and encourage all citizens to participate in philanthropy.

6.4 Summary and Discussion Providing charitable assistance is an important step in performing charity and the development and improvement of this mechanism is important to realizing the objective of charity. Raising the efficiency with which charitable funds are used contributes to enhancing the credibility of charitable organizations, which can provide a guarantee for the smooth performance of charitable donations. The optimization and innovation of charity assistance methods can be analyzed from two aspects: the type of assistance and the nature of assistance. As far as the type of assistance is concerned, the traditional mode of donating funds and materials directly should be transformed in the direction of modes which emphasize protecting beneficiaries’ rights and fostering their capability for selfdevelopment. At present, China’s charitable assistance is offered in the form of giving funds and materials to recipients, while the proportion of services, psychological guidance, and training for capability development has been low. For example, in the domain of disaster relief, assistance to disaster-struck areas are mainly materials and construction aid, while services like psychological guidance for disaster victims are scarce. Thus, China needs to increase the proportion of assistance covering rights and capability development and to constantly optimize the modes of providing assistance oriented toward developing recipients’ self-help capabilities. Regarding the nature of assistance, traditional assistance tinted with strong administrative color should be transformed in the direction of the non-governmental assistance, which is more flexible and autonomous. In recent years, along with the government’s efforts to adjust relevant policies and the development of networks and information technology, non-governmental content and autonomy have been growing as part of charitable assistance. For example, the introduction of commercial concepts into some charity programs, the construction of a community charity mechanism represented by Shenzhen’s experience, the innovation and transformation of China Charities Aid Foundation for Children and other foundations, all of which give new impetus to reforming the currently prevailing charitable assistance mode. China

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can promote the optimization of the modes and efficiency of charitable assistance by making more effort to nurture specialized talent and develop community-based charity. Through the analysis of the characteristics of charitable funds donated, it is found that charitable organizations based on foundations are the mainstay and play a key leading role in the assistance process. Thus, charitable organizations should improve their mode of giving assistance oriented toward education and poverty alleviation, the two domains which society has paid the most attention to. Aside from the current mode of offering material assistance to recipients directly, more effort should be made to increase recipients’ self-development capabilities. For example, offering psychological guidance to students going through compulsory education to help them cultivate proper values and outlooks on life and conducting skills training of poor people to foster their ability to subsist and develop, as well as to increase their job opportunities. The allocation of charitable resources in different domains should be better oriented toward social problems calling urgently for solutions at present. More measures should be taken to promote the diversified development of charitable programs and to reform assistance modes so that they can be better adapted to the problems of different domains. For example, the present model of imposing uniformity in all cases in the domain of medical aid should be reformed to avoid a mechanical means of providing different cases with funds and aid according to the same standards. In fact, it is due to assistance providers’ failure to consider the concrete conditions of different patients that the absurd phenomenon of “lacking not money but patients” occurs. Charitable organizations should design different assistance programs to provide different medical assistance to recipients suffering from different diseases. On the basis of investigation, they should know the medical fees and services required for different cases and ensure scientific screening of the targeted recipients of medical aid, particularly in impoverished mountainous areas, which are remote, ill-informed, and inconvenient to access, preventing the occurrence of “some sad stories getting sadder” caused by the unbalanced allocation of charitable resources. Additionally the government should introduce laws and regulations as soon as possible to supply a legal guarantee to ensure the smooth performance of charitable assistance and make a clear and rigorous definition of charitable organizations, so as to ensure their legality. By pursuing preferential tax policies and setting up a scientific system for supervision and regulation, it can create a legal environment favorable for charitable organizations conducting assistance. As charitable donation is the source from which philanthropy lives, so charitable assistance is the fundamental basis on which philanthropy grows.48 The process of providing charitable assistance, that is to say the process of using funds donated, is as an important guarantee for realizing the public welfare purpose of charity. Thus, the development of a sound charitable assistance mechanism is a necessary requirement for the development and improvement of the charity donation mechanism. This calls for more efforts to optimize the existing modes of charitable assistance and to 48

Xu (2010: 183).

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innovate new ones so as to ensure the safe, efficient, and reasonable use of donated funds, thus supplying a sufficient impetus for charitable donation.

References Cairang, D. (2013, September 22). Inspiration from Taiwan’s practice of punishing online fundraising cases. Southern Urban Daily. Feng, P., Song, Z. (2012). Report on the Charitable Services in China. In T. Yang (Ed.), Annual Report on the Development of Charities in China (2012). Social Sciences Academic Press. Gan, Q., & Liu, X. (2014, November 6). Some charitable programs lack not money but patients: A survey of unbalanced charitable assistance allocation. Xinhuanet. Retrieved from http://news. sina.com.cn/c/2014-11-06/082531103043.shtml Li, Y. (2014, November 20). Building a carrier of mutual benefit guaranteeing charity. Shantou Daily. Liu, W. (2009). Reflection and prospect: China’s sixty years of social charitable assistance. Academic Forum, 12. Liu, Y. (2011). Annual report on the charitable assistances in China Liu, Y., & Li, Y. (2012). Annual report on the charitable assistances in China (2012). In T. Yang (Ed.), Annual report on the development of charities in China (2012). Social Sciences Academic Press. Liu, Z. (2013). Non-public foundations: Mission and responsibility. In T. Yang (Ed.), Annual report on China’s philanthropy development (2012). Social Sciences Academic Press. Mo, W., Zou, P., & Song, L. (2010). The thought, practice, and development of Chinese charities. People’s Publishing House. Peng, D. (2012). Working conference on 2011 annual inspection of foundations opened in Beijing. Society and Public Welfare, 4. PRC Ministry of Civil Affairs. (2013). 2013 China civil affairs yearbook. China Statistics Press. PRC Ministry of Civil Affairs Research Institution. (2014, December 9). Ten major features of China’s charities in 2014. http://www.charity.gov.cn/ PRC Standing Committee of NPC. (1999, September 1). Law of the People’s Republic of China on donation for public welfare undertakings. PRC State Council. (2014, December 18). Guiding opinions for promoting the sound development of the charity undertakings. Salamon, L. M., et al. (2004). Global civil society: Dimensions of the non-profit sector. Kumarian Press. Song, Z. (2012). Annual report on the charitable donations in China (2012–2013). In T. Yang (Ed.), Annual report on the development of charities in China (2014). Social Sciences Academic Press. Song, Z. (2014). Annual report on the charitable donations in China (2012–2013). In T. Yang (Ed.), Annual report on the development of charities in China (2014). Social Sciences Academic Press. Wan, D. (2008). The tendency of philanthropy to be individualized. Yangtze, 4. Wang, Z. (2014a, July 17). How should entrepreneurs do when charity permeates culture. Baotou Evening News. Wang, Z. (2014b). Modern charity and social governance. Social Science Academic Press. Wikipedia. (2014, December 18). Charity shop. Retrieved from http://en.wikipedia.org/wiki/Cha rity_shop. Xu, F. (2009). “Food bank” brings about the American pattern of giving assistances. Disaster Reduction in China, 10. Xu, L. (Ed.). (2005). Studies of the charity development in China. China Society Press. Xu, L. (2014, April 1). Shenzhen to set up 50–100 community foundations in three years. Southern Urban Daily.

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Xu, Y. (2010). On foundations: a study of the Chinese foundations in transformation. China Society Press. Xu, Y. (2011). On the influence of American community foundations on the development of communities. Industrial & Science Tribune, 17. Xu, Y. (2012). Transformational reform of public foundations: Difficulty and innovation. In T. Yang (Ed.), Annual report on China’s philanthropy development (p. 2012). Social Sciences Academic Press. Xu, Y. (2014, November 28). Eight types of foundations in China. Retrieved from http://news.fou ndationcenter.org.cn. Yang, T. (2002, April 1). Defining the periods in the development of NPOs. China Sociology Network. Retrieved from http://www.sociology.cass.cn. Yang, T. (Ed.). (2012). Report of the development of philanthropy in China (2012). Social Sciences Academic Press. Yang, T. (Ed.) (2015). Annual report on China’s philanthropy development (2014). Social Sciences Academic Press. Zhang, M. (2014, November 25). How does an public welfare organization get involved in “individual assistance?” China Philanthropy Times. Zhu, J. (2015). From planned charities to citizens’ public welfare. In T. Yang (Ed.), Annual report on China’s philanthropy development (p. 2014). Social Sciences Academic Press. Zi, Z. (2006). The destiny of wealth: An analysis of American philanthropic foundation. Shanghai People’s Publishing House.

Chapter 7

Analysis of Developmental Trends in China’s Charitable Donation System Gongjing Gao and Jianguo Gao

As China entered the new millennium, its system of philanthropy entered a new stage of rapid development. Positive changes in this system have been the inevitable result of social developments and reforms occurring across the country. Drawing on the experiences of philanthropic systems in developed countries, this chapter will explore developmental trends for the general pattern of donation in China, as well as major sub-mechanisms in the overall approach to charitable donation over recent years. These sub-mechanisms include the systems of organization and management, monitoring and transparency, and public and private fundraising.

7.1 Development Trends in the General Pattern of Donation Generally speaking, the modern pattern of charitable donation is characterized by the following three features: in quantitative terms, the level of charitable giving of a country broadly aligns with the overall level of its economic and social development, and a relatively stable proportional relationship is maintained between the two; in terms of donors, individuals or families make up the main group of donors, with charity foundations as the second most important group, and enterprises as a supplementary group; lastly, the recipients of donations are varied, and there has been a gradual shift from the traditional focus on relief towards a more diversified The original version of this chapter was revised: Prof. Gongjing Gao’s name has been added as the author. The correction to this chapter is available at https://doi.org/10.1007/978-981-16-6194-5_8 G. Gao (B) · J. Gao (B) Shandong University, Jinan, China e-mail: [email protected] J. Gao e-mail: [email protected] © Social Sciences Academic Press 2022, corrected publication 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_7

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Fig. 7.1 Annual figures for charitable donations in China (1998–2012)

approach directed at development. Contrastingly, the following features are salient in the traditional pattern of charitable giving: in terms of both absolute quantity and relative proportion, the charitable donation level of a country is on the low side and is clearly out of alignment with its overall economic and social development; donors are imbalanced, due to, as of now, inadequate fostering of individual awareness on the issue of charitable giving; the recipients of donations are mostly the impoverished or victims of unexpected disasters, and donations to them are mainly one-off forms of relief, with little going to the diverse array of development-oriented fields such as science, education, culture, art, medical treatment, and environmental protection. Currently, China’s approach to charitable donation is at the critical stage of transition from the traditional to the modern pattern, clearly displaying transitional features in terms of the three aforementioned dimensions.

7.1.1 A Rapid Growth in Philanthropy, with the Possibility of Much Greater Future Development Since the late 1990s, and particularly since the new millennium, China has seen a rapid growth in charitable donations. Between 1998 and 2012, the annual growth rate reached 26.74% (see Fig. 7.1). The year 2008 represented a turning point, with the Wenchuan earthquake disaster stimulating greater awareness among Chinese citizens of the importance of donating to charity, as evidenced by the amount of donations that year totaling close to RMB 50 billion, an increase of 260.9% over 2007. In 2009, the total amount of donations surpassed RMB 50 billion, while the figure for 2010 approached RMB 60 billion. By 2011 and 2012, though the effect of the Wenchuan earthquake on charitable donations had diminished, the total amount donated still reached RMB 49.01 billion and 57.88 billion respectively.1 1

The “amount donated” includes only donated sums of money, not the converted totals for donated goods. For details, see “Statistics Bulletin on Social Services Development, 2009–2012,” issued by the Chinese Ministry of Civil Affairs. http://www.mca.gov.cn/article/zwgk/tjsj/. (2014/11/10).

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“Statistics Bulletin on Civil Administration Development, 1998–2009” and “Statistics Bulletin on Social Services Development, 2010–2012,” issued by the Chinese Ministry of Civil Affairs. http://cws.mca.gov.cn/article/tjbg.(2014/11/10). Over the same period, China has taken initial steps to establish and improve a network to handle social donations. In 2002, 21,000 sites for the regular collection of such donations were set up across the country. Following the SARS outbreak, civil affairs departments increased their efforts to transform donation-giving into a regular and standardized practice using diversified channels. In 2004, 1842 charity supermarkets were built, and by the end of that year, 32,000 sites, including 9,053 charity supermarkets, had been set up across the country.2 The building of this community network, the charity supermarkets in particular, has encouraged citizens to make routine donations to charity because it is now more practicable to sell donated goods and thus to raise funds to assist those in need. The provision of this new and unified system for deploying donated goods means poor families now have a more convenient channel for accessing social services.3 There are still a number of obstacles to the streamlining of this network, some of them perhaps merely superficial. Ongoing exploration and development should, however, lead to improvements to the basic model, as to more effectively encourage members of the public to donate to charity. Despite the rapid growth in charitable donations, and the ever improving donation network, the overall situation is not keeping pace with China’s economic and social development. Experience in Western developed countries indicates that the stable proportion of charitable donations should be over 2% of a country’s GDP. For example, between 1929 and 1959, the average annual total from only private charitable donations in the United States accounted for 2.1% of that country’s GDP, and the percentage reached 2.5% in 1997.4 Since the beginning of the twenty-first century, the average annual total of charitable donations in the US has been stable at 2.2% of GDP,5 maintaining, on the whole, proportional alignment with US economic and social development. In comparison, China’s GDP in 2012 reached RMB 51,947 billion,6 while in the same year the total volume of charitable donations was about RMB 57.88 billion,7 accounting for only 0.11% of GDP.8 Clearly, that low percentage is seriously out of line with China’s rapid economic and social development. 2

2002–2012 annual statistics bulletins on civil administration development, issued by the Chinese Ministry of Civil Affairs. For the original data, see http://cws.mca.gov.cn/article/tjbg/.(2014/09/08). 3 Gao (2006: 121). 4 Wang (2011: 114). 5 American Association of Fundraising Counsel (2014). 6 State Statistics Bureau of China. “Report on the Final Results of Verifying the 2012 GDP of China.” http://www.stats.gov.cn/tjsj/zxfb/201401/t20140108_496941.html. (2014/9/8). 7 Chinese Ministry of Civil Affairs. “Statistics Bulletin of Social Services Development in China, 2012.” http://cws.mca.gov.cn/article/tjbg. (2014/11/10). 8 “In 2012, the total amount of funds and materials China received from donors at home and abroad was about RMB 81.7 billion, accounting for 0.16% of China’s 2012 GDP, and representing a per capita donation of RMB 60.4.” See China Charity Information Center, “2012 Report on Charitable Donations in China.” (http://www.charity.gov.cn/fsm/sites/newmain/preview1.jsp?Col umnID=362&TID=20130925084543284400468). (2014/11/10). Although statistical specifications

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Having said that, however, the relative gap in charitable donations between China and developed countries has been narrowing, and a more positive trend has been evident. Measured by dollar amount, the United States is the most philanthropic nation in the world, with donations in 2005 totaling USD 260.28 billion,9 or about RMB 2,154.21 trillion (converted by the annual median exchange rate of RMB to USD for that year).10 This represents 357 times the total amount of charitable donations in China for the same year. However, 2011 saw a sharp diminishing of the gap to 25 times the amount, and in 2013 the figure dropped even further—to 21 times China’s total.11 Charitable donations in China are showing tremendous progress, both in terms of domestic expansion and also relative to Western developed countries, a favorable trend that will doubtless continue.

7.1.2 The Modern Donor Pattern in China is in a Developmental Stage China is in the early stages of moving away from a traditional pattern of charitable donorship towards a more modern one, as evidenced by the rapid growth in individuals and enterprises as donors, the breaking of the dominant pattern of traditional foundations, and the burgeoning of private foundations. The most salient feature of the modern pattern of philanthropy is that donations by individuals and families constitute the overwhelming majority of all charitable donations. Over a lengthy period, due to institutional inertia, a relatively small middle class, and a low level of awareness, philanthropy in China was strongly guided by government. The government in turn relied excessively on administrative or semi-administrative means to pressure enterprises and public institutions into donating to charity and failed to foster the capacity and awareness of citizens to freely participate in the act of charitable giving. As a result, a pattern emerged whereby donations from enterprises and public institutions formed the mainstay, while those from individuals and families were secondary, and bequests and charitable foundations were almost negligible. In contrast, the salient characteristic of modern philanthropy should be that donations from individuals and families form the major part of donations, those from bequests and foundations constitute a minor part, and those from enterprises are supplementary. may vary, the proportion of the total amount of charitable donations relative to GDP is still below 0.2% in China, lower than that of any western developed country. 9 American Association of Fundraising Counsel (2006). 10 The 2005 medial exchange rate of the RMB to the USD was 827.65. See State Administration of Foreign Exchange of China, “Table of RMB Medial Exchange Rate.” http://www.safe.gov.cn/wps/ portal/sy/tjsj_hlzjj_inquire. (2014/11/10). 11 It should be noted that the pronounced narrowing of this gap was brought about only partly by the tremendous growth in the amount of charitable donations after 2008. A second factor was the significant appreciation of the RMB over the same period.

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Table 7.1 Statistical data of charitable donation patterns in the USA, 1968–2007 Unit % Years

Individuals

Bequests

1968–1972

77.40

10.00

8.50

4.10

1973–1977

81.90

7.30

6.60

4.20

1978–1982

83.10

6.60

5.50

4.80

1983–1987

80.70

6.70

6.40

6.10

1988–1992

79.90

7.40

7.20

5.50

1993–1997

77.20

8.80

8.40

5.60

1998–2002

75.90

8.50

10.80

4.80

2003–2007

75.90

7.50

11.60

5.00

Mean value

79.00

7.85

8.13

5.01

1.1625

2.1546

0.6917

Standard deviation

2.7759

Foundations

Enterprises

Source American Association of Fundraising Counsel (2008)

Taking the United States, with its relatively developed system of philanthropy, as an example, its four main sources of donations are individuals, bequests, foundations and enterprises, establishing a stable contemporary charitable donation pattern. As statistics reveal (see Table 7.1), in the 1968–2007 period (with 5 years as the unit of statistical analysis), individual donations comprise by far the largest proportion, at around a fairly stable three quarters of the total. The second biggest share is from foundations, with an average of 8.13%, a figure that has continued to increase over the past ten years, now maintaining a steady 10% share. Next is the share of bequests, accounting for about 8%. The smallest share is that of enterprise donations, which for many years has only been about 5%. In 2007, for example, charitable donations reached a record high of USD 306.39 billion, of which USD 229.03 billion (74.8%) were donations from individuals, 23.15 billion (7.6%) from bequests, 38.52 billion (12.6%) from foundations, and 15.69 billion (5.1%) from enterprises. If donations from bequests and family foundations are placed in the ‘individual’ category, then that category actually accounts for 88% of the total in that year.12 The overwhelming majority of individuals (or families) in the US are charity-conscious and make donations and the average amount donated continues to grow. In 1996, 68.5% of American families gave charitable donations13 , while in 2000, that proportion surpassed 89%. Since the beginning of the twenty-first century, more than two-thirds of American families have made annual donations.14 In 1998, the average donation per family in the United States was USD69615 . As noted above, the amount donated by individuals reached USD229.03 billion by 2007, a 12

American Association of Fundraising Counsel (2008). Hodgkinson and Weitzman (1996). 14 Mesch et al. (2006: 565–586). 15 Schervish and Havens (1998: 237–242). 13

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2.7% increase over 2006. The average amount donated per family was approximately USD 2,000.16 In China, the notion of voluntary giving and the ability of individuals to donate are still significantly underdeveloped when compared with developed Western countries. In 2006, according to estimates by scholars, the per capita charitable donation of Chinese citizens was about RMB 1.7.17 Of course, one needs to keep in mind that it is only from the late 1970s, less than four decades ago, when the Chinese government adopted its economic reform and opening up policies, that a modern sensibility regarding philanthropy began to evolve in China, and only a mere two decades or so ago when China’s philanthropic system began to really take off. It requires a considerable length of time for a modern system of charitable donation to develop, as evidenced by the United States, where it took more than a hundred years for such a system to become well-established. Over the past ten years, however, the pattern of charitable donors in China has been undergoing significant positive changes. First, individuals and enterprises are playing an increasingly important role as donors. In 2005 charitable donations amounted to more than RMB 5 billion and only two years later, that figure surpassed RMB 10 billion. The impetus for this growth can be attributed mainly to an awakening of philanthropic consciousness and the enhanced ability on the part of Chinese citizens to give to charity. According to incomplete statistics, “In 2007, small donations given mainly by ordinary individuals increased, totaling around RMB 3.17 billion. There were more than 200 large donations of over RMB 10 million each made by individual donors or fundraising projects, with more than 15 such donations per month. Over the year, 13 individuals or units each gave RMB 100 million, amounting to a total of RMB 2.003 billion.”18 Compared with the donations of the rich and powerful, the amounts given by ordinary individuals are of course relatively small, but, in a modern system of philanthropy, the latter will come to occupy an important position. For example, from 2001 to 2007, about half of the donations contributed by individuals in the United States came from wealthy families with a yearly income of USD 100,000 and above, and the other half came from families with a yearly income below USD 100,000.19 In 2007, 49% of donations by American individuals came from the 90% of families with a yearly income below USD 100,000, and the remaining 51%, from the 10% of families with a yearly income over USD100,000.20 Therefore, as far as the contribution relative to the ability to give is concerned, the lower income stratum plays a significant philanthropic role. In the same way that the number of donations by individuals has increased in China, donations by Chinese enterprises have also entered a period of rapid growth. 16

Hrywna (2008: 18). Liu et al. (2006: 41). 18 Charity Coordination Office of the Chinese Ministry of Civil Affairs, and China Charity Information Center. “Analysis Report on 2007 Charitable Donations in China.” (http://www.donation. gov.cn/jsp/). (2013/12/1). 19 Gittell and Edinaldo (2006: 721–736). 20 American Association of Fundraising Counsel (2008). 17

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In particular, following the 2008 Wenchuan earthquake, most of the country’s wellknown enterprises made large donations, many of them above RMB 10 million. As provided by the 2008 “Corporation Income Tax Law,” the amount deductible by an enterprise on the basis of its charitable giving was raised from 3% of its taxable income to 12% of its annual profit, resulting in a substantial increase in donations by enterprises. In 2013, for example, charitable donations given by enterprises accounted for around 70% of all donations, representing an 11.63% increase over 2012. 90% of enterprise donations were contributed by private and foreign-owned enterprises. The growth in donations from foreign-owned enterprises was particularly impressive—up nearly 30% from 2012 and accounting for over 40% of total enterprise donations.21 It can be predicted that, as China’s modern pattern of charity becomes better established, donations from enterprises and from individuals will continue to grow in their own way for some time to come, but, also that over time, the structural imbalance between the two will gradually lessen. Second, the conventional pattern of China’s philanthropic foundations has been broken, and the number of private foundations has begun to rise. Over the last thirty years or so since China’s first public welfare foundation, “China Children and Teenagers’ Fund” was established in July 1981, the system of philanthropy in China has been dominated by public foundations, most of them operating on a national scale. With the rapid rise of China’s economy and the development of various social arenas, however, the ways in which non-governmental players can participate in philanthropic activities have diversified. Individuals in some companies and enterprises, including the first generation of successful entrepreneurs since economic reforms were introduced, began to nurture philanthropic aspirations and a desire to establish programs for the public good. Their call for an independent and professional charity system laid important social and economic groundwork for the growth of China’s private foundations. In 2004, the Chinese government promulgated its “Regulations on the Administration of Foundations,” which encouraged both individuals and legal entities to establish foundations. This provided the institutional impetus and official guarantee for the break-up of the traditional unitary pattern of public fundraising foundations in China. In 2005, official approval was given for the establishment of the “Heungkong Charitable Foundation,” the first national private foundation in China.22 Between 2005 and 2012, the number of private philanthropic foundations grew rapidly across the country, from 254 to 1686. This annual growth rate of 27.56% was much higher than the 11.79% growth of their public counterparts. In the same 21

China Charity Information Center, “2013 Report on China’s Charitable Donations” (http:// www.charity.gov.cn/fsm/sites/newmain/preview1.jsp?ColumnID=362&TID=201309250845432 84400468). (2014/5/25). 22 The “Heungkong Charitable Foundation” was established on June 14, 2005 by the Heungkong Group with a contribution of RMB 50 million. Its founder is Zhai Meiqing, president of the Group. It is the first national private foundation in China, with Approval No. 1001, assigned by the Chinese Ministry of Civil Affairs. Its purpose is to advance the spirit of humanitarianism, assist the needy, and commit itself to the cause of social welfare. Its funds go to assisting education, poverty alleviation, disaster relief, etc. For details, see “http://www.hkf.org.cn/”. (2012/5/6).

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Table 7.2 Expansion of foundations in China, 2003–2012 a Year Number of foundations

Annual growth rate (%)

Public Private National b Local Total c Public Private National Local Total 2012 1316

1686

199

2830

3029

8.05

23.07

8.74

16.41

15.88

2011 1218

1370

183

2431

2614

10.63

25.92

18.83

18.82

18.82

2010 1101

1088

154

2046

2200

7.00

36.00

4.05

20.71

19.37

2009 1029

800

148

1695

1843

9.12

24.42

11.28

15.78

15.40

2008 943

643

133

1464

1597

4.31

47.48

24.30

18.73

19.18

2007 904

436

107

1233

1340

19.10

24.93

8.08

17.99

17.13

2006 759

349

99

1045

1144

5.27

37.40

7.61

18.35

17.33

2005 721

254

92

883

975

–

–

9.52

9.28

2004 –

–

84

808

892

–

–

–

–

−6.50

2003 –

–

–

–

954

–

–

–

–

–

9.30

Note a This table is based on the original data (with some adjustments) provided in the 2003–2012 annual statistical bulletins on civil administration development, issued by the Chinese Ministry of Civil Affairs from 2003 to 2012. For the original data for each year from 2004 to 2012, see “Statistical Bulletin on Civil Administration Development” issued in that year. The data for 2003 is available in the “2004 Statistical Bulletin on Civil Administration Development.” For all relevant data, see http://cws.mca.gov.cn/article/tjbg/ b The term “national foundation” refers to a foundation which has been registered with the Chinese Ministry of Civil Affairs. It is sometimes also informally referred to as a national level foundation or a central level foundation. The term “local foundation” refers to a foundation which has been registered at the local level of civil administration c The totals of 2010, 2011 and 2012 include, respectively, 11, 26, and 19 representative institutions of overseas foundations. The total for 2012 also includes 8 foreign-associated foundations

period, the proportion of private foundations went from 26.05 to 55.66%. In 2011, China’s private foundations outnumbered public foundations for the first time, and a year later, the number of the former was 1.28 times that of the latter, whereas in 2005 they had constituted only 35% of the latter (see Table 7.2). The main receivers and channels of donations in China in 2013 were foundations and charitable federations, which received seven tenths of the total amount. Of the donations to foundations, more went to non-public foundations than public ones.23 The growth of private foundations in China is mainly attributable to the burgeoning of local foundations. As shown by a comparison between the development of national and local foundations, the latter enjoyed an annual average growth rate of 31.28% from 2004 to 2012, much higher than the 17.11% growth rate of the former (see Table 7.2). In spite of their rapid growth in recent years, it must be noted that, compared with their equivalents in developed countries, China’s private foundations lag far behind in their absolute and relative numbers and donated assets. For example, in the US, between 1996 and 2006, around 31,000 new foundations were established, and nearly 23

China Charity Information Center, “2013 Report on Charitable Donations in China.” (http:// www.charity.gov.cn/fsm/sites/newmain/preview1.jsp?ColumnID=362&TID=201309250845432 84400468). (2013/9/25).

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90% of that growth was in the form of non-public foundations.24 In 2007, the US had more than 72,000 foundations, with a total asset value of up to USD 670 billion and total donations amounting to USD 42.9 billion, of which private foundations accounted for over 90%, with donations amounting to USD 35.3 billion, or 82.28% of the total amount donated.25 Positively speaking, this gap between China and the developed countries indicates that there is still vast potential for the development of private foundations in China. Judging by the rapid development of such foundations in China over recent years, and with China’s rapidly growing economy, increasing social maturity, and improving laws, regulations, and policies, it can be predicted that within the next decade private foundations will be in a dominant position in both absolute and relative terms. This will completely change the traditional pattern of philanthropic foundations in China and a modern pattern with private foundations as its mainstay will come into being.

7.1.3 Areas Receiving Donations Are Becoming Diversified and Development-Oriented Donations Have Increased Traditionally in China, most charitable donations went to areas such as education and poverty alleviation, rather than to development-oriented support for a broader range of social arenas, such as medical treatment and public health, arts and culture, environmental protection, public services, community development, policy advocacy, and nonprofit project support. With the rapid growth of non-public philanthropic foundations in diversified social fields, the range of recipients of charitable donations in China has also begun to diversify, signaling the gradual dismantling of the previous uniformity.26 A 2008 report on the development of non-public foundations registered with the Ministry of Civil Affairs revealed that, in addition to the fields of education and traditional poverty alleviation, two foundations focused primarily on medical treatment and public health and six others had this as one of their concerns. These eight accounted for 20.5% of all foundations. Seven were involved with promoting the development of science and technology and the nurturing of scientific and technological talents, comprising 17.9% of the total number of foundations. Four covered policy advocacy (10.3% of the total), three were concerned with promoting the arts (7.7%), and another three focused on environmental protection (also 7.7%). One

24

Charity foundations in the United States are generally divided into private and public foundations. The former can be further divided into independent, corporate, and operating foundations and the latter into community foundations and others. The private foundations are roughly equivalent to non-public fundraising foundations or private fundraising foundations, while public foundations are roughly equivalent to public fundraising foundations. 25 The Foundation Center, 2008. Foundation Growth and Giving Estimates. http://foundationcenter. org/. (2014/11/10). 26 Gao (2012: 65).

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foundation was engaged in promoting community development (2.5%). Of particular note is the establishment of the Narada Foundation in 2007—China’s first nonpublic philanthropic foundation with a focus on public grants and nonprofit project support.27 These all indicate that the original homogeneous pattern of donation recipients has begun to be broken and, in its stead, a new tendency towards diversification is taking shape. Overall, however, the overwhelming majority of China’s charitable donations are currently still used in the traditional area of relief, rather than development. For example, in 2008, 74.4% of all the non-public philanthropic foundations registered with the Ministry of Civil Affairs focused on traditional fields such as education, poverty alleviation, and assistance to the disabled, while only 25.6% were committed to supporting such fields as science and technology, culture, medical treatment and public health, environmental protection, community development, and policy advocacy.28 Philanthropic foundations in Western developed nations do not focus on traditional poverty alleviation; instead, most funds span diverse fields, such as health, education, arts and culture, environmental protection, public affairs, and human services. For example, if we look at the pattern of donations given by American foundations in 2008, we see that funds flowed predominantly to the following six fields: health, education, arts and culture, human services, public affairs,29 and environmental and animal protection, respectively accounting for 22.9%, 21.8%, 12.5%, 12.5%, 10.0%, and 8.6% of the total amount donated. In addition to these, the percentages of funds which went to international affairs, science and technology, religion, and social sciences were 5.7%, 2.6%, 2.2%, and 1.2% respectively. The remaining 0.1% was distributed across other areas.30 In developed countries, since poverty alleviation tends to be defined as a government responsibility, the purpose of the vast majority of charitable foundations and other charitable donors have little to do with the alleviation of poverty and much more to do with promoting social services and public benefits, as well as promoting the development of the social and public sectors. The reason for the uniform orientation of China’s charitable donations lies partly in China’s own cultural traditions and philanthropic preferences and its rather late entry into the philanthropic field.31 It also partly stems from the Chinese government’s encouragement and advocacy of philanthropic support in the areas of social relief and poverty alleviation. For 27

“2008 Research Report on the Development of Non-Public Fundraising Foundations in China,” issued on July 2, 2009 by the Forum on the Development of Non-Public Fundraising Foundations in China. http://www.cpff.org.cn. (2011/11/15). 28 “2008 Research Report on the Development of Non-Public Fundraising Foundations in China,” issued on July 2, 2009 by the Forum on the Development of Non-Public Fundraising Foundations in China. http://www.cpff.org.cn. (2011/11/15). 29 Here, “public affairs” refers generally to activities in the public interest, relating to such aspects as human rights and social movements, community promotion and development, charity and voluntary actions. 30 The Foundation Center, Foundation Giving Trends, 2010. http://foundationcenter.org/. (2014/11/10). 31 Gao (2012: 65).

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example, the “Guiding Opinion on Promoting the Healthy Development of Philanthropy,” issued by the State Council of China in 2014 emphasizes that charity should give salience to the basic principle of poverty alleviation.32 In recent years, as the number of non-public philanthropic foundations has rapidly expanded, their purpose and orientation of assistance have begun to diversify. Although somewhat unclear at present, this is a trend that is not only likely to continue, but also further develop and intensify.

7.2 Developmental Trends in Organization and Management The foundation of China’s system of philanthropy is its organization, and the development of this system has been held back due to a number of organizational constraining factors, two of which are particularly important. The first is “excessive control” over charitable organizations by government administration. The second is fragmentation caused by the “vertical and horizontal segmentation” between higher and lower levels of administration or between different departments and regions. In recent years, there appears to have been positive movement for these two factors—a shift from “strict control” to a “more flexible” position and from “vertical and horizontal segmentation” towards “comprehensive coordination.”

7.2.1 From “Strict Control” to “More Flexible” The tight official control over charitable entities has mainly been reflected in such aspects as the registration system, the level of governmental support for nongovernmental organizations, and the process for approving the tax-exempt status of these organizations. First, as a continuation of its rather strong macro-control of China’s planned economy, the government has for many years exercised relatively strong control over the selection and registration of non-governmental organizations (NGOs). It has been a requirement that all NGOs, philanthropic bodies included, should be affiliated to, and supported by, a relevant administrative department. They also need to satisfy a series of relatively high-barrier conditions as stipulated by relevant laws and regulations before they can be registered.33 As a result of this dual management system, many charity organizations lack the conditions to be recognized as independent legal entities. The highly rigorous registration provisions have also served to limit the growth of many smaller charitable organizations and many small and medium-sized 32

“Guiding Opinion on Promoting the Healthy Development of Philanthropy,” issued by the State Council of China, December 18, 2014. 33 Silk (2000: 95–96).

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organizations have not been able to obtain legal registration. The “Regulations on the Administration of Foundations” (issued by the State Council and put into effect on June 1, 2004), stipulated that the start-up funds of any national philanthropic foundation should be not less than RMB 8 million, that of a local public fundraising foundation, not less than RMB 4 million, and that of a non-public philanthropic foundation should be not less than RMB 2 million. The regulations also stipulated that all start-up funds had to be held in cash bank accounts. The required funds to establish a non-public foundation were raised from registered funds of RMB 100,000 (as stipulated by the 1988 “Regulations on the Administration of Foundations”) to RMB 2 million. Things were made more difficult due to the short history of China’s charity organizations and the lack of dynamic supervision and regulatory experience. Therefore, when establishing the supervisory and regulatory threshold for foundations, high standards and strict requirements according to the principle of “better on the high side than the low side” were usually adopted, so as to facilitate the official tasks of management and monitoring. In addition to the excessively high threshold for start-up funds, the provisions around remuneration are also strict. For example, as required by current regulations, “The directors who are paid by a foundation shall not comprise more than one third of all its directors,” and “Supervisors and directors who do not hold full-time positions in a foundation shall not receive payments from it.” Moreover, the “strict control” over registration increased governmental influence on non-profit organizations (NPOs) , something that has been repeatedly criticized. Thus, for many years in China, “there were only legally existing governmental and official non-profit organizations (GONPO) , but no legally existing NPOs.”34 Such a long-standing situation of excessive control over registration is not conducive to China’s initial move towards a more modern system of philanthropy and has resulted in the marked inability of China’s charitable organizations to adapt to the economic and social development of the country. Second, since the Chinese government has been apt to give much more backing to government-run GONPOs, in spite of efforts it has made to explore and advocate support for charitable NGOs, there is still much scope to increase that support.35 Originating in governmental departments, particularly civil administration departments, GONPOs have a strong governmental flavor and can more easily gain access to official policy and resource support, and thus enjoy a stronger basis for development. The number of such NGOs is small, however, and they occupy a certain monopoly position. The other type of charity organization, that set up by a non-governmental body, is usually small-scale, with a weak basis, and requires more official policy and resource support to enable its development. Third, the authority for granting approval of tax-exempt status to charitable organizations is firmly located in central government. Consequently, only a small number of applicants can be granted that status. What is more, the approval procedure is rather complex. All of this places constraints not only on the enthusiasm for donating to

34 35

Sun et al. (1999: 23). Gao and Gao (2006: 235–254).

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charity on the part of individuals and enterprises, but also on the ardent growth of charity organizations. From these three aspects, we can see that China’s system of charity organization management strongly manifests the traditional feature of “strict control.” Such an approach is actually a concrete embodiment of China’s traditional management system prevalent in its planned economy era. In light of the current market economy of China, it is now deemed unsuitable for the requirements of managing social services. The resultant strong governmental flavor that permeates charity organizations has restricted the growth of China’s system of philanthropy. Reforming the existing management system would present a new direction for substantially encouraging the growth of charity organizations in China. A number of developments that have occurred in this regard over recent years are considered below. First, the status and function of charitable giving has been gradually raised to a position of importance. According to statistics from a scholar, People’s Daily did not publish a single favorable article on the subject of philanthropy in China in the 45 years from 1949 to 1994.36 From the mid-1990s on, charitable donations began to gradually increase, while 1998 saw a big growth in donations after China was stricken by a catastrophic flood. Since the beginning of the new millennium, there has been a year-on-year increase in regular donations, gradually demonstrating their important function in social assistance. The Fourth Conference of the 16th Congress of the CCP included charity as an important component of the social security system. In 2011, the Chinese Ministry of Civil Affairs issued its “Outline for Guiding the Development of Charity in China from 2011 to 2015,” which recommended “creating a new situation where a system of philanthropy is developed in China, in which there is wide participation by the general public, significant growth of social donations and voluntary services, and efficiently, openly, and transparently operating charity organizations.”37 The Third Conference of the 18th Congress of the CCP proposed that efforts be made to implement a range of innovations in social governance, and recommended that non-governmental forces be mobilized to develop charitable work. Thus, China’s philanthropic organizations started to rapidly move forward and the status and function of philanthropic endeavors began to be elevated to an important position. The Third Conference of the 18th Congress of the CCP also stressed the need to stimulate the vitality of social organizations, ameliorate the relationship between the government and society, and speed up the separation of governmental administration from social management. As People’s Daily reported: “A deadline is to be set for the separation of industrial associations and chambers of commerce from administrative organs. Moreover, special support and priority is to be given to developing four categories of social organizations—industrial associations and chambers of commerce, science and technology, public welfare and charity, and urban and rural community

36

Tian (2004: 64–65). “Outline for Guiding the Development of Charity in China from 2011 to 2015,” issued by the Chinese Ministry of Civil Affairs, July 15, 2011.

37

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services, all of which should be directly registered when they are founded.”38 The “Guiding Opinion on Promoting the Healthy Development of Philanthropy” went further and emphasized that the work of directly registering charity organizations should proceed steadily and prudently and the administrative authority for the registration of charity organizations that meet the necessary conditions should be gradually decentralized. It encouraged local governments and non-governmental bodies to provide different kinds of financial support and capability-building services, such as venture capital investment for charitable purposes to charity organizations in their start-up period.39 All of these official initiatives created a more relaxed policy and social climate for starting up, promoting, and developing charity organizations. The above policy analysis reveals that there is now a clear trend of gradually moving away from “strict control” of the management of charity organizations. Second, as stipulated in the new “Enterprise Income Tax Law,” passed at the fifth session of the Tenth National People’s Congress, the tax deduction for donations given by an enterprise in any given year has been raised to 12% of its total profits. This increase in the level of tax exemptions for charitable donations indicates an increasingly relaxed system of management in the philanthropy arena. Third, according to a document issued jointly by the Ministry of Finance and the State Administration of Taxation in early 2007, the responsibility for assessing pretax deductions for local charitable donations has been transferred to the provincial level. In recent years, thanks to efforts by various circles in China, the government has gradually moved from being “too strict” to “more flexible” in its management of charity organizations, something that is likely to become a fundamental trend in the development of China’s philanthropic endeavors in the near future.

7.2.2 From “Vertical and Horizontal Segmentation” to “Comprehensive Coordination,” Emphasizing Multi-Faceted Management The management of charitable donations is complex, involving a range of governmental departments. For it to develop successfully requires comprehensive coordinated governance, conducted jointly by various government departments across diverse areas of responsibility. The direct governmental system for the administration of China’s philanthropy is made up of the civil administration departments at various levels. Tax and legal matters are dealt with by departments of finance and taxation, as well as legislatures at various levels. Management of the registration process also involves industrial and commercial administrative departments, as well as various other CCP, government, and social organizations. Thus, the traditional administrative 38 “Decision on Major Issues Concerning Comprehensively Deepening Reforms.” People’s Daily, November 16, 2013. 39 “Guiding Opinion on Promoting the Healthy Development of Philanthropy,” issued by the State Council of China, December 18, 2014.

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approach of “vertical and horizontal segmentation” is no longer adequately responsive to the development of modern philanthropy, where the need for in-depth change and reform urgently calls for a comprehensive system of management coordinated across diverse government departments and other fields. The gradual shift of China’s charity management towards a more comprehensive and coordinated system can be seen from the following. First, many government departments have strengthened their coordination and cooperation in the formulation and introduction of relevant policies. In early 2007, for example, the Ministry of Finance and the State Administration of Taxation jointly issued a document, transferring responsibility for assessing pre-tax deductions for local charitable donations to the provincial level. Second, integration and coordination within the Ministry of Civil Affairs has been strengthened, and a special leadership group, as well as a specialist division, have been set up to coordinate the system of charity donations. Third, as referred to above, the Chinese Ministry of Civil Affairs issued its “Outline for Guiding the Development of Charity in China from 2011 to 2015,” in 2011, stressing the need to improve the organization and coordination of charitable donations.40 This demonstrates that the government has already clearly recognized the importance of solving the “vertical and horizontal segmentation” issue in the management system of the charity sector and is paying attention to the sector’s multi-faceted governance. Fourth, the 2014 “State Council’s Guiding Opinion on Promoting the Healthy Development of Philanthropy” clearly stated its requirements concerning the establishment and improvement of the organizing and coordinating mechanisms governing charitable undertakings, by advocating, for example, integration and coordination between charity organizations and the government regarding poverty alleviation and social assistance. Fifth, after many years of effort and the solicitation of public opinion, a high-level Charity Law is being formulated to standardize charitable undertakings. The successful introduction of this law will substantially improve the current management approach by creating a pathway for the development of various aspects of charitable donation under unified legislation, aspect such as ideas for its growth, types of donors, channels for access, assessment and monitoring, the delimitation and transfer of public-benefit property rights, financing and investment, and exit mechanisms. The new law will provide a clear opportunity for China’s outdated system of administrative control to move steadily towards the comprehensive and coordinated governance of charitable organizations. In sum, China is moving away from the traditional notion of “control” towards the modern concept of “governance” in its management of philanthropic activities, reflecting the country’s progress towards the modernization of its state governance system and governing capacity. The basic experience of developed countries in their management of charity organizations emphasizes multi-faceted management, which accentuates the comparative advantages and functions of government, market, and non-governmental forces and gives full reign to individual areas of expertise, as well as the joint and coordinated governance of the charity field. With its own 40

“Outline for Guiding the Development of Charity in China from 2011 to 2015,” issued by the Chinese Ministry of Civil Affairs, July 15, 2011.

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unique national conditions, China of course should not simply and mechanically imitate the experience of developed nations in its own governance of philanthropic organizations. Certainly, however, the traditional influence of government has been overly pronounced, resulting to a great extent in a “crowding-out” effect on other collaborators in the area of governance and a relative ossification of the management system, with such weaknesses as “mis-functioning,” “under-functioning,” and “overfunctioning” in the government’s role. Therefore, on the basis of its national conditions, and drawing on the experience of multi-faceted governance in Western developed countries, China should expend greater effort to bring about relevant reforms and implement specific policies, so as to ensure a clear delimitation of the respective functions of government, market, and charity organizations. Only in this way will China’s system of philanthropy move towards a multi-faceted form of governance that is both “flexible” and “comprehensively coordinated.”

7.3 Developmental Trends in Monitoring and Transparency The monitoring and transparency system in China’s charitable donation field has drawn extensive attention from the general public, charity organizations, government departments, and the relevant academics. Currently, the positive trend in this area is mainly reflected in the following two ways: the gradual establishment of a system for evaluating charity organizations and initial moves towards complete transparency.

7.3.1 Incipient Establishment of a System for Evaluating Charity Organizations Generally speaking, evaluation is the process of measuring and assessing the efficiency, benefit, and value of policies, projects, services, institutions and activities by means of specific criteria, procedures and methods, with the aim of accessing relevant information that will serve as the basis for maintenance, readjustment, termination, or reform. Evaluation was first widely applied in the field of enterprise management, but from the early twentieth century, it gradually spread to other fields, including public policy.41 In the 1970s, something of a global revolution occurred—the so-called “New Public Administration.” One of the major management tools for advancing this revolution was systematic evaluation. There has since been a tremendous rise in the use of evaluations, causing some Western scholars to opine that the traditional “administrative state” is being replaced by an “evaluative state.”42 The evaluation of philanthropic organizations is to meet the profound and realistic need to enhance these organizations’ capacity to raise funds, as well as to increase the public’s trust of 41 42

China State NGO Administration (2007: 93). Deng et al. (2007: 93).

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them. In the course of the development of the American charity fundraising market, there were many scandals of individuals and institutions feathering their own nests in the name of charity. With their exposure, the public’s confidence in all charity organizations gradually waned and willingness to donate declined, much to the detriment of broader philanthropy. American charitable organizations responded to this situation by joining together and advancing a range of evaluative activities, including the setting up of a charity information bureau tasked with enhancing the social accountability and self-governing capabilities of charitable organizations, restoring public confidence, helping the general public identify first-rate donation-raising institutions, and guiding the general public in philanthropic activities.43 As a result, the evaluation of charitable organizations is now well-developed in Western countries, and has not only become a monitoring tool for standardizing the activities of those organizations, but also serves as the most important mechanism driving the growth of charitable undertakings. During the initial stages of the development of philanthropy in China, the demand for evaluation of charity organizations was generally not very strong. There were various reasons for this, such as the high cost of evaluation and the small amounts donated. As a result, inadequate attention was paid to proper evaluation by the government, non-governmental bodies, and donors. With the rapid expansion of China’s charity arena, however, the number of sizeable donations has been increasing and unfortunately a series of scandals involving donations have surfaced. At the same time, a number of theories and methods for evaluating non-profit organizations have been introduced into China and then improved upon. Thus, the evaluation of charity organizations is now taken seriously by the government and other bodies concerned with charitable activities. Philanthropy in China is currently in a new stage of rapid growth and charitable donations, particularly those involving large sum, are being made on a daily basis. However, in recent years, the exposure of many scandals in the charity domain has threatened the credibility of charity organizations. Consequently, various social groups have begun to express their misgivings about the accountability of these organizations. There is thus an urgent need to evaluate them. Fortunately, China’s civil administration departments and relevant academics have recently begun to attach more importance to the evaluation of charity organizations, as evidenced by the following developments. In 2007, the State NGO Administration of China established a system for carrying out an initial round of evaluations of national foundations and other large scale charity organizations. Additionally, the Ministry of Civil Affairs has set up a series of relevant research projects and called for tenders, with the aim of joining forces with academia to explore theories, methods and indicators appropriate for the evaluation of China’s NGOs, including charity

43

Deng et al. (2007: 94).

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organizations.44 Third, the theories, methods and indicators for evaluating NPOs and their practice have become a focal point for research in relevant academic circles. The system for evaluating the activities of charities is still in its infancy in China. The routine mechanism for the government’s evaluation of charity organizations is incomplete and coverage is somewhat limited. Also, the exploration and application of evaluation theories, methods, and indicators are still tentative and a complete and effective evaluation tool suited to all types of charity organizations in China has yet to be found. Lastly, evaluation has generally been in the hands of relevant government departments, while independent non-governmental evaluation organizations are still at an embryonic stage. On July 8, 2010, 35 foundations in China jointly established the “China Foundation Center” website, which has, by means of data research and collection, developed a series of information products concerning foundations, leading to the annual publication of the Foundation Transparency Index (FTI).45 Overall, however, non-governmental evaluation organizations in China are currently only in the initial stage of development. In time, a competitive market for non-governmental evaluation organizations needs to be allowed to evolve, so as to foster the positive development of such organizations through the mechanism of “survival of the fittest,” and to provide the impetus for enhancing information transparency. In this regard, the following predictions for the near future can be made. First, a government evaluation platform with the State NGO Administration of China as the dominant player will gradually be completed and, on the basis of exploratory evaluation of large-scale charity organizations, theories, methods, and systems of relevant indicators appropriate for the evaluation of Chinese charity organizations will gradually be established. Also, the evaluation of large-scale charity organizations will become routine, and the range of organizations evaluated will gradually expand. Lastly, the number of independent non-governmental bodies evaluating charitable organizations will continue to grow and eventually form a competitive market. In brief, it can be foreseen that a mechanism for evaluating charity organizations will be established in the future with the government as the principal player and nongovernmental forces as participants.

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It has been pointed out that, since China has its own unique national conditions and since there exist considerable differences between NPOs in China and those overseas, imported evaluation theories and methods should not be mechanically copied and applied in China, but rather should be integrated with the special characteristics of China’s NPOs. There are currently some scholars in China who advocate the direct borrowing of foreign evaluation indicators, but they lack adequate research on the suitability and applicability of these evaluation indicators to the Chinese context. It has thus been advocated that empirical studies should be conducted on evaluation theory and the establishment of a system of evaluation indicators which apply to China’s unique NPOs. (See Guosheng Deng. NPO Evaluation. Social Sciences Academic Press, 2001: 3) In addition, it is inappropriate to set up overly high criteria for the evaluation of NGOs in their early stage of development, or their development will probably be strangled (See Guosheng Deng. et al. The NGO Evaluation System: Theory, Method and the Indicator System. 94). 45 China Foundation Center Website, Foundation Transparency Index. http://www.foundationce nter.org.cn/ (2014/11/12).

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7.3.2 Gradual Establishment and Improvement of a Charity Transparency Mechanism Accountability is the lifeblood of charity organizations or institutions.46 The key to enhancing social accountability in the area of charitable donations lies in the establishment and improvement of an open and transparent charity system. If donors discover that a charitable institution has failed to fulfill its designated function, or if they do not clearly understand how donations are being used, then their donation behavior will become increasingly conservative and, correspondingly, the volume of their donations will decrease. In the United States, charity organizations are keenly aware of the importance of keeping the general public well-informed on their operations and actions as autonomous entities. Supplying the general public with information is, in fact, a legal requirement. While in operation, a charity organization is governed by an official accountability system, from its registration as a legal entity and application for tax-exempt status to its regular annual submission of taxdeclaration forms to the relevant tax department (or, in some states, the relevant legal department).47 On responsibility for maintaining openness and transparency to the general public, US law is extremely detailed and strict.48 As famously stated by Russell Leffingwell, former president of the American Carnegie Corporation of New York, charities should have “glass pockets.” The many scandals which occurred as part of the development process of China’s system of philanthropy aroused wide public concern. At present, the openness and transparency of charity organizations in China is still on the low side and there are misgivings on the part of the public about how charitable donations are utilized. As commented by someone in charge of a foundation for many years, “There are too many lures, too many opportunities, too many loopholes there [in the financial affairs of the foundation] and human nature is so weak…”49 Research on what influences the public’s willingness to give to charity found that “graft, holding funds back, and embezzlement” and the perception that 46

Huang and Yao (2003: 77). Adler et al. (2007: 105). 48 For example, according to the provisions of relevant American charity laws, a charity organization is duty-bound to provide duplicated copies of the following to anyone seeking financial information: documents relating to its application for tax-exempt status, its three most recent tax declaration forms, and all related documents except for donor lists. If there is an on-the-spot request for access to information, it must be responded to immediately; if the request is made in written form, a response needs to be forthcoming within thirty days. All documents, except for a small number that, by law, may remain inaccessible to the public, should be made freely available, and cannot be deemed ‘secret.’ Some charity organizations have discovered that providing such information to the public is very complicated, since they have to make available Table 990 and Table 990-PE, which contain all of the information relating to the remunerations and benefits received by the following personnel: the five highest-paid employees, excluding members of the decision-making Board; and the top five major service providers who are not employees of the organization. Despite the cumbersome nature of these procedures, information may not be held back for any reason; it must be fully revealed to the public and subjected to public scrutiny. See Adler et al. (2007, pp. 114–115; 143–213). 49 Deng. et al. (2007: 186). 47

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“donations are not sent to those who need them most” are viewed as some of the most serious problems.50 If charitable operations have transparency issues, they will seriously damage public trust in charity organizations and affect public enthusiasm to donate to charity. The Chinese government has paid considerable attention to enhancing the openness, transparency, and accountability of charity organizations and has taken the following measures to address these concerns. Stressing the need for whole-process supervision and the construction of public information platforms, the “Outline for Guiding the Development of Charity in China from 2006 to 2010,” issued by the Ministry of Civil Affairs, made the following stipulations. First, the internal governance structure of charity organizations should be improved. An open and standardized financial management system and a system for tracing donations, giving feedback and publicizing results should be set up. Codes of practice and standards in the charity industry should be fully implemented along with appropriate monitoring procedures. There should be legal, administrative, media, and public scrutiny of third-party evaluation systems, so that a combined system of selfmanagement and external monitoring can gradually come into being, all of which will enhance the accountability of charity organizations.51 The social organization China Charity Information Center, which is under the aegis of the Ministry of Civil Affairs, has established its website at www.donation.gov.cn.52 This website serves as a platform for disseminating information on giving donations, seeking assistance, ongoing monitoring, and annual inspections of donations to the public. The “Guiding Opinion on Promoting the Healthy Development of Philanthropy,” issued by the State Council of China, stipulates clearly what information should be made public, as well as when, how, and where, which substantially increases the accessibility of social scrutiny and the normalization of information disclosure. Second, more research is being conducted in the area of charity donation to improve methods of openness and transparency. In early 2008, the Charity Coordination Office of the Ministry of Civil Affairs and the China Charity Information Center jointly issued a “2007 Analysis Report on Charitable Donations in China.” This was the first such annual report in China, and there has been one issued every year since. Also in 2007, the China State NGO Administration published reports evaluating national foundations and other large-scale philanthropic organizations, thus taking evaluation as a monitoring and managerial means for encouraging organizations to enhance openness and transparency. Since 2009, the China Charity Information Center has made information monitoring part of its routine work, a result of which was its 2009 “Report on Monitoring Information Disclosure by National

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He and Chen (2005: 77). “Outline for Guiding the Development of Charity in China from 2006 to 2010,” issued by the Chinese Ministry of Civil Affairs, July 15, 2011. 52 See http://www.donation.gov.cn/jsp/index.html. (2013/08/09). 51

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Charity Organizations in China.”53 Its 2010 annual report on transparency analyzed charity information disclosure in that year, formulated a charity transparency index, and made public its list of organizations ranked by transparency levels.54 It is foreseeable, therefore, that the building of a transparency system will proceed in the following way. First, regarding administrative management, the Ministry of Civil Affairs will promote the China Charity Information Center and its website as a platform and thereby begin to construct a unified national statistical system for public information on charity donations. In this way, it can institutionalize the regular and routine publication of information on donations, evaluations and annual inspections, and associated inquiries. Second, regarding legality, the introduction of the Charity Law presents an opportunity for stricter and more detailed requirements regarding transparency, while the feasibility of conducting monitoring and ensuring accountability in both content and procedure can also be enhanced considerably. Third, as far as internal governance is concerned, the government and society at large can bring pressure to bear on relatively large-scale charity organizations to strengthen their own internal organization and management and make the operational process surrounding donation operations more transparent. The formation of self-regulatory associations is also desirable. Fourth, from a technological perspective, by adopting modern web-based and software technology, most charity organizations will be urged to build their own websites for the purpose of publishing information; these can be integrated into a network of charity associations or the website of the China Charity Information Center. Such a reform of the present fragmented and non-standardized online presence of charity organizations will enable most of them to regularly make the sources and destinations of donated money and goods publicly available on the same network platform. Fifth, a highly transparent, convenient, and efficient system can be built to enhance the accessibility of information and to facilitate public inquiry and monitoring. The experience of Western developed nations regarding the openness and transparency of charity organizations is that these organizations must be based on comprehensive supervision, openness to public questioning and access to information, and monitoring by non-governmental bodies. Overall, it can be said that the experience of developed countries in elevating these principles of openness and accountability reflects general principles for the systematic development of charitable giving. The “Outline for Guiding the Development of Charity in China from 2011 to 2015,” issued by China’s Ministry of Civil Affairs in 2011, reiterated all the basic requirements for building a charity information disclosure system. The progressive implementation of these will certainly significantly accelerate China’s progress in institutionalizing and legalizing the transparency of its philanthropic system, and thereby enhance the accountability of its charitable organizations.

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China Charity Information Center, “2009 Report on Monitoring Information Disclosure by National Charity Organizations in China.” http://www.charity.gov.cn/fsm/html/files/2011-12/30/ 20111230154211734193395.pdf. (2013/11/10). 54 China Charity Information Center, (2013).

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7.4 Developmental Trends in Charitable Fundraising The capacity to raise funds is a significant variable in measuring the governance capability of charity organizations that can also reflect the developmental level of a country or region’s philanthropic systems. The means by which charities raise funds determines to an extent the amount of funds raised and is thus an important part in the study of a charitable donation system. In recent years, the trends of diversification, marketization (the general adoption of market principles), specialization, and professionalization, have emerged in China’s charitable donation domain and there has also been growing momentum for new methods of fund raising, such as equity donation.

7.4.1 Diversification and Marketization in Modes of Raising Donations The advanced development level of philanthropy in Western developed nations is due to many factors, of which the diversification and marketization donation-raising modes constitutes an important one. As giving isn’t always a simple matter of altruism, but can fulfill various self-interest or other needs, a range of fundraising strategies are adopted to meet the various wants and motivations of donors. Charity organizations thus adopt various means to raise funds. For example, establishing intimate and stable interactive networks, providing services to donors who have special requirements (such as maintaining anonymity), introducing membership systems, holding special fundraising activities, offering gifts to charitable donors, and buying charity sale tickets. Also, a diverse array of marketing strategies is utilized to help promote particular charitable causes: home visits, phone calls, emails, and the internet, among others. Enlisting the help of famous individuals, cooperating with well-known enterprises in fundraising and holding various forms of recreational and sports activities for publicity or direct fundraising. Different donation-raising strategies are aimed at donors groups with different characteristics. Intense market competition exists in the charity field, promoting a sense of “survival of the fittest,” which is conducive to promoting a strong sense of striving to continually enhance transparency and develop high quality donation services within charity organizations, thus providing donors with varied, diversified, and individualized donation choices. Fundraising modes in China were for many years far less diversified. Donation drives were mainly the result of internal initiatives by government agencies, public institutions, and enterprises, which meant that they had a pronounced administrative flavor. At the same time, most charity organizations neglected to research and develop new fundraising modes and strategies and lacked initiative and the capacity for innovation, because they were accustomed to passively “waiting for, relying on, and asking for” donations. In the past several years, with the rapid growth of charity

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organizations in China, there have been a number of significant and positive changes in fundraising modes and strategies. One is that charity organizations now have a better understanding of the complexity of donor motivations and have taken the initiative to satisfy the diverse demands of donors. Traditional Chinese culture attached too much importance to the altruistic aspect of charitable donation and the sanctity of that motivation. In recent years, however, quite a few charity institutions have begun to pay attention to the complexity of donor motivations, and have actively taken mutually beneficial measures to satisfy the specific demands of enterprises and individuals as donors so that both sides can enjoy a win–win situation. A second point is an emphasis on innovation. Large-scale charity organizations have taken the initiative to employ media such as TV and the internet, making use of public service advertising, the “celebrity effect”, contact with well-known enterprises, and cooperation with government agencies and have thus developed diversified multi-channel charity marketing strategies. For example, the China Youth Development Foundation joined hands with the CCTV program “Go for Your Dream,” and by doing so raised more than RMB 100 million annually for two consecutive years. The Chinese Red Cross Foundation also received donations of more than RMB 100 million by using the attractive power of celebrities. Of particular note is the new phenomenon of online fundraising. In recent years, the internet has grown rapidly in China and raising funds through websites has become a common practice, and an important means for collecting donations. Thus, “in 2013, donations raised online in China surpassed RMB 300 million, with the main network donation platforms being Tencent’s “gongyi.net,” Sina’s “gongyi.weibo.com,” Alibaba’s “love.Alipay.com,” and Yeepay’s “gongyi.yeepay.com.” An increasing proportion of the public are choosing to donate online. In 2013, 1.16 million users donated on Tencent’s charity platform; over 2 million netizens gave direct Weibo donations on Sina’s Weibo donation platform; and more than 100 million donations were made on Alipay.”55 Fundraising through the internet has many advantages, including low cost, convenience, speed, and a high target-reaching rate. With the booming growth of social networks in China, this channel for collecting charitable contributions will certainly grow in importance. Lastly, a more detailed classification of charity donors is evolving, as to adopt correspondingly diverse fundraising modes. For example, when the target donors are society’s wealth and powerful, more effort is made to promote the idea of charity as a noble way of living and a notion aligned with the modern concept of wealth. When the target donors are ordinary individuals, the emphasis is on attracting small amounts by providing channels for regular donations—welfare lotteries, the sale of prize-giving tickets, and other such means. The rapid growth of China’s economy and society and the influence of Western ideas and strategies regarding charity have promoted the diversification of fundraising modes in China. At the same time they have provided 55

China Charity Information Center, “2013 Report on Charitable Donations in China.” http:// www.charity.gov.cn/fsm/sites/newmain/preview1.jsp?ColumnID=362&TID=201309250845432 84400468. (2014/5/25).

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an impetus for the trend of marketization. The past few years have witnessed the rapid development of China’s non-governmental charities, and especially of private foundations, whose sharp rise has invigorated competition in China’s charity market. These two trends—diversification of fundraising modes and the marketization of charity—will surely quicken the pace of reform among the traditional, passive charities, eliminate those charity institutions lacking in competitiveness, and bring into being greater numbers of charity institutions strong in fundraising competitiveness and capable of modern governance.

7.4.2 Specialization and Professionalization of Fundraising Modes Modern charitable fundraising involves a complex system of operations, ranging from fundraising, planning, marketing, and organizing charity activities to the utilization, evaluation, and feedback of donated funds, all of which constitute an increasingly specialized and professionalized process. In addition, with the formation and development of the modern charity market, the increasingly intricate cooperation and competition in the fundraising arena has also promoted the specialization and professionalization of the collection of funds, which is mainly reflected in the following ways. First, modern charity fundraising organizations and institutions (especially charitable foundations) have been rapidly developing and a large body of professionals with expert knowledge has been emerging. Although the growth of modern charity organizations in Western developed nations has a history of only one hundred years or so, these organizations have become the dominant force in the third, or voluntary, sector and have attracted many specialized personnel. Second, the mature expertise, techniques, professional ethics, and standards that operate in the charity field mean that, in the US, for example, an individual has to go through the process of obtaining specialized qualifications to work as a fundraiser. Third, a relatively mature system of specialized trainers and researchers has been developed for the charity sector. Specialized and professional institutions for training in social work, social welfare services, and other areas, provide a guaranteed supply of specialized personnel for charitable activities. In addition, much more research is now being conducted at universities and independent specialized institutes on charity-related issues. Fourth, charity organization and management associations have appeared, constituting an important mark of the specialization and professionalization of philanthropy. During the twentieth century, many associations, such as the “American Association of Fundraising Counsel” and the “Association of Fundraising Professionals,” were founded in America to promote the specialized and professionalized development of the charity industry.

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Fig. 7.2 Figures for NGOs in China. Source “Statistical Bulletin of Civil Administration Development, 1998–2009” and “Statistical Bulletin of Social Services Development, 2010–2012,” issued by the Chinese Ministry of Civil Affairs. http://cws.mca.gov.cn/article/tjbg

Due to the short history of modern philanthropy in China, and the tradition of strong administrative dominance over the charity field, the specialized and professionalized development of charity activities and behaviors in China has been somewhat hampered in comparison with Western countries. The twenty-first century has marked a new stage for China’s charitable organizations, however, as they begin to attach greater importance to the specialization and professionalization of their work. The rapid growth of NGOs, particularly of modern charity organizations and institutions, has created a favorable environment for the development of China’s charity system and brought about a need for a considerable number of specialized personnel, high-level specialists in particular. With the furtherance of China’s reforms and opening to the outside world, especially after the early 1990s, China’s NGOs have grown considerably, the total number increasing from 4,446 in 1988 to 499,000 in 2012, an increase of 111 times. Since the beginning of the new millennium, the number of NGOs in China has continued to grow steadily each year (see Fig. 7.2). This rise has brought about an environment favorable for organizational development. According to a scholarly statistical report, not even one organization that explicitly called itself a charity existed from 1949, when modern China was founded, to 1993. From 1993 to 2001, by contrast, 172 new charitable organizations emerged.56 In 2003, the State Statistical Bureau began to publish relevant statistical data concerning charitable foundations—the number for that year totaled 954. For 2012, it was 3,029, representing a 217.51% increase over a ten-year period.57 Second, the expansion of specialized social work education has brought about a reserve of specialized personnel for the domain of charity in China. This education has developed more rapidly than originally anticipated. From 2000 to 2013, the number 56

Tian (2004: 64). Chinese Ministry of Civil Administration, “2012 Statistics Bulletin of Social Services Development.” (http://cws.mca.gov.cn/article/tjbg/201306/20130600474746.shtml). (2013/11/10).

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of institutions of higher learning in China offering a specialization in social work increased from 55 to more than 310, guaranteeing an ample reserve of specialized personnel for the development of China’s third sector. Third, the government has been active in promoting the specialized and professionalized development of China’s charity industry. Under the guiding policy of “constructing a vast team of social workers,” the Chinese Ministry of Social Affairs has set about promoting the experimental work of nurturing specialized social workers designated for charity work. Fourth, the diversification and marketization of China’s charity fundraising modes have been drivers behind the specialization-based division of labor and professionalized development in the charity field. In order to survive, foundations and other charity organizations have to adopt professional, precisely oriented, and innovative strategies and tools to maintain themselves in the charity market. They need to make better use of modern charity marketing and foster their own charity brands, so as to gain advantages in the competitive charity market. Despite the current rather low levels of specialization and professionalization in China, the first steps to remedy this have been taken. This is a trend that will no doubt strengthen in the future, gradually leading toward the formation of relatively independent and specialized non-governmental charity associations, as well as a system of sectoral standards and professional codes of ethics. Fifth, there has been a steady increase in new types of donations, equity donations being just one example. According to the traditional understanding, donations usually come in the form of money, goods, or services. With the healthy flourishing of China’s capital market, however, there are now new types of charitable contributions, in the forms of stock dividends and equity and bond donations. Though contributing marketable securities to charity is new to China, this trend will definitely strengthen. In 2005, Mengniu Group of China announced that Gensheng Niu, its chairman, would donate 51% of the dividend from all company stock under his name to the Lao Niu Foundation for the remainder of his life. Subsequently, he was referred to as China’s “No. 1 Equity Donor” (actually his was a dividend rather than an equity donation).58 In 2009, Dewang Cao, Board Chairman of the Fuyao Glass Group of China, declared that he would give 700 million in stock from the 70% of the company stock held by his family to establish the Heren Charity Foundation.59 In the same year, Fashu Chen, chairman of the New Huadu Industrial Group, donated RMB 8.3 billion of his company stock to the “New Huadu Charity Foundation” that he had founded.60 New forms like these have not only enriched existing types and modes of donation, but have also generated new charity management issues. A host of complex challenges such as uncertainties over equity donations and the delimitation of property rights, taxation, and earnings and the inter-relationship of financial interests between listed companies and foundations, as well as monitoring and management, business operations, and disposition of stock rights, all of which have galvanized 58

Cheng (2006). Li and Hou (2011). 60 Ye (2009). 59

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relevant governmental departments to putting effort into building systems dealing with equity funds donated by enterprises for the public good. Hence, the Ministry of Finance issued its “Circular on Financial Issues Related to Equity Donations Made by Enterprises for the Public Good” in 2009 in order to institutionally standardize these donations. The State Council’s “Guiding Opinion on Promoting the Healthy Development of Philanthropy” (referred to above) strongly encourages exploration into new forms of donation, such as intellectual property rights royalties, technologies, stock rights, and marketable securities. With the thriving development of the capital market and the standardization of securities donations in China, the trend towards diversified and securitized forms of charity donation will continue. The experience in Western developed countries has been that a mature charity system manifests itself through diversified and marketized fundraising modes that are highly specialized and professionalized. Though China still has a long way to go before it can establish a similarly mature charitable fundraising system (including the kinds of donation modes existing in the West), it has shown some developmental tendencies in that direction in recent years. Sixth, the recent appearance of charitable trusts in China has begun to create a new impetus for more professionalized operations in the charity domain. The modern system of trusts has reached a level of relative maturity and standardization, with a highly specialized, flexible, and relatively strong operational capability for capital. A charitable trust usually refers an individual or entity entrusting property and/or funds to a trustee for charitable purposes. As stipulated by a contract between the two parties and relevant legislation, and according to the donor’s intention, the trustee oversees the management and use of the property and/or funds. Charitable trusts have now become an important mode in determining how funds are donated and utilized. The development of a charitable trust system in China can effectively improve levels of professionalism, and benefit the preservation and increase in value of charitable funds and optimization of the benefits of donation. The Trust Law which China introduced in 2001 encourages the development of public trusts, providing the basic legal guarantee for their growth. When the Wenchuan earthquake struck in 2008, the Xi’an Trust Company (now renamed as the Chang’an Trust Company) introduced the “Public Trust Program for the 12 May Earthquake Disaster Relief” to assist with disaster relief. This is regarded as China’s first charitable trust. China’s charitable trust system is presently only in its early stages and it has also been constrained by various institutional factors and conservative thinking. According to incomplete statistics, there are only a few dozen public trust programs in China that meet the required conditions and the number of charitable trusts is smaller still. The current situation notwithstanding, according to the Charity Law, which is in the legislative phase, the charitable trust system should be further standardized and promoted. As China’s economy and society rapidly develop and notions concerning modern forms of charity become increasingly widespread, China’s charitable trust system will inevitably enter a period of rapid growth in the near future, providing a new impetus for the professionalization of China’s charitable donation system.

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7.5 Summary and Discussion As China achieves overall economic and social progress, significant positive developmental trends have emerged in its approach to charitable donation, regarding its donation pattern, charity organization management (including systematic tax incentives), monitoring and transparency, and fundraising. First, developmental trends in the pattern of donation are reflected mainly in the following ways. Since the beginning of the new millennium, the quantity of donations has grown rapidly and China’s donation network has continued to improve. Although both are still, on the whole, out of step with China’s overall level of economic and social development, the gap with developed countries has been gradually narrowing. China’s modern donor pattern is in its early stages but developing well, as evidenced by the rapid growth of donations contributed by individuals and enterprises, the breaking of the traditional pattern of foundations, and the rise of private fundraising foundations. In terms of the structure of beneficiaries, the areas receiving donations have begun to diversify, with development-oriented donations on the increase. Second, developmental trends in the charity organization management system are revealed in two aspects. First, there is the shift from “strict control” to “more flexible” management, regarding the registration system and the process of approving and assessing tax-exempt status. The government has also bolstered its support for non-governmental charities and increased the tax-exempt rate for donations by enterprises. Second, the former “vertical and horizontal segmentation” has begun to gradually move towards “comprehensive coordination,” with a greater focus on the comprehensive coordinated regulation of charity organizations by different government departments and other relevant bodies. Third, one of the trends in the development of monitoring and transparency mechanisms is that initial efforts are being made to set up a system for evaluating charity organizations, with the government as the principal player and non-governmental bodies as participants. Specifically, the following are occurring or will be occurring in the near future. First, the government evaluation platform dominated by the Chinese NGO Administration is being gradually improved, and, on the basis of the tentative evaluation of large-scale charity organizations, the theories, methods, and relevant indicators applicable to the evaluation of China’s charity organizations, are in the process of being established. Second, evaluation of large-scale charity organizations will be routinized, and coverage of evaluations will be gradually expanded. Third, independent non-governmental charity evaluation bodies will be robustly developed, and a competitive market for evaluation will be fostered. Fourth, emphasis has been laid on whole-process supervision, the construction of public information platforms, and the participation of and monitoring by non-governmental forces. Lastly, charity fundraising is becoming diversified and marketized, with a clear orientation towards specialization and professionalization. The modern fundraising mode of securitized donations has already emerged and continues to grow, while a system of charitable trusts is now in its infancy.

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The positive changes in the development of a system of philanthropic donation have become an important driving force behind the growth of China’s charity industry. These changes have generally involved the government as the dominant player. In China, since the transition towards a modern form of philanthropy has begun rather late, and had a relatively weak basis, the central government has adopted a number of legal measures, such as the Tax Law, in its efforts to promote the growth of charitable endeavors. Additionally, many local government officials now directly participate in the charity realm, by serving as the organizers of charity activities, utilizing public and financial resources and the power of the public. When the government is directly involved in charity activities it can play a vital role in dealing with sudden disasters and carrying out relief work since it is capable of efficiently and speedily concentrating large amounts of resources. However, in the long run, such government dominance is not conducive to the positive growth of philanthropic work, and, to a certain extent, it actually restricts the development of non-governmental charity. This restriction manifests in excessive governmental participation and a resultant “squeezing-out” effect on non-governmental resources and also in the disadvantaged and dependent status of non-governmental organizations (in terms of, for example, low normativity, accountability and efficiency), resulting from their longterm inability to develop robustly. Thus, while the importance and necessity of the government’s role should certainly be acknowledged, any “offside” (overly intrusive) behavior by the government should nevertheless be prevented. In recent years, government dominance in the charity field has in fact tended to gradually diminish, as indicated in a 2013 report, which showed that the growth rate of all charity donations received by the civil administration system fell significantly in 2013.61 In summary, the positive development of China’s charity system depends, on the one hand, on government regulation and control, supervision, and promotion, by means of laws and regulations, such as the Tax Law and the Charity Law. On the other hand, it requires the government’s retreat from direct involvement in charitable activities and a further loosening of official control, so that a relatively relaxed climate favorable to the growth of non-governmental charity organizations can be created.

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China Charity Information Center, “2013 Report on Charitable Donations in China.” (http:// www.charity.gov.cn/fsm/sites/newmain/preview1.jsp?ColumnID=362&TID=201309250845432 84400468.) (2014/5/25).

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References Adler, B. B., Mittermaier, I., & Levitt, D. (2007). The rules of road: A guide to the law of charities in the United States. (J. Jin, Trans.). China Society Press. American Association of Fundraising Counsel. (2006). Giving USA 2006. Retrieved from http:// www.aafrc.org. American Association of Fundraising Counsel. (2008). Giving USA 2008. Retrieved from http:// www.aafrc.org. American Association of Fundraising Counsel. (2014). Giving USA 2013. Retrieved from http:// www.aafrc.org. Cheng, F. (2006, March 14). How much money has Niu Gensheng, the “No.1 equity donor” of China, donated? China Philanthropy Times. China State NGO Administration. China NGO Evaluation (Vol. 93). China Society Press. Deng, G., et al. (2007). The NGO evaluation system: Theory method and the indicator system. Beijing University Press. Gao, G. (2006). Operational mode of charity supermarkets—a case study of a charity cupermarket in Jinan. Social Sciences, 3, 121. Gao, G. (2012). Current developments, difficulties and relevant policy considerations concerning non-public fundraising Foundations in China. Journal of University of Jinan, 3. Gao, J., & Gao, G. (2006). The progress of a non-governmental charity organization: A case study of ‘Niu Qun’s All-Out Donation’”. In H. Du & J. Gao (Eds.), Philanthropy and a harmonious society. Jinan Press. Gittell, R., & Edinaldo, T. (2006). Charitable giving: Factors influencing giving in U.S. Nonprofit and Voluntary Sector Quarterly, 35. He, L., & Chen, T. (2005). Some considerations on the current development of philanthropy in China. Social Sciences, 8, 77. Hodgkinson, V. A., & Weitzman, M. S. (1996). Giving and volunteering in the United States. Independent Sector. Hrywna, M. (2008, July 1). Special report. The Nonprofit Times. Huang, D., & Yao, J. (2003). Exploring a strategic path for the contemporary development of philanthropy in China. Social Sciences, 8. Li, J., & Hou, X. (2011, May 9). Cao Dewang’s equity donation tests the wisdom of government: Four problems remain to be solved. Beijing Times. Liu, C., Liu, Z., & Ye, B. (2006). Improving the institutional arrangements for charitable giving in China. International Economic Review, 5, 41. Mesch, D. J., Rooney, P. M., & Steinberg, K. (2006). The effects of race, gender, and marital status on giving and volunteering in Indiana. Nonprofit and Voluntary Sector Quarterly, 35. Pan. Y. (2007, January 16). The charity organization and the government, who does whose job? China Society News. Schervish, P. G., & Havens, J. J. (1998). Embarking on a republic of benevolence? New survey findings on charitable giving. Nonprofit and Voluntary Sector Quarterly, 27. Silk, T. (Ed.). (2000). Public Welfare Undertakings and their Laws and Regulations in Asia [Trans. China Science Foundation Research Society. Science Press, pp. 95–96]. Sun, L., et al. (1999). Mobilization and participation: Case studies on the donation-raising mechanism of the third sector. Zhejiang People’s Press. Tian, K. (2004). The decoupling of organization: Organizational operation under non-coordinate constraint, a theoretical framework for studying the relation between charity organizations and government in China. The Study of Sociology, 4. Wang, R. (2011). An empirical study of the relationship between the development of philanthropy and economic growth. Business Studies, 1.

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Correction to: Analysis of Developmental Trends in China’s Charitable Donation System Gongjing Gao and Jianguo Gao

Correction to: Chapter 7 in: J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_7 The original version of this book was published without Prof. Gongjing Gao’s name in Chap. 7, which has now been added. The book and the chapter have been updated with the change.

The updated version of this chapter can be found at https://doi.org/10.1007/978-981-16-6194-5_7

© Social Sciences Academic Press 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5_8

C1

Postscript

The charitable undertaking, which falls under the third sector, involves the activities non-governmental organizations and citizens as individuals organize and participate in of their own accord, and it makes an important field indicative of the development of times. In organizing modern charitable activities, the charitable organizations are the agents, which play the core role in raising and allocating charitable resources and providing charitable services. The academic studies of charitable undertaking, no doubt, will be conducive to pushing ahead the expansion of more standardized operation of charitable activities on the micro level and the public governance and social transformation on the macro level. In contemporary China, after experiencing a relatively long period when the system of charitable organizations and activities was dominated by the government, her charitable undertaking has been entering into a fresh phase of transformation and becoming more and more non-governmental content based, law-governed, specialized, and industrialized. As the principal power driving the development of China’s charitable undertaking, her charitable organizations will step further in drawing on the market resources and public resources and give more play to their tremendous autonomy and initiative in strengthening self-management, standardizing fundraising behaviors, publicizing information well, building joint platforms, and so on. Thus, they will create conditions more favorable to shaping a relatively independent public governance space and stepping up the overall construction of a modernized and law-ruled society. The studies of charitable undertaking are conducted on an interactive basis. The charitable undertaking itself is dynamic, for it is a process of growing and developing, which provides us with the domain and opportunity for our understanding its function, features, and laws. Meanwhile, the studies of charitable undertaking have undergone a broadening and deepening process and the new conclusions and findings therefrom have been boosting the standardization and modernization of the charitable undertaking. Over the past ten and more years, the present study has been going on. As early as 2001, our research team began to conduct the project “A Study

© Social Sciences Academic Press 2022, corrected publication 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5

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of the Internal Structure and Operating Mechanism of Non-Governmental Organizations in China” supported by China National Social Science Fund. The SARS period in 2003 saw the upsurge of charitable activities, which brought about an important opportunity for our study of the charitable undertaking in China. The principal part of this achievement is the research results we have reaped under our project “A Study of the Charitable Mechanism in China” supported by China National Social Science Fund. Its abstract has been published by Reporting Major Achievements issued by National Office for Philosophy and Social Sciences and also by the special column “Selected Achievements Made by Projects Supported by National Social Science Fund” on Guangming Daily. In June, 2014, when applying for publication supported by “Library of National Social Science Fund Achievements,” we added to it a part of what we achieved under my charity theory research project “A Study of Innovation of Assistance Fund Raising Modes and Methods” supported by Shandong Province Charity Federation in 2013. Besides me, the chief scholar in charge of the two projects, the other members of our research team include Qin Li, Gongjing Gao, Weiwei He, Yanzhuo Deng, Jianjun Dong, Xueping Ren, Xiao Wang, YunhuaWu, Yanbin Cheng, and Liyang Feng, who each have collected relevant literature and first-hand data and completed writing the chapters respectively according to our labor division, some of which are the outcomes of collaboration between them. From our cooperative research to our application of the achievement for publishing as a contribution to “Library of National Social Science Fund Achievements,” and to its final publication, we revised and improved our manuscript three times. In the whole process, all the participating scholars, in a display of team spirit, joined hands to bring our research work to satisfactory completion, each having made his or her contribution. We are grateful to National Office for Philosophy and Social Sciences and the reviewers of our manuscript for their recognition of it and accepting it into “Library of National Social Science Fund Achievements,” which is a great honor to us. Our thanks are also due to Director Genxing Tong and Editor Ruifen Xie of Social Sciences Academic Press for their hard work in helping us to apply for publishing funded by the library and the actual publication of our manuscript, and for their valuable suggestions in editing the manuscript. Each year, there spring up many new phenomena in regard to the charitable undertaking, causing new changes to the variables bearing on it. A study of the charitable givings, which is highly practical and operational, requires a great amount of specific knowledge of laws and regulations, management, economics, and sociology. Notwithstanding our great efforts, as regards some opinions in our achievements as well as some results from and statements of our probing into the charitable donation mechanism, surely they are not free from problems, which call for our further efforts to resolve them and improve our study in future. Any criticism of and suggestion for our work are welcome! Jianguo Gao 30 December, 2014 Shandong University Jinan, Shandong

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Zhu, X., & Song, Y. (2008). A review of studies on donating behaviors abroad. Theory Journal, 11. Zhao, H. (2013). From administrative dominance to pluralism: A study of the operations of charitable organizations. China Social Sciences Press. Zhao, L. (2008). A study of the legal system for public trust. Legal Press. Zi, Z. (2003). The way of giving: A review of modern American public welfare foundations. Shanghai People’s Publishing House. Zi, Z. (2006). The destiny of wealth: An analysis of American philanthropic foundation. Shanghai People’s Publishing House.

Index

A Acceptance of donation, 3, 6, 7 Affiliate marketing, 10 Aiding the disabled, 66 Aid project, 30, 250, 262, 265, 266, 269 Aid to college students’ start-up initiatives, 269 Altruism, 2, 10, 20, 144, 168, 318 American charitable donations, 2 Annual inspection, 135, 149, 193, 195, 316, 317 Annual reports, 9, 99–101, 117, 136, 194, 203, 316, 317 Annual statement, 196 Anti-driving effect, 187 Assessment of charitable organizations, 269 Assistance mechanism, 23, 259, 273, 276, 279, 294 Auditing, 81, 82, 136, 192, 193, 196, 203, 231 Autonomy, 28, 111, 134, 137, 138, 159, 161, 180, 244, 271, 279, 280, 293

B Beneficiary, 3, 6, 7, 24, 48, 56, 57, 72, 95, 104, 115, 116, 118–120, 123, 135, 145, 147, 154, 202, 204, 205, 215, 237, 246, 248, 250, 253, 263, 264, 266–270, 277, 284, 287, 293, 324 Benefit, 3, 5–7, 13, 24, 55, 57, 60, 65, 83, 90, 94, 104, 108, 113, 114, 128, 153–156, 158, 166, 168, 171, 177–179, 181, 186, 190, 205, 209, 210, 212, 215, 219, 230, 237, 240,

244, 245, 248, 255, 287, 290, 306, 311, 312, 315, 323 Bequests, 112, 251, 300, 301 Board, 11, 52, 56, 95, 113, 123–126, 133, 138, 141–143, 145, 146, 150, 152, 154–158, 201, 211, 232, 237, 254, 286, 315, 322

C Call for donations, 56, 57, 211 Charitable activities, 4, 10, 23, 30, 49, 53, 54, 61, 67, 74, 77, 96, 105, 195, 215, 218, 229, 250, 260, 264, 279, 286, 291, 292, 313, 320, 325 Charitable aid, 6, 30, 123 Charitable donation, 1–3, 6–26, 28–31, 40, 45, 47–49, 51–54, 59–64, 66, 68, 69, 71–74, 76–78, 80, 83, 87–90, 93, 107, 112, 117, 118, 130–132, 134, 159, 160, 165–173, 175–182, 184–186, 188–192, 194–198, 200, 202–206, 210, 213–215, 218–220, 223, 230, 232, 235, 237, 238, 242–244, 246, 248, 249, 251, 255, 256, 259, 270, 273, 279, 283, 286, 288–290, 293–295, 297–306, 309–313, 315, 316, 318, 319, 323–325 Charitable donation market, 26, 89, 90 Charitable evenings, 229, 230 Charitable foundations, 6, 11, 27, 62, 69, 93–96, 100–116, 118–120, 125, 130, 133–135, 138, 140, 155, 157, 159, 160, 177, 204, 226, 232, 266, 288, 291, 300, 303, 306, 320, 321

© Social Sciences Academic Press 2022, corrected publication 2022 J. Gao (ed.), Mechanisms of Charitable Donations in China, Research Series on the Chinese Dream and China’s Development Path, https://doi.org/10.1007/978-981-16-6194-5

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348 Charitable fund-raising marketing, 236 Charitable funds, 17, 26, 28, 30, 47, 55, 60, 63, 64, 71, 72, 79, 83, 89, 90, 106–112, 114, 116–118, 123, 128, 130–136, 139, 159, 174, 177, 193, 220, 225, 226, 229, 248, 249, 256, 264, 267, 270–273, 278, 280–282, 287, 291, 293, 294, 323 Charitable information disclosure, 9, 12, 29 Charitable organizations, 1–6, 9–12, 16, 22, 23, 26–30, 42, 43, 59, 62, 64, 66, 93, 94, 107–112, 115–117, 119, 121–123, 126–131, 133, 134, 137–139, 141, 159–162, 172–174, 179, 187–190, 195–198, 201, 202, 204, 216, 219, 223–226, 228–236, 238, 241, 243, 248–250, 253, 256, 257, 259–266, 270, 271, 273, 274, 276, 278–294, 307, 308, 311, 313, 314, 317, 321 Charitable purpose, 4, 94, 133, 160, 248, 289, 310, 323 Charitable service, 22, 95, 116–118, 266, 268, 274, 290 Charitable service institutions, 94 Charitable trust, 64, 248, 323, 324 Charitable undertakings, 53, 106, 117, 179, 180, 189, 210, 217, 218, 223, 235, 246, 311, 313 Charity consciousness, 13, 26, 68, 103 Charity culture, 13–15, 26, 46, 89, 156, 157, 161, 213, 220, 229, 276, 284, 285, 292 Charity expenditure, 118 Charity federation, 25–27, 44, 55, 56, 58, 59, 67, 69, 70, 72, 93–95, 99–101, 108, 110, 112, 114, 119, 120, 122–140, 159, 174, 175, 188, 199, 226, 227, 229, 230, 232, 269, 270 Charity games, 28, 79, 244 Charity law, 4, 31, 129, 160, 195, 220, 291, 311, 315, 317, 323, 325 Charity laws and regulations, 203 Charity organizations, 4, 5, 7, 9, 17, 19, 21, 22, 26–30, 39, 45, 53, 55–63, 67–69, 73–75, 88, 90, 100, 128, 171–175, 177–180, 182, 184, 187–190, 192–196, 198–203, 205, 214, 218–221, 223, 225–227, 234–239, 242, 244, 246–253, 255, 256, 277, 279, 290, 307–322, 324 Charity performances, 18, 79

Index Charity resources, 111, 118, 161, 162, 172, 173, 214, 233, 249, 269, 286 Charity responsibility, 169 Charity sales, 153, 244, 251, 318 Charity supermarket, 129, 262, 263, 288, 289, 299 Children of migrant workers, 266 China aging development foundation, 189 China charities aid foundation for children, 101, 102, 225, 263, 265, 274, 277, 280, 293 China charity federation, 11, 44, 55, 56, 69, 77, 78, 88, 89, 94–96, 100, 108, 119, 120, 123, 124, 129, 131, 139, 140, 186, 187, 197, 233, 248, 262, 268, 269, 277 China charity information center, 2, 9, 299, 302–304, 316, 317, 319, 325 China charity transparency, 199, 202, 250 China children and teenagers foundation, 102, 119, 227, 268 China disabled persons federation, 187 China education development foundation, 189 China entrepreneur health project, 266 China foundation center, 97, 98, 103, 105, 198, 199, 203, 289, 314 China foundation for poverty alleviation, 56, 99, 101–103, 112, 119, 120, 135, 186, 189, 224, 234, 242, 264, 265, 274, 281, 282 China medical foundation, 266 China population welfare foundation, 102, 119, 268 China red cross foundation, 100, 102, 108, 112, 201, 268 China social welfare foundation, 96 China welfare fund for the handicapped, 53, 99, 102, 119, 135, 189, 263 China women’s development foundation, 119 China youth development foundation, 18, 55, 96, 99, 102, 103, 107, 112, 116, 119, 120, 135, 201, 226, 227, 232, 268, 319 Civil society, 5, 23, 132, 161, 253, 285 Codes of practice and standards in the charity industry, 316 Collecting donations online, 197 Common crises, 83 Community foundations, 96, 97, 278, 288, 291, 305

Index Comprehensive coordination, 31, 307, 310, 324 Contract law, 191, 192, 195 Cooperative fundraising, 225, 256 Corporate donations, 10, 19, 31, 59, 60, 88, 90, 145, 180, 181, 183, 238, 241 Corporate donor, 100, 173, 237 Corporate foundation, 56, 96, 97, 104, 291 Corporate income tax law, 16 Corporate social responsibility, 10, 238 Credibility, 12, 19, 28, 57, 60, 62, 74, 75, 90, 102, 106, 112, 134, 147, 150, 156, 157, 159, 160, 162, 171–173, 177, 190, 198, 201, 202, 221, 225, 235, 238, 250, 252, 278, 293, 313 D Delimitation of property rights, 322 Development-oriented donations, 305, 324 Direct donation, 10, 55–57, 69, 182, 184, 186, 195, 232 Disadvantaged groups, 69, 84, 117, 123, 128, 138, 234, 263, 264, 266, 285–287, 292 Disaster relief, 5, 26, 27, 46, 49, 51, 55, 66, 74, 77, 80, 89, 104, 116–121, 123, 192, 213, 228, 248, 264–267, 269, 271, 273, 286, 293, 303, 323 Donation, 2–4, 6–22, 24–31, 39–64, 66–90, 93, 94, 99–102, 104–110, 112, 117, 118, 128, 130–132, 134, 135, 141–151, 153–158, 161, 167–198, 200–220, 223, 224, 226–242, 244, 245, 247, 249–252, 254–256, 260, 263, 264, 268, 270–272, 283–285, 288, 297–306, 309–311, 313, 315–319, 322–325 Donation consciousness, 28, 165, 205 Donation contract, 112 Donation mechanism, 3, 24, 45, 107, 294 Donation-raising mechanisms, 22, 30, 57, 208 Donations of heritage, 6 Donors, 1–4, 6, 7, 9, 12, 15, 17, 19, 21–26, 29–31, 39–41, 48, 51, 55, 56, 60–62, 64, 70–74, 76, 78–82, 84, 86–88, 90, 95, 99, 101, 109, 112, 120, 125, 128, 134, 142–145, 147–150, 152, 154–158, 160, 168, 171, 172, 175, 178–180, 182, 185–188, 190, 192, 197, 201, 208–210, 215, 216, 220, 223–233, 236–248, 250–256, 271, 273, 282–284, 286, 288, 297–300,

349 302, 306, 311, 313, 315, 318, 319, 322–324 Dual management, 102, 111, 202, 307

E Economic benefits, 177, 178, 247 Enterprise donations, 10, 16, 26, 47, 48, 52, 53–56, 60, 83, 112, 173, 180, 301, 303 Environmental protection, 5, 118, 168, 228, 261, 267, 269, 275, 283, 286, 292, 298, 305, 306 Equity donations, 31, 48, 64, 184, 249, 318, 322, 323

F Family foundations, 96, 301 Financial reports, 73, 122, 136, 139, 196, 203, 282 Financial statements, 196 Fiscal appropriations, 97, 108, 130 Fixed sum was for fixed purpose, 79 Foreign-owned enterprises, 303 Form 990, 196 Foundation, 4, 6–8, 10–13, 16–19, 27–29, 31, 43, 56, 57, 64, 67, 74, 77, 94–109, 114–120, 135, 136, 140–159, 167, 174–176, 182, 186–188, 192, 194–196, 199, 202, 203, 214, 216, 218, 219, 223, 227, 228, 230, 233, 235, 238, 242, 244, 248, 253, 255, 261–263, 265, 266, 268, 270, 271, 273–277, 280, 284, 287–289, 291–294, 297, 300, 301, 303–308, 313–316, 319, 322, 324 Foundation donations, 112 Foundations set up by individuals, 104 Foundation transparency index, The, 314 Fraudulent donations, 192 Fund-raising, 9, 12, 17, 18, 28, 30, 76, 99, 241, 284, 318 Fund-raising information, 30, 99, 153, 158, 242, 244, 250, 251, 284 Fundraising mechanism, 11, 27, 28, 58, 107, 108, 121, 130, 131, 139, 141, 147, 149, 154–156, 161 Fund-raising organizations, 94, 120, 320 Fund-raising strategies, 11, 236, 238, 239, 245, 253, 255–257, 318 Fundraising way, 256

350 G Gift tax, 12, 160, 179, 187 Ginkgo fellow program, 117 Governmental supervision, 19, 190, 191, 200, 204, 218, 220 Government-run foundation with private support, 96 Grassroots charitable organizations, 140, 274 H Happiness project, 119, 268 High value donations, 27 High-volume donation, 10 I Incentive, 11, 14, 16, 18, 19, 26, 29, 61, 62, 69, 72, 82, 86, 126, 127, 138, 154, 155, 158, 165, 171, 183–187, 189, 190, 204, 209, 210, 218, 219, 226, 278, 324 Income tax, 4, 15, 29, 73, 83, 154, 180–183, 185, 186, 188, 190, 303, 310 Independent foundations, 96 Independent fundraising, 225, 256 Individual donations, 6, 10, 26, 61–63, 66–69, 87, 90, 112, 131, 144, 145, 166, 171, 180, 185, 186, 192, 229, 238, 239, 241, 284, 301 Individual income tax, 61, 69, 86, 185, 190 Individual income tax law, 61, 69, 73, 185 Industry self-regulation, 204 Informal mutual benefit norm, 155, 156 Information disclosure, 9, 12, 29, 95, 150, 157, 159, 161, 193, 194, 196, 197, 201–203, 244, 250, 256, 316, 317 Information platform, 31, 121, 180, 198, 213, 250, 286, 316, 324 Initial capital, 95, 104, 108, 109, 113–115, 142, 278 Initial fund, 103, 111 Institutions, 6, 7, 11, 17, 19, 39, 40, 42, 43, 45, 62, 64, 66, 71, 77, 78, 85, 88, 96, 111–113, 115, 123, 125, 127, 131, 132, 138, 170, 192, 231, 233, 253, 255, 261, 270, 285, 300, 304, 312, 313, 315, 318–322 Intermediary organizations, 9–11, 17, 93, 159 International charitable organizations, 127, 131, 139 International NPOs, 161

Index J Joint fundraising, 224, 225, 256

L Large state-owned enterprises, 26, 47 Law of the people’s republic of china on donation for public welfare undertakings, 5–7, 39, 40, 185, 192–195, 244, 245, 247, 261, 270 Legal liability, 192 Legal person, 101, 110, 123, 149, 278 Legal property, 6, 47 Level of donations, 175, 208 Local public fundraising foundation, 308 Love parcel program, 120

M Management cost, 109, 134–136, 226 Management mechanism, 17, 126, 256 Marketization, 19, 318, 320, 322 Mechanism of mobilizing donors, 16 Medical services, 123, 270, 277 Monitoring and managerial, 316 Monitoring and transparency mechanisms, 324 Motivations to donate, 84 Multi-level management, 132, 137–139

N Named funds, 108, 109, 130 Narada foundation, 96, 104, 114, 117, 120, 121, 261, 265, 275, 306 Natural persons, 6, 39, 40, 61, 64, 95, 97, 101, 102, 184, 185, 233, 244, 245, 261 Non-cash donation, 181, 184 Non-governmental charity organization, 17, 29, 31, 56, 67, 88, 171, 188–190, 193, 220, 325 Non-governmental enterprises, 51, 53, 57, 88 Non-governmental sector, 5, 55, 105, 140 Non-profit organization, 3, 4, 27, 59, 93, 106, 122, 123, 130, 308, 313 Non-targeted donation, 79

O Officially-run non-profit organizations, 171 One day charity, 63, 67–70, 72, 75, 76, 112, 132, 133, 170, 232

Index One foundation, The, 201 Open and transparent, 10, 136, 150, 159, 211, 227, 231, 315 Operational foundations, 96, 97, 136, 291 Organization self-discipline, 16, 29, 204, 219, 220 P Participatory fundraising, 229, 230, 256 Philanthropic preferences, 105, 306 Phone calls for donations, 224 Popularity, 109, 111, 144, 157, 158, 227, 241 Poverty alleviation, 26, 62, 96, 104, 107, 117, 119, 121, 123, 189, 194, 214, 215, 228, 242, 250, 263, 266, 269, 271–273, 275, 277, 281, 283, 286, 294, 303, 305–307, 311 Preferential tax, 12, 29, 183, 184, 188–190, 219, 220, 285, 291, 293, 294 Preservation and increase in the value, 134 Pre-tax deduction, 83, 182, 183, 186, 188, 310, 311 Private foundations, 11, 28, 31, 95–97, 147, 291, 300, 303–305, 320 Private non-enterprise, 4, 196, 233 Professionalization, 256, 290, 318, 320–324 Project hope, 16, 77, 186 Public affairs, 207, 211, 306 Public assistance, 259 Public finance, 6 Public foundations, 27, 29, 45, 64, 95–97, 99–105, 107, 109, 110, 112, 114, 116, 117, 120, 135, 139, 140, 142, 153, 159, 174, 196, 203, 204, 271, 274, 275, 303–305, 308 Public media, 237, 251 Public sector, 130, 306 Public supervision, 197, 211, 225 Public welfare, 2, 5–7, 10, 11, 14, 16, 17, 19, 26, 39, 40, 47, 53, 55, 64–66, 71, 77, 89, 94, 99, 100, 104, 117–123, 135, 140, 147, 150, 154, 158, 160, 173, 175–179, 182–186, 188–190, 192, 194, 196, 199, 202, 205–207, 210, 215, 220, 224–226, 228–231, 233, 235, 236, 244, 246, 248, 249, 251–254, 256, 260, 261, 264, 265, 270, 271, 274–278, 280, 282–284, 288–291, 293, 294, 303, 309 Public welfare donation, 12, 14, 29, 58, 59, 64, 154, 178, 181, 183, 184, 186, 188–190, 196, 224, 242

351 Public welfare undertakings, 5, 7, 40, 47, 53, 65, 69, 72, 73, 78, 79, 95, 180, 182, 183, 185, 189, 192, 197, 205, 206, 208, 210, 211, 213, 214, 230, 231, 245, 246, 260, 261, 269

Q Qualification, 137, 183, 186, 188, 190, 196, 225, 233, 235, 320

R Raise, 11, 30, 45, 46, 60, 68, 90, 96, 97, 112, 123, 128, 130, 132, 133, 142, 152, 154, 174, 190, 213, 225, 227, 233, 237, 244, 256, 259, 274, 280, 284, 299, 312, 318 Red cross society of china, The, 45, 78, 101, 120, 187, 189, 198, 233 Regional foundations, 98, 99 Registration and management governmental organ, 140 Regulation on foundation administration, 95, 103, 135, 140, 143 Related transactions, 195, 250 Relief modes, 30 Reports on charity transparency, 194 Right to name, 112

S SARS Crisis, 77, 78, 85, 87 Schools for children of migrant workers, 275 Seedling medical aid program, 284 Semi-administrative operation, 138 Semi-governmental organization, 123 Small donors, 225 Smile train, The, 131, 262, 268, 277 Social assistance, 6, 12, 24, 77, 78, 83, 96, 106, 117, 119, 122, 247, 259, 286, 292, 309, 311 Social benefit, 7, 103, 158, 237, 292, 293 Social donations, 9–11, 15, 18, 26, 27, 43, 45, 48, 51, 61, 63, 77–84, 87, 97, 99, 104, 107, 130, 141, 144, 145, 147, 154, 155, 170, 175, 177–179, 183, 186, 189, 193, 212, 223, 238, 241, 299, 309 Social exchange theory, 21, 178, 244 Social groups, 5, 6, 47, 96, 113, 118, 159, 259, 261, 262, 264–267, 313 Social image, 157, 178, 189, 238

352 Social network, 28, 150, 152, 156, 319 Social organizations, 2, 4–6, 39, 40, 62, 77, 78, 89, 93, 96, 97, 102, 106, 107, 109, 122, 123, 140, 152, 161, 171, 182–185, 187, 188, 194, 195, 200, 216, 220, 223, 233–235, 260, 261, 270, 274–278, 309, 310, 316 Social participation, 52, 73, 89, 160 Social responsibilities, 2, 12, 13, 47, 49, 52, 53, 85, 86, 105, 151, 155, 160, 169, 177, 178, 190–192, 220, 236, 240, 243, 249, 279, 285 Social service, 5, 21, 94, 128, 140, 248, 261, 288, 290, 298, 299, 306, 309, 321 Social supervision, 1, 12, 19, 29, 78, 81, 162, 165, 190, 194–198, 200–202, 204, 212, 218–220, 231 Social trust, 8, 10, 28, 74, 81, 156, 158 Social work, 255, 320–322 Sources of funds, 110, 130, 143 Spring buds program, 119 Suntech’s “charity fraud”, 172, 197 Surtax system, 179

T Targeted donation, 79 Tax departments, 180, 315 Tax-exempt, 5, 29, 86, 307, 308, 315, 324 Tax-exempt rate for donations, 324 Tax-exempt status, 29, 307, 308, 315, 324 Tax policies, 2, 15, 16, 29, 61, 181, 185, 186 Tencent charity, 242

Index Third distribution, The, 2, 24, 61, 74, 259 Third-party evaluation, 196, 316 Third party supervision, 200 Third sector, 3, 4, 17, 23, 24, 216, 236, 322 Total tax deductions, 29 Trust, 12, 17, 19, 28, 31, 58, 64, 67, 73–75, 116, 119, 135, 136, 147–150, 152, 154–156, 161, 168, 178, 189, 197, 211, 216, 218, 231, 248, 249, 270, 271, 288, 312, 316, 323 Trustee, 119, 166, 248, 323

U University education foundation, 11, 12, 25, 28, 93, 99, 104, 141–159 University foundations, 96, 104, 144, 147

V Valid charity programs, 266 Value-added tax, 15, 29, 181, 183, 187 Venture philanthropy, 30 Voluntary service, 2, 26, 89, 104, 120, 244, 260, 262, 275, 288, 309 Volunteering services for charity, 249

W Walkathon, 229, 256 Water cellar for mothers, 119 Welfare lottery, 26, 64, 65, 89, 107, 245, 319