What is behind China’s rise in charitable giving?
The start of charitable giving as a trend in modern China can by pinned on a single date—May 12, 2008, the day an eight-magnitude earthquake hit Sichuan province leaving 70,000 people dead.
Before that disaster, making charitable donations simply didn’t enter the heads of most Chinese people. It was just assumed that the state was responsible for dealing with all problems—especially disasters. But the earthquake changed that. Millions of Chinese citizens from all over the country provided support to the victims, with philanthropic giving in China increasing 30 fold in a single year, from $440 million in 2007 to $16.1 billion in 2008.
“The Sichuan Earthquake was a cultural turning point, because people just wanted to help and give what they could,” says Elizabeth Knup, regional director of the Ford Foundation in China. “The internet enabled it and because there is a much larger middle class now, people thought ‘wow, I as an individual have some agency to make a difference in the life of somebody else.’ Fundamentally, there was a regulatory turning point and a cultural turning point and things just grew from there.”
Philanthropy—in the modern sense of the word—is still relatively new to China’s landscape, but it has taken a firm hold, increasingly amongst middle class urban residents and particularly in the form of company corporate social responsibility (CSR) programs.
On the up
On a global scale, China’s level of philanthropy is still small, despite its remarkable growth in recent years, but other factors are helping to encourage more giving, including a new supportive legal framework and an internet-connected society.
In the past decade, philanthropy in China has increased at an average of 20% year-on year, compared to GDP growth of between 6% and 7%, and total donations reached a new high of $23.4 billion in 2017, or around 0.2% of total GDP, according to a report released by the Asian Venture Philanthropic Network. In the United States, for comparison, charitable giving makes up 2.1% of total gross domestic product (GDP). That means there is huge potential for growth.
Ford Foundation’s Knup says the growth in philanthropy is based largely on two factors, separate from the Sichuan quake. “The first is the economic growth that has taken place here, leaving people with higher levels of disposable income. Second is the regulatory environment. The charity laws that were introduced in 2016, allowed for the establishment of more private foundations in China.”
While private wealth has increased in China over the past decade, there remains a huge gap between private prosperity and private giving. In the World Giving Index of 2018, an annual report published by the Charities Aid Foundation that ranks how charitable countries are, China came 142nd out of 146 countries. And according to The Economist, Chinese giving is only around one-hundredth of what Americans donate per person.
In many countries’ philanthropic sectors, funding predominantly comes from private donations, with corporate giving only representing a relatively small slice of the pie. The opposite is true for China.
Corporate giving in China accounts for a staggering 80% of all philanthropic funding, while in the US only 14% comes from corporations and 80% comes from individuals, according to the Nonprofit Quarterly. That is largely because the framework for charitable giving and disbursement hardly exists in China. At a 2015 ceremony to launch a new degree program in nonprofit management at Peking University, Alibaba’s co-founder Jack Ma said that, “Giving donations to charities is much harder than earning money.”
Giving as a culture
Western philanthropic practices are relatively new to modern China, but the country has thousands of years of history involving charitable giving. Both Confucianism and Buddhism contain the core value of benevolence and the concept of caring and helping others is rooted in Chinese culture.
“Here in China, there is an old saying, ‘Don’t refrain from doing good just because the good deed is minor,” says Pastor Fan, a pastor involved in the philanthropy work of churches in Wuxi. “Buddhist and Confucian values still play a big role in people’s behavior towards other people.”
Charity, however, was one of the things that disappeared along with private wealth for the first three decades after the communist victory in 1949. During those years, the responsibility for helping others shifted almost entirely to the government, and that approach persists.
“With the communist vision of China comes the idea that the government is going to take care of everything,” says a foreign NGO (nongovernmental organization) worker in China.
Yong Lu at the China Research Center says that during that era and to some extent beyond, “almost any recognition of the need for private charity was considered a sign of government failure and was not encouraged.”
It was only when China began to reopen its markets to the world in 1978 that Beijing started to consider ways to balance both public and private efforts in providing social services to its people.
The role of civil society
China’s middle class has become the largest in the world, according to many estimates. Investment banker Credit Suisse estimated the size of the middle class at 109 million in China in 2015, compared to 92 million in the United States, based on possession of assets of between $50,000 and $500,000. This middle class represents enormous potential when it comes to increasing private donations.
“There are so many people in China, that even if every person makes a small contribution, it can easily add up,” says Knup.
“People now have more money than they used to, the education they receive is more multifaceted than before and they have better access to information,” says Zhenxi Zhong, executive director of environmental organization Roots and Shoots in Shanghai. “More and more Chinese people are going abroad these days and their minds are opening up to the possibility of philanthropy being something they can do at home as well.”
A massive level of internet-connectivity in China is another development contributing toward an increased involvement of civil society in philanthropy.
“It is a highly-internet connected country, almost everyone has a mobile phone and almost everyone is on WeChat,” says Knup. “So those technologies have penetrated society on a deeper level than elsewhere. Using big internet platforms, you can really mobilize a lot of people.”
Despite these positive trends, Rory Barrow, a teacher involved in volunteer work, says that many people are still hesitant to help.
“My understanding of the typical Chinese mindset is that it’s important to help your family and your friends, but that’s basically where it stops,” says Barrow. “Much of what is given out of that circle surrounds the idea of saving face and putting a good image out there. A big reason for that is because it is understood that the government will take care of everything else.”
“Familial bonds in China are very strong, so many families question why they should give to a charity instead of giving the money to someone in the family,” says the foreign NGO worker. “As China is a developing country, there is still a great sense of need here.”
Other reasons why private giving in China is at such a relatively low level include a lack of trust in charities, the modern historical legacy and a lack of understanding on how the philanthropic system works.
“There is often a strong fear, particularly amongst the older generations, of appearing prodigal or helping someone and then getting into trouble,” says Barrow. “Many people don’t want to get involved in things that don’t immediately concern them. We can see this in the news stories of individuals getting into accidents in the streets and people are unwilling to help them, for fear of getting blamed in some way.”
The actors in the ecosystem of philanthropy in China are the same as elsewhere—NGOs, corporations, individuals and the state. But the relative importance of each is vastly different. The state and corporations—in the form of CSR programs—play a much larger role in China than in many other countries.
For private organizations, Fan says that there are three main sources of funding available. “The first is direct donations from people in society, the second is through online donations and the third is from the government.”
CSR is a relatively new practice in China. According to the World Economic Forum, between 1999 and 2005, only 22 CSR reports were published in the country, but in 2006 the concept of CSR was added to corporate law and CSR programs have since mushroomed and Chinese firms now dominate.
“In the past, [philanthropy] used to be more centered on multinationals,” says Zhong. “It used to be rare for a local company to give to a charity. It’s becoming more and more important now, especially for business success. People feel that you have to be able to show you’re not just making money, you’re giving back.”
Chinese companies have realized that in order to remain competitive they must promote a positive brand image, and part of that is adopting socially and environmentally sound practices in line with global CSR standards. Positive performance in CSR provides companies with returns in the form of more consumer support.
“Maintaining a good image plays a big role in China, especially for big companies and the government,” says Barrow. “The hope is that charitable giving will improve their public image, but also to create a sense of charitable giving in the people that see it.”
The importance of the state’s role in all sectors of China’s economy and society is undeniable, with philanthropy being no exception. In an effort to boost and better regulate the sector, the government has created a legal framework and provides funding to selected organizations.
“I would say up until the 1990s, the citizens of China really expected all of the social problems to be solved by the state,” says Knup. “And it was only when the state began to realize that they could benefit from the help of NGOs and other grassroots level organizations that the philanthropic sector started to grow.”
“The government needed NGOs to take that step to be closer to the ground,” adds Knup. “The millions of NGOs operating in China are now seen as doing a kind of ‘last mile delivery’ for the government.”
Others have underscored the link between public image and the state wanting organizations to concentrate on certain societal issues.
“A very common thing when I meet somebody at a company that works in interfacing with NGOs and charities is that their business card is labeled ‘corporate social responsibility/government relations’, which tells me that their charitable giving is connected to how the government wants them to direct their funds,” says the foreign NGO worker.
The year 2016 proved to be an important milestone for philanthropic organizations, with the introduction of a Charity Law and later a Foreign NGO Management Law. Before then, these organizations had generally operated in a policy gray area. “There used to be very few regulations for international NGOs in China until this law came along. It really wasn’t a regulated space,” says Knup.
The Charity Law included new registration processes, tax incentives for organizations, an expanded definition of “charitable activities” as well as regulations regarding the management of volunteers and donations.
“I believe that the new laws are a way in which the government is trying to unify the sector and get more companies involved,” says Zhong. “It has opened up a lot of potential funding sources for nonprofit organizations as well.”
The law allowed individuals to more easily establish philanthropic organizations and improves the transparency and efficiency of operations.
While there are benefits to such a legal framework, some organizations still find the registration process lacking in efficiency. “The procedure to start an organization still seems to be more complex than in other countries,” says Kanako Uehara, who works for an animal shelter in Wuxi.
The Charity Law has a broader definition of philanthropic activities than the documents issued by the state, which means that organizations working in particular sectors still find it hard to receive support from relevant government departments. “The main difficulties of starting an NGO in China are in raising funds and navigating government registration,” says the NGO worker.
Philanthropy in China is still in its formative stage, in terms of many factors, including fundraising, the number of organizations involved and attitudes. Issues such as transparency, financial support and accountability have reared their heads.
“Relatively speaking, it’s still quite difficult [to do charity work in China],” says Fan. “There are three main reasons for this. The first is that the policies regarding philanthropy here are not complete. The second is that society’s trust in philanthropy is inadequate. And the third is the lack of recognition or awareness of our work.”
“A lot of the time, private philanthropy is not very transparent,” says Knup. “Usually the people in power—the people who have the money—have a certain power over the people who want the money—the grantees. And if you’re not careful about how you handle that relationship, it can become one that’s not very positive … I think that’s as true in China as it is in the US.”
As with any significant cultural shift, creating a private philanthropy state of mind in China will take time. But young people in China are already more active than their parents’ and grandparents’ generation when it comes to charitable giving and volunteering.
“The sector is really young, and so people are still trying to find their way,” says Knup. What does it mean to be a philanthropist? What is the power dynamic? What is my responsibility? What is the level of transparency and accountability we should have in this sector? What are the values we should hold ourselves to? These are all things that are still in debate.”
“Compared with older generations, young people have a greater sense of participation and donations are more than just providing financial support,” says Qing Gu, a program officer at the Ford Foundation. “The way they engage in philanthropy is much more diversified, such as through social media, artwork and volunteering. It’s more dynamic than what we see in older generations.”