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Economy

China's nonprofits mushrooming, but lack qualified people

Only one-tenth of the country's foundations are run professionally, expert says

Tencent mobilized WeChat users to donate to its annual online charity event, "99 Charity Day," on Sept. 7 to 9.

HONG KONG -- China's growing economy has given rise to a motley crowd of wealthy people, encouraging the business of giving for social causes. But a lack of expertise is retarding the country's philanthropic undertakings, according to an industry expert.

"At present, talent is a huge challenge," said Wang Zhenyao, dean of the China Global Philanthropy Institute, a Shenzhen-based training school founded by five entrepreneurs-turned-philanthropists, including Bill Gates, Ray Dalio and Niu Gensheng, to nurture skilled volunteers in China.

Wang Zhenyao

Help wanted

Wang said the number of qualified heads or managers of charities has failed to match the speed with which charitable foundations are springing up across China. Over the decade to 2016, their number more than quadrupled to 5,545.

The growth of nonprofit organizations is largely driven by private foundations, whose number jumped over tenfold during the period, compared with 123% growth for public entities, according to the China Foundation Center.

Wang estimates China will need roughly 50 million of professionals to staff its philanthropic sector, using the U.S. as a benchmark. Currently there are only 7.63 million people working in various kinds of social organizations in China, some of which may not count as philanthropies.

His observation is echoed by Roy Chen, CEO of Grace Financial, a Hong Kong-based multifamily charity office. Chen told a forum on Sept. 21 that the dearth of specialists is the No. 1 bottleneck to efficient channeling of charitable money in China.

"On the whole, foundations in China are still in their nascent stage of development," said Wang. adding that only a tenth are run professionally -- meaning they make disclosures about their governance and finances, conduct research and assess the impact of their initiatives.

Even within that 10%, the quality varies. "A lot of foundations still have huge room for improvement," said Wang. "The more established ones are better, but the newer ones are still learning the ropes."

The China Foundation Transparency Index, which ranks 6,266 Chinese foundations against a checklist of transparency indicators, stood at 48.5% as of October 19.

Gifts by mainland Chinese philanthropists over the past decade have centered on disaster relief and improving access to education, according to a report by the Los Angeles-based Global Chinese Philanthropy Initiative. Although ethnic Chinese in the U.S. also prioritize education, their interests have expanded to areas such as health and science research, the arts and culture.

"Maybe it's a matter of progression," said Victor Kuo, one of the authors of the report, suggesting it will take some time before the practice of "giving with measurable impacts" becomes mainstream among mainland philanthropists. He noted that many Chinese donors are motivated by sectoral interests, affiliation and pragmatism, rather than creating a social impact.

Projects such as the Lao Niu Foundation's undertaking to plant 40 million trees in Inner Mongolia to halt desertification are rare. Created by Niu Gensheng, the founder and former CEO of China Mengniu Dairy, the foundation received almost all the proceeds from the Hohhot-based dairy product maker's initial public offering in Hong Kong in 2004.

Keep giving

Aside from rising wealth, greater support from the central government has spurred philanthropy in China, said Wang, who worked for 22 years at China's Ministry of Civil Affairs, during which time the country's Charity Law was enacted.

The law was conceived in 2004, passed in March 2016, and implemented in September of that year. It streamlined registration and fundraising procedures for nonprofit organizations, and improved tax incentives for charitable foundations and corporate donations by waiving corporate income tax on charitable donations exceeding 12% or more of a company's profits.

It also provided a legal framework for approved internet companies, including Alibaba Group Holding's affiliates, Baidu and Tencent Holdings, to raise and manage funds for charity.

These tech players are seen as crucial to the growth of China's charitable sector because of their ability to make nonprofit organizations more transparent and facilitate online payments. Tencent, for instance, mobilized over 12 million WeChat users, who donated a total of 829.9 million yuan ($125.2 million) from Sept. 7 to Sept. 9 during its annual online charity event, "99 Charity Day."

Tencent Chairman Pony Ma Huateng topped the 2016 Hurun Charity List with donations totaling $2.15 billion, while his schoolmate and Tencent co-founder Chen Yidan ranked second, at $615 million.

Wang said the Chinese government has good reasons for promoting the development of philanthropy. If charitable giving rose to 2% of the country's gross national product, that translates to trillions of yuan and 60 million to 70 million jobs, enough to employ 10% of China's labor force.

"Beyond providing relief to the underprivileged and alleviating poverty, [philanthropic enterprises] are highly beneficial for cultivating moral values and social development, too," said Wang, noting the country is still rebuilding from the tumult of the Cultural Revolution of the 1960s and '70s.

He said Chinese presidents from Deng Xiaoping to Xi Jinping have all been positive toward philanthropy. Their attitudes are "very consistent," said Wang. "The government is getting progressive," he said.

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