For years scholars, international organizations, and local nonprofits have called for China’s government to loosen regulations that make it difficult for three million nonprofits to legally register. The central and provincial governments have varied in their treatment of nonprofits with each region adopting their own policies. Over the past year, the Ministry of Civil Affairs (MCA), which governs the social sector, progressed from talking about new laws for the social sector to drafting and submitting them for review. Even so, they admit there is no specific timeline for the approval and implementation of these plans.
In this post we take a look at what laws the MCA proposed and the possible effects they will have on China’s social sector.
China’s 12th Five-Year Plan
In July 2010, an article in Xinhua quoted an officer of the Legislative Affairs Office as saying the draft of a new charity law was “generally written.” Coinciding with these promised laws, the central government prepared for the 12th five-year plan, which mapped out reform from 2011-2015. The major changes proposed to the social sector were:
- The abolishment of the dual management registration system. With this system social organizations receive legal status only after registering with both the MCA and another governmental department.
- New tax deductions for charitable donations. There is little information on what the new tax deductions will include. According to current regulations, a company's charitable tax deductions cannot exceed 12 percent of their total annual profit. Individuals can deduct up to 30 percent of their taxable income. In practice, very few nonprofits, even legally registered ones, can issue a tax-deductible receipt.
- Increased transparency for nonprofits to raise their standards and credibility, including the use of donations.
This proposal proposes clearer checks and balances and does away with the need for a governmental sponsor. Many nonprofits were unable to register in the past because many government agencies were unwilling to risk being responsible for them.
Yet the planning session came to a close, and it is still unclear as to what next steps may be.
Dual Management System
The dual management system seems to be the primary factor holding up this legislation. It is mentioned in three sets of regulations currently under amendment: the Regulation on Registration and Administration of Social Organizations, Regulation on Foundation Management, and Provisional Regulations for the Registration Administration of Private Non-Enterprise Entities.
News sources reported conflicting information regarding progress on the legislation. On July 4 of this year Li Liguo, head of the MCA told the Beijing Times that organizations working in charity, social welfare, and social services could register with them directly. But on August 3, MCA vice-minister Dou Yupei told China Daily that the regulation amendment had only been submitted the previous week. Zheng Yuanchang, also of the MCA said this legislation would cover “nonprofit registration, foundation management, and the registration of private non-enterprise units.”
But some nonprofit leaders doubt the legislation will pass any time soon. Implementing such a law nationwide is a risk and the number of applications could be overwhelming. Instead, there has been smaller scale experimentation. In 2008, Shenzhen successfully dropped its dual registration requirements, becoming the first city in China to do so. Nearly two years later, Beijing has dropped the dual management system in a few of its districts. According to a regulation published in December 2010, social organizations in Beijing’s Zhongguancun district can directly register under the MCA only, except for special cases. (There is no clear definition of what organizations fall in the ‘special cases’ category.) More than 10 social organizations in Zhongguancun have registered successfully; however, the majority were not grassroots nonprofits. We found information about two of the newly registered organizations. One is a research group that supports technology companies and the other is a public foundation.
Is No News Good News?
While scholars and some China watchers would like to see less of the government’s heavy hand in the social sector’s development, not everyone agrees that the new regulations will increase nonprofits’ freedom or provide an open door for the thousands of unregistered grassroots organizations. The Asia Times reports,
There is a belief that with official registration NGOs will face stricter government management, and some studies suggest only NGOs in charity and social welfare will be eligible. As such, 90 percent of the existing NGOs would still have to remain ‘underground’.
That the new legislation will affect so few organizations is somewhat startling since most nonprofits would consider themselves within the MCA’s broad categories of “public benefit, social service, and social benefit.” As a result, many impact-driven grassroots environmental, health, and legal aid organizations may not benefit from the new regulations. Additionally, by eliminating the dual management system, the MCA may feel they need to tighten their governing of NGOs.
Since SVG’s inception, grassroots nonprofit leaders have voiced that their number one need is legal registration. So far, it is unclear whether these new developments will grant them this wish. Yet there is something to be said for the estimated 10 percent who will be able to register and expand their services once the reforms pass. These baby steps may not be giant leaps forward, but they are forward motion nonetheless.