Carnegie Reporter, Vol. 4, No. 4 | Philanthropy in China, page 2

Lately, as private enterprise has grown without causing too much disorder, the Chinese government has slowly begun to loosen its rein, granting approval to an increasing number of charities and nongovernmental organizations, although many have government roots and continuing connections. But at the same time, some of the more independent-minded or controversial NGOs have actually been shut down.

Meanwhile, authorities have signaled that the government cannot pay for all the social services needed by China’s 1.3 billion people. Since 2001, the Ministry of Civil Affairs has supervised the publication of the China Philanthropy Times, a newspaper that promotes the concept of both individual and corporate philanthropy and bestows philanthropy awards. Recently, at the opening of the 17th Central Committee of the Communist Party National Congress, General Secretary Hu Jintao not only encouraged “private sectors to operate educational undertakings” but also said the country’s social security system should provide for basic allowances to be “supplemented by charity and commercial insurance.” In a nod to civil-society groups willing to fill the gaps, Hu also said the government would accelerate the separation of “governmental and nongovernmental functions.”

The government has also discussed what many say is a necessary next step to encourage philanthropy: passage of a law that would require charities to disclose and provide an audited accounting of how they spend their donations. But last year’s measure was shelved and nothing has yet happened to revive it.

Another issue is China’s tax regime, which provides little incentive to give. Neither mainland China nor Hong Kong has an estate tax, so families may preserve their wealth from generation to generation. Neither has a capital gains tax for individuals. Instead of an income tax, the mainland government taxes the salaries of top earners, obligating about 30 percent of the working population to pay (vs. about 50 percent in years past); it allows taxpayers to deduct 2 percent of their salaries for charity and there is talk of raising that to 12 percent, according to Reuters. In Hong Kong, individuals can deduct up to 25 percent of their salaries for charitable contributions. But few people pay income taxes anyway, and as in many fast-developing countries there has been little enforcement.

What has prompted the Chinese to give is worldliness. Hong Kong is the base of most of China’s big philanthropists, including Li. “The wealth here is older and more sophisticated,” Peralta says, thanks to Hong Kong’s long stretch as a British Crown Colony. Many wealthy Hong Kong Chinese—not just Li—have been giving for years. And they haven’t been shy about taking credit: Their names adorn buildings and colleges at several universities in Hong Kong, for example.

Peralta says that philanthropy is “catching on” in mainland China, but that the amounts involved remain tiny. “The gifts are more high-profile there because it’s new, but until recently they had to be careful not to attract investigations about corruption,” he says. “Philanthropy had an association with corruption in the past.” Now, experts say, being successful is starting to be defined in a way that includes philanthropy as well as the right clothes, car, and social activities.

That’s not to say that the dynamic of giving in China, Hong Kong included, is the same as in the U.S. Generally, for example, the receiver announces the gift, because the giver must seem altruistic and humble.

Nor will “competitive philanthropy” take root in China the way it has in America—with rich individuals vying to top one another with gifts. In China, a wealthy family would never vastly overstep its position with an outsized donation: Stanley Ho, worth an estimated $9 billion, would not out-give Li Ka-shing.

Another distinction is that while philanthropy in America is frequently aimed at fostering social change, the Chinese prize social harmony and stability, and the bulk of their gifts go to safe, non-controversial areas like education, poverty alleviation and basic health care. Global warming would be out, as would AIDS and women’s causes.

Here, too, Li seems to be leading Chinese philanthropy. His gifts, an estimated $1 billion to date, have created Shantou University near his hometown in rural China, established health research centers, and set up medical clinics for China’s poor and disabled, and for cancer victims, according to the Chronicle of Philanthropy. He has also given money to an oncology research program at the University of Cambridge in the United Kingdom, supported controversial health measures like the use of palliative pain relief medicines, and donated to charities in Australia, Europe, North America, and Singapore.

Seeing how philanthropy develops in China won’t be easy, though. Charitable foundations created by Chinese philanthropists are completely opaque, with few reporting or auditing requirements and no requirements to give money away. “They are black boxes,” says Peralta. “You have no idea about the sources of the money or how it’s doled out. It becomes a multipurpose vehicle—they commingle business, charity, and personal aims.” Indeed, in January, the National Basketball Association formed a Chinese entity with the Li Ka-shing Foundation as an investment partner alongside the Walt Disney Company, the Bank of China, and two other business groups.

So the big-givers lists and the numbers collected by publications and consultants may be a tad less revealing than perceived. Certainly, there are many wealthy Chinese who have yet to join the new philanthropic class. Still, as the consumer society grows, when a history of this period is written Li may not only be linked with Deng Xiaoping but also compared to Andrew Carnegie.

Read about how charitable giving by individuals is emerging in China in the wake of the devastating May 13, 2008 earthquake.

Judith H. Dobrzynski, a former a senior editor at The New York Times, Business Week, and CNBC, is a writer based in New York.