New Policy to Address Corporate Philanthropy in China

Authors

• Pei Bin

  Former Director, China Partnership Development, BSR

Following the 2008 Wenchuan earthquake, many state-owned enterprises (SOEs) began writing big donation checks and competing for national media attention. This trend quickly increased attention on corporate philanthropy in China. At the time, companies thought that the more they donated, the more socially responsible they were. Very few people questioned the authorization of SOEs to make discretionary donations. Nobody asked if it was legal for SOEs to use state assets for charitable purposes. And nobody questioned whether SOEs had an obligation to disclose information on the use of their donated funds and their funds' impacts.

No questions were asked, that is, until recently, when the Tsinghua NGO Research Center reported that nearly 80 percent of the total charitable donations made following the Wenchuan earthquake—over RMB 76 billion—were donated to local governments, who were then expected to provide services for local communities. Following this report, Chinese scholars and the public began questioning, for the first time, the effectiveness and the degree of independence of charitable giving in China.

With the goal of mitigating corruption in China’s philanthropy sector, the State-Owned Assets Supervision and Administration Commission issued a new policy yesterday that aims to regulate how SOEs donate. More specifically, the policy will limit and control disorderly and discretionary donation behaviors, clarify procedures and boundaries of rights for donation approvals, and direct big donations to support public goods that are national priorities.

This new regulation is one step in the right direction, but the development of an independent philanthropic system still has a long way to go. Under the current system, local governments set philanthropic targets each year, and many foundations and corporations are pressured to give to the local governments rather than create their own strategic approach to philanthropy.

Chinese corporations and foundations can learn from their peers in the United States and in other countries on how to be strategic in their giving, instead of simply writing big donation checks. BSR is launching CiYuan (慈源)—a project that will support the development of an independent philanthropy sector in China by increasing the capacity of foundations and the quantity and quality of independent NGOs, and strengthening business support and collaboration. There are huge opportunities in this space if the Chinese can find innovative solutions to address community needs, improve professional management, enhance information sharing and disclosure, build accountability and trust, and strengthen collaboration among NGOs, foundations, corporations, and government.