荒诞者共和

Most knowledgeable experts summarize the current situation for NGO’s in China as one of legal uncertainty -- there is no smooth or transparent registration system, nor any legally guaranteed “right” to exist. On the other hand, even NGO’s that have been unable to register admit that Chinese authorities often do not restrict them from carrying out their work. Most unregistered NGO’s, as well as NGO’s registered as corporations, hope that relevant laws will be revised to facilitate registration. This would then enable them to avoid unorthodox and counter-intuitive legal structures.

NGO’s in China, however, whether registered or unregistered, “corporations” or “not for profit,” are clearly multiplying. The main caveat to this observation is that NGO’s which try to broach politically sensitive subjects such as human rights, labor or religion remain few and far between, and constantly risk abrupt closure. NGO’s operating in areas of lesser political sensitivity -- for example environmental education or advocacy, health activities, services for the disabled, or general education -- can usually carry out their activities with relatively few restrictions and little interference.

NGO’s Defined and Counted

Taking a head count of NGO’s in China is difficult, and has to start with the troublesome matter of definitions. The Ministry of Civil Affairs (MCA) variously refers to NGO’s as “people’s organizations” (minjian zuzhi), “non-governmental organizations” (feizhengfu zuzhi), or “social organizations” (shehui tuanti). According to the NGO Research Center at Tsinghua University, these three terms are actually synonymous. Additionally, the term “private non-profit organization (minban fei qiye zuzhi), or “minfei,” provides an even more expansive definition of an NGO in China. Minfei organizations in China can include some hospitals, educational institutes and retirement homes, for example.

According to the NPO Network, a domestic NGO, the category “social organization” can in turn be subdivided into five types: academic associations (xueshu), trade associations (hangye), professional associations (zhuanye), federations (lianhe), and foundations (jijinhui). According to MCA statistics, at of the end of 2001 China had 129,000 “social organizations” and 82,000 “private non-profit organizations.” Experts say there may in fact be around 100,000 “private non-profit organizations” in China, with the number increasing every year.

Another type of organization characteristic of China is the “quasi-governmental NGO” or “government-organized non-governmental organization,” commonly known as the “GONGO” (banguanfang zuzhi). According to MCA, GONGO’s are not required to register, so there is no official estimate of their number. NPO Network agrees that estimating the number of GONGO’s in China is very difficult. The State Department Annual Human Rights Report for China in 2001 reported there were 1,500 GONGO’s at the end of 1998, but others claim this statistic is too low, and perhaps represents only national-level GONGO’s, omitting provincial and county-level organizations. Given that China has 2,000 counties, they may be right.

Unregistered NGO’s, finally, are perhaps the most numerous type of organization. The Tsinghua NGO Research Center estimates that nationwide there are 1,400,000, while NPO Network puts the number at 2,000,000.

Laws and Regulations

The “Regulations for Registration and Management of Social Organizations” were promulgated by the State Council in September 1998. This set of regulations requires that NGO’s be registered with the state. The Ministry of Civil Affairs and local Civil Affairs Departments (at the county level and above) have the authority to register NGO’s.

Not all social organizations must go through the registration process, however. Exceptions include:

local chapters of the eight categories of “people’s organizations” that comprise much of the membership of the Chinese People’s Political Consultative Congress (such as the Communist Youth League or the All-China Federation of Trade Unions);

“social organizations” directly approved by the State Council (such as the China Writers Association or the All-China Journalism Association);

organizations with legislated status (such as the All-China Lawyers Association); and

groups that can be considered “internal” organizations falling within an existing institution, organization or business enterprise.

This last loophole is an extremely important one for many NGO’s that have been able to establish themselves as programs associated with universities.

Amendments to the regulations have been discussed for years, and a specific draft has been pending for more than six months. According to some, the draft rules were due out at the end of 2002. But specific information about what amendments are pending has not been released publicly. One knowledgeable academic expert guesses that the new rules may be promulgated after the next meeting of the National People’s Congress, or by late March. A representative of one foreign NGO, based on conversations he has had with participants in the legislative review process, thinks it may take longer. All knowledgeable interlocutors in China believe that the emergence of the Falun Gong movement, and the government’s crackdown against it, significantly slowed the process of drafting and approving new NGO registration rules.

Accountable to Two Masters

To register under current rules, NGO’s are required to find an organizational sponsor (in Chinese slang, a popo or mother-in-law), which is usually a government agency carrying out work in a similar subject area. An environmental NGO, for example, might seek sponsorship from the State Environmental Protection Administration or a local Environmental Protection Bureau. In the language of the law, this organizational sponsor is called the “professional leading unit” (yewu zhuguan danwei).

Separately, an NGO when registering must also accept the authority of the “registration management agency” (dengji guanli jiguan), usually the local Civil Affairs Department but sometimes the central-level Ministry for Civil Affairs. Both the “professional leading unit” and the “registration management agency” must approve each registration.

The law does provide for redress against government misuse of authority in managing social organizations. Malfeasance or dereliction of duties by either of the two agencies responsible for social organizations can be punishable by criminal prosecution or administrative sanctions. Thus, it is illegal, for example, for an official to seek or accept a kickback (in cash or in kind) for registering a social organization. Less favorable to NGO’s seeking to register is the fact that a registering official can theoretically be held responsible for misconduct on the part of an NGO under his or her authority -- naturally making officials more cautious about approving registrations.

The Ministry of Civil Affairs, the key “registration management agency,” has significant legal power over social organizations. It may issue warnings, order organizational changes or cancel an NGO’s registration if it spots misconduct. Examples of misconduct under Chinese rules include:

Lending a social organization’s registration certificate or official stamp to others;

Refusing to undergo examination or supervision;

Diverting from original intended objectives;

Acting without permission in establishing branches or representative units;

Engaging in for-profit activities;

Misusing NGO funds; or

Violating Chinese law in collecting or using donations. (Membership dues are capped at 10 RMB ($1.20) according to the rules applied to some Chinese NGO’s.)

At times, the attitude of the “registration management agency” will go beyond mere “supervision” and become more explicitly political control. In particular, the article of the Social Organizations Law which gives the “registration management agency” authority to cancel an NGO’s registration if it “diverts from its original objectives,” can be used to exert pressure on organizations that engage in activities government officials find objectionable, or inconvenient. Chinese NGO representatives admit that this provision limits their activities, often forcing them to tiptoe carefully around issues of potential political sensitivity and avoid criticizing the government.

Each year, social organizations face two types of examinations -- one for each “boss.” First, each NGO must, by March of each year, submit an annual report to the “professional leading unit” regarding its activities over the previous year. In addition, by May of each year, NGO’s must undergo an annual investigation by their “registration management agency.”

Although the yearly “examination” process sounds ominous, Chinese NGO’s interviewed by the Embassy had no complaints with what they view as a merely administrative procedure. However, interlocutors were almost universally displeased with the requirement to have an organizational sponsor or “professional leading unit” to register. The single biggest reason that NGO’s give up trying to register is difficulty finding an organization willing to sponsor them.

Is Corporate Registration a Good Alternative?

Despairing of finding a “professional leading unit” to enable legal registration as a social organization, a number of NGO’s in China have taken the short cut of registering as corporations. One such organization’s founder explains that throughout they tried to register the organization under the “Social Organizations Law” for two years. But because the organization was new and unknown, they could not find a sponsor. In the end, the organization registered as a corporation; the process took only one month, and cost 10,000 RMB ($1,200). Looking back, the organization’s leaders say they don’t mind the system of having MCA oversee the work of NGO’s. However, they feel that organizations should not have to find a “second sponsor.”

Taxed NGO’s

In China, even duly registered “social organizations” do not enjoy the special tax-exempt status common in many countries. Instead, most NGO’s are treated as for-profit entities. In fact, according to China’s “Business Enterprise Taxation Regulations,” every financially independent enterprise in China must pay taxes.

Due to their special circumstances, however, and in an attempt to encourage charity giving, the government has taken some steps to give social organizations certain tax dispensations, including:

Exempting interest earned by foundations;

Allowing lower taxation rates on donations that promote public welfare; and

Allowing tax-free donations from abroad if they are routed to humanitarian or poverty-relief organizations approved by the State Council.

In addition, ten large Chinese foundations, including the Youth Foundation, Soong Ching Ling Foundation and Chinese Red Cross, receive special exemptions from taxation.

In short, registered “social organization” NGO’s end up paying some taxes, but generally minimal amounts. Unregistered NGO’s pay no taxes as an organization, of course, but individuals receiving income as a result of their activities should -- theoretically at least -- pay taxes on that income as an individual. (The degree of compliance or non-compliance with individual taxation prevalent in China is an issue beyond the scope of this report.)

The situation for NGO’s registered as corporations is more problematic. In the past, many “corporate NGO’s” were held to an informal standard that was more lax than the taxation regime for genuine for-profit corporations. For example, one such NGO reports that in past years it consistently paid some nominal, minimal tax in the range of a few hundred dollars annually. Another paid about 5% of income in taxes and “sought the understanding” of the tax department. In other words, although the tax rate for a true corporation should in fact be much higher, the NGO was able, on an informal basis, to settle on a lower tax rate.

Recently, however, some NGO’s have reported that they are facing a critical situation – a “crisis of survival” according to one interlocutor -- due to accounting reforms for corporations due to be implemented in 2003, which would make it more difficult for tax authorities to use their own discretion to “turn a blind eye” and not require full payment of corporate tax. Instead, registered corporations would be required to pay tax monthly on all income received. NGOs are still investigating the implications of these new rules for their operations.

Some Chinese academics agree with the authorities that organizations should pay tax if they are registered as companies. However, they also think the tax system should accommodate registered non-profit “social organization” NGO’s -- not only by not taxing their income, but also by allowing individuals and corporations making a donation to a registered NGO to take a tax deduction for their donation.

The NGO Research Center at Tsinghua University points out that 80-90% of Chinese NGO funding actually comes from international sources. The principal reason for this skewed funding situation is China’s lack of an institutional structure for charitable giving. Some experts in China are suggesting that the country should study U.S. 501(c) tax law, so that China can consider this type of legal framework for financing NGO’s and encouraging charitable contributions. A key issue for a 501(c) law in the Chinese context, however, would be enforcement; tax authorities will be loathe to create a loophole allowing corporations to create meaningless tax shelters with phantom employees.

No Framework for Foreign NGO’s

Because the Social Organizations Law does not apply to foreign NGO’s seeking to register in China, the State Council and National People’s Congress are reportedly considering drafts for a “Foreign NGO Law.” In the absence of such a law, foreign NGO’s have also had to perform various feats of organizational gymnastics to set up a legal presence in China.

One route is to seek the status of an “international organization,” which comes with tax and customs exemptions. Aside from the United Nations agencies, however, the only organization known to have followed this route is a Beijing-based multinational organization called the International Network for Bamboo and Rattan (INBAR). The International Water Management Institute (IWMI), a similar organization in mission and structure, decided to establish a “foreign representative office” instead, after learning that registration as an “international organization” would require lengthy procedures and the case-specific approval of the State Council.

Establishing a foreign representative office involves registration with the State Administration of Industry and Commerce (SAIC), and tax and liability rules are similar to those applied to the representative office of a standard foreign corporation. However, similar to the process of registering a domestic Chinese “social organization,” registering a foreign NGO in China as a “foreign representative office” requires a Chinese sponsor. In the case of IWMI, the Ministry of Water Resources agreed to be IWMI’s sponsor. With help from a Chinese sponsor, foreign NGO personnel say that the process of registration itself is fairly transparent and involves relatively little red tape, requiring only 6-8 weeks. Still, most foreign NGO’s also take pains to hire a reputable accounting firm to satisfactorily document to Chinese tax authorities that the foreign NGO’s income comes from foreign donations, not from business conducted in China.

The “foreign representative office” registration approach, however, essentially guarantees that all foreign NGO’s that have registered in China will operate, to some extent at least, as “joint ventures” in tandem with an existing Chinese organization. Not surprisingly, a few foreign NGO’s have decided to forego this route and operate as unregistered entities.

One large international NGO with whom we spoke is still operating in China on an unregistered basis. Starting in the autumn of 2001, the organization began registering with the Foreign Enterprises Service Corporation (FESCO), an organization under the Ministry of Trade and Foreign Economic Cooperation (MOFTEC) which is in some ways a competitor of the State Administration of Industry and Commerce (SAIC), noted above. But that process was later suspended for reasons unknown to the NGO. Regardless of this setback, however, the NGO was able to “register” one Beijing-based Chinese employee as an overseas employee (working on the payroll of the overseas-based NGO). This entitles that person to be paid by the NGO (through FESCO) and to have domestic health insurance.

Clearly, the permutations that can co-exist in the current Chinese system are various and confusing. The main point remains that, absent specific legal provisions for foreign NGO’s, many resourceful foreign NGO leaders are still able to get by and accomplish their missions -- although with plenty of bumps along the way.

Public Perceptions

China Development Brief (CDB) conducted an informal survey of 130 “better-off” Beijing citizens in fall 2002, asking questions about their perceptions of NGO’s. According to a representative of CDB, the results were surprising, with the elite public’s understanding of the concept of independent organizations much greater than expected. Many individuals recognized a number of Beijing’s more active and prominent NGO’s, and were able to give names of others. The representative attributed strong public recognition of NGO’s to the role of the Chinese press, which tends to give extensive coverage to the activities of NGO’s, even small, individually funded ones.

Interviewees were also asked questions about making donations or participating in charitable organizations. In general, they responded that the most trusted channels for making donations were work units, schools, and neighborhood committees. Respondents had made individual contributions for disaster relief, support for the disabled and school dropouts, and poverty relief for Western China, and 95% of those surveyed said they would be willing to donate to such causes again. Few, however, said they would be comfortable donating money or time to smaller organizations.

In contrast, in interviews with several acquaintances, cab drivers, and other non-elite “people on the street,” Embassy staff discovered negative attitudes toward NGO’s, especially in the area of finance. In response to the question, “would you donate money to a non-profit or non-governmental organization doing important work in society?”, numerous people responded they would not. They attributed their response to skepticism about how NGO’s managed their funding. Their perception was that NGO’s were not publicly accountable, and sometimes corrupt in their use of funds. In 2002, a scandal related to financial management at one of China’s best-known GONGO’s, the Youth Foundation, received heavy publicity. A similar recent scandal involving Project Hope (a Chinese organization that assists rural schools in poor regions, not the international health NGO) was also covered in the media.

The Future of Chinese NGO’s: What They Need to Prosper

The institutional problems facing Chinese NGO’s, in particular their uncertain legal standing and scarce funding, greatly complicate the ability of the NGO’s to attract quality employees. Experts say that low social status and low pay prompts many capable people interested in working at NGO’s to go into private businesses or academic institutions instead. While it is not uncommon for NGO’s in other countries to also pay salaries lower than those in the private sector, Chinese NGO’s tend to offer less job security than their overseas counterparts.

Additionally, some analysts note that some NGO’s have been successful largely because of charismatic leaders who play central roles in their organizations. These same analysts point out that when these individuals retire or leave their organizations, the organizations may suffer.

The representative of one domestic NGO hopes the international community will keep interacting with Chinese NGO’s. She suggests that, in order to help build capacity, foreign donors should carry out complete assessments of project results, rather than merely looking at proposed budgets and participating in occasional meetings. She also highlights the need for international organizations to be involved in pushing legal reforms affecting NGO’s. Finally, she emphasizes that it is important for Chinese NGO’s to use GONGO’s and quasi-governmental organizations as a bridge to the Ministry of Civil Affairs in order to achieve legislative reform.

From a foreign NGO’s point of view, the biggest dilemmas facing Chinese NGO’s are their legal, financial and human resources sustainability. Domestic NGO interlocutors share these concerns, but appear to be more concerned about sustainable financing than their tenuous legal status. Many Chinese NGO leaders say that they need to study how to attract funding and institute systems of financial accountability. They also hope that laws will be revised so that both NGO regulation and the registration process are more transparent.

Environmental NGO’s Are Freer: Wave of the Future?

Some foreigners assume that NGO’s in China are few, oppressed, and perhaps underground. This is certainly true for organizations that focus on areas such as human rights, labor, or religious freedom. In stark contrast to this situation, however, NGO’s working in the fields of environment, health, education, and services for the disabled are actually actively welcomed by the government agencies handling these issues. China’s environmental authorities in particular have a generally positive attitude toward environmental NGO’s, because they play a significant role in public education. According to one NGO, the government sees these NGO’s as capable of motivating large groups of volunteers to act for a common cause in non-controversial areas, such as recycling, tree planting or anti-litter campaigns. In addition, national-level environmental officials say they welcome the help of NGO’s and the media in exposing corruption and malfeasance related to environmental enforcement.

In over a dozen conversations with domestic and foreign NGO’s working in the environmental area, Embassy officers did not hear of a single organization that failed to get off the ground -- sooner or later -- or was forced to close due to the inability to legally register. This fact is telling because it debunks the international perception that all NGO’s face political hurdles trying to establish operations. Furthermore, purely administrative obstacles to legal establishment of an NGO do not appear to be a deterrent for most new organizations.

It is still difficult, however, to find government officials willing to talk openly and specifically about NGO issues or the law. Due to the government’s experience with the [FarLongGone] religious movement, freedom of association issues are considered dangerous topics. Therefore, all organizations when registering get the same message -- “don‘t overstep your bounds.” In spite of the restrictive legal environment, experts note that government officials are less negative about NGO’s than before. “Outright hostility has been replaced by a more laissez faire attitude,” says one interlocutor.

Conclusion

While many Chinese NGO’s face obstacles to registration, it appears that numerous organizations find ways to carry out activities either as unregistered entities or as “corporations”. In politically non-sensitive areas, at a minimum, legal barriers do not appear to be deterring would-be organizers from carrying out plans to establish NGO’s. Time will tell how the enforcement of the new tax law will affect such “corporations” and their financial viability. As several interlocutors have suggested, the amended Social Organizations Law may make registration less onerous, or do away with the requirement of a sponsor.

We expect the activism of today’s embryonic NGO’s, and their efforts to improve China’s regulatory framework, will eventually pave the way for future organizations to operate in more politically sensitive areas. Legal authority to operate is a necessary first step on the road to full participation for Chinese civil society organizations.