China’s charity law was finally passed after being in the works for a decade. The law, while imperfect, marks an important milestone. Li Shangjing reports.

On March 16, 2016, the Charity Law of the People’s Republic of China was passed at the Fourth Session of the Twelfth National People’s Congress (NPC), with 2,636 votes in favor, 131 votes against and 83 abstentions. After China’s President Xi Jinping issued the presidential order, the Charity Law will come into effect on September 1. It will bring to an end more than a decade’s worth of legislative process, giving birth to China’s very first comprehensive law regulating charitable undertakings. 

The Charity Law, while imperfect, marks an important milestone. While charity legislation seems to have suddenly accelerated after years of sluggish development, charity practices, in comparison, have been developing at an astounding speed in China during the past ten years or so.

For over a decade, public foundations, non-public foundations and non-governmental public welfare organisations have sprung up at a furious pace. According to public data on the website of China Foundation Center, there are 1,546 public foundations and 3,320 non-public ones as of March 17, 2016. In addition, the total amount donated has risen from less than RMB 10 billion in 2006 to around RMB 100 billion today.

The Ministry of Civil Affairs proposed the drafting of the Law on Promoting Charitable Undertakings as early as in 2004. In 2007, it completed the draft, and by the end of 2008, the Ministry submitted it to the Legislative Affairs Office of the State Council but failed to submit the same to the Standing Committee of the NPC for deliberation. It was not until November 2013 that the Charity Law was included by the Standing Committee of the Twelfth NPC in the list of Category-1 legislative projects for priority consideration.

Prior to the promulgation of the Charity Law, China’s charity industry was mainly regulated by the Law on Donations for Public Welfare Undertakings issued in 1999, the Regulations on the Administration of the Registration of Social Organizations issued in 1998 and the Regulations on the Administration of the Registration of Foundations issued in 2004. Industry insiders have said that these outdated legislations no longer match the developments and practices of public welfare and charitable undertakings in China. 

LIBERALISING PUBLIC DONATIONS

Liberalising the right to raise public donations is one important breakthrough featured in the new legislation.

For a long time, only a handful of government-backed charitable organisations were allowed to raise donations from the public in China. The new legislation aims to break up the monopoly on this right, generating healthy competition in public welfare fields.

According to the new law, a charitable organisation that has been legally registered for two years or longer and operating in compliance with regulations may apply to the civil affairs authority with which it is registered for a certificate proving its public donation-raising qualifications. If, after investigation, the civil affairs authority finds that the applicant has not been given any administrative punishment prescribed by the new law, it shall issue the qualification certificate to the applicant.

The new law also prescribes that the methods to raise donations from the public include placing donation boxes in local public places, holding charity performances, contests, sales, exhibitions, auctions, evening galas, etc., and releasing donation-raising information vial local radio stations, TV stations, newspapers and periodicals and other media.

CHARITABLE TRUSTS 

At the same time, the new legislation has introduced financial instruments represented by charitable trusts, which is considered by the academe as a great incentive to the development of public welfare undertakings. Charitable trusts represent a form of public welfare investment that is common overseas, aiming to preserve and increase the value of public welfare assets. The main idea of such a trust is to conclude contracts to fix the purposes of wealth by law. 

At present, although the concept of public welfare trusts already exists in China, it is only mentioned in the Trust Law and has not really been put into practice. 

The new Charity Law expressly provides that “charitable trusts are public welfare trusts”, and that “where this Law is silent, relevant provisions in the Trust Law of the People’s Republic of China shall apply”, marking the trust mechanism as one of the most important ways to engage in charitable and public welfare undertakings and expressly recognising the status of trust companies as trustees of charitable trusts. This is of great significance in establishing the legitimacy and properness of the engagement in charitable trusts by trust companies. 

Meanwhile, the Charity Law makes it clear that civil affairs authorities are responsible for regulating charitable trusts, which solves the issue of which authorities are responsible for the administration of public welfare undertakings – an issue left out by the Trust Law. Furthermore, the Law requires the establishment of charitable trusts be subject to record-filing, greatly facilitating the development of charitable trusts. 

In short, as summarised by Narada Foundation, the Charity Law has made progress in the following eight aspects: cancelling business administration authorities, recognising charitable organisations without legal person qualifications, appropriately liberalising the right to raise public donations, activating a huge amount of charitable assets by adopting public welfare trusts, prohibiting compulsory administrative requirement for donations, paying great attention to charitable assets, establishing clear rights and responsibilities regarding information disclosure, and vigorously driving the implementation of preferential taxation policies. 

Imperfect it may be, but the Charity Law is a necessity. As Yang Tuan, the Deputy Director of the Social Policy Research Center of Chinese Academy of Social Sciences, pointed out in an article, “The most important tasks of the Charity Law are to straighten out the relationships among the State, the government and the public and to safeguard citizens’ social rights. The key is to let citizens achieve autonomy in accordance with the law and organize themselves in accordance with the law to realize their legitimate pursuits.”