Many individual and corporate donors are interested in supporting charitable projects in China. Unfortunately, making grants to foreign organizations can be challenging, and China’s unique legal environment creates an additional layer of complexity to the process. As it stands today, civil society there is underdeveloped and heightened governmental regulations can be difficult to navigate. Cultural misunderstandings and language barriers also routinely complicate relationships with local organizations. The philanthropic process is further convoluted by US regulations governing international grants.
Kordant Philanthropy Advisors published a new guide that lays out some of the issues faced by donors in making grants to organizations in China and how they can be addressed. Some of the main issues donors should consider include:
Registration and Types of Organizations
Since 1994, civil society groups have been allowed to register and operate legally in China, provided they have a government sponsor. However, nearly 25% of these organizations are registered as businesses as finding an official patron is not easy. Grantmakers will need to differentiate between the various types of organizations and adjust their due diligence process as some organizations choose not to share sensitive documents such as financial statements.
In March 2010, the Chinese State Administration of Foreign Exchange (SAFE) issued a circular that required all local Chinese organizations receiving foreign contributions to open a special bank account authorized to receive overseas donations. The process to open the account is onerous and time consuming. As a result of this regulation, a large number of small, unregistered organizations (or those registered as businesses) are no longer able to receive foreign donations directly.
Corruption and Lack of Transparency
Distrust and suspicion, especially of state-run nonprofit organizations, have grown among the general public. Misuse of funds is a primary concern for many grantmakers. The Foreign Corrupt Practices Act (FCPA) in the US puts onus of due diligence and verification of the use of funds on the donor, and grants to GONGOs with current or former government officials at the helm can be especially tricky.
Government Control and Direction
The state has gradually made space for non-governmental organizations but they have also put regulations and procedures in place to ensure state control and scrutiny.
Language and Cultural Issues
The language used to describe organizations in China can be complex and confusing. Donors interacting with Chinese grantees should also take into consideration cultural issues, including protocols for meetings and events. Donor expectations around transparency, sharing of financial information, monitoring, and evaluation might be regarded as unreasonable or unfeasible, and reflective of a lack of trust by the grantee. Terms can also be lost in translation.
The evolving legal and social philanthropic landscape had made it difficult for grantmakers to support projects in China. However, by remaining sensitive to local needs and recognizing that making grants to China is a unique process, donors can ensure that their philanthropic contributions are invested properly in the vulnerable communities that need it most.
Read the full report, Grantmaking in China: Common Challenges to Giving for International Donors
About the Author
Nishita (Nish) Bakshi is a philanthropy advisor and strategist. She is an expert in international grant making, Indian diaspora philanthropy, and corporate social responsibility. Currently, Nish consults with organizations in the areas of program development, grants management and social impact.