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The past, present and future of Chinese philanthropy

Giving in the People’s Republic of China

By Professor Peter VogelPeter Vogel and Malgorzata Kurak

For centuries, philanthropy flourished in China, taking its inspiration from the values and beliefs of Confucianism, Taoism, or Buddhism. However, charitable giving grew less common with the introduction of communism to China. It was eventually revived by the market reforms of 1978 and, since then, thanks to growing resources and “opening up”, Chinese philanthropy has made a great recovery.

A real turning point in the emergence of philanthropy in the People’s Republic of China was the nation’s response to a devastating, magnitude-eight earthquake that hit Sichuan province in 2008. The public response to this catastrophe resulted in a 30-fold increase in charitable giving by the end of 2008 (USD 16.1 billion) compared to the previous year (USD 440 million).

Giving in China has been steadily growing ever since. According to the 2019 AVPN report, giving grew by 15% in 2015 and 20% in 2016. In 2017, total giving amounted to USD 23.4 billion, an annual increase of 7% and equivalent to 0.2% of China’s GDP.

Individual and family philanthropy

China’s recent rapid economic development has enabled the accumulation of significant wealth in the hands of a small number of individuals. Today, China has the second-highest number of millionaires in the world. It is estimated that the richest one per cent of households owns a third of the country’s wealth, comparable with the world’s highest levels of income inequality. Despite this disparity, the emergence of private wealth has been a critical contributor to China’s rediscovery of philanthropy.

Many of the wealthiest Chinese entrepreneurs and philanthropists have spent significant portions of their wealth to address the most pressing needs of the Chinese nation. According to the Family Philanthropy Legacy Center’s report at the China Global Philanthropy Institute, these newly wealthy individuals seek to create a legacy and to promote social values through family philanthropy.

Giving through private and family foundations is a rather new way of giving in China. With the first family foundation established in 1986, Chinese family philanthropy grew significantly to 268 family foundations by 2018 – contributing 4 per cent of all charitable giving in China. Family foundations in China are not only growing in number but also in size. By 2017, more than six in every 10 family foundations had significantly exceeded the minimum level of funds required (USD 290,000). Nevertheless, most family foundations in China (54 per cent) are classified as small or medium-sized, with assets below USD 1.5 million.

Furthermore, more than eight out of 10 family foundations’ executive directors are professional managers, with only 17 per cent being family members. Since private wealth, inheritance, and family foundations are all relatively new in China, only 20 per cent of family foundations currently involve next-generation family members and, of these, the majority only stretches to two generations. Meanwhile, just 4.2 per cent of family foundations in China have engaged a third generation in giving.

Recent research shows also that family ownership intensifies the effect of institutional pressures on firms’ philanthropic giving, as reputational motives overlay legitimacy concerns. Family philanthropists, therefore, tend to be the most generous givers in China and they place high on the top philanthropists rankings, such as the 2018 Hurun Report. For example, two out of the top three most generous Chinese givers for 2018 had been giving significant amounts through their family foundations, and these are:

  1. He Xiangjian, Co-founder of Midea, gave $1,180m to the He Foundation (donating to the related family foundation), and other charitable organizations;
  2. Xu Jiayin, Chairman of Evergrande Group, gave $540m to various charities;
  3. Lu Zhiqiang, Chairman of Oceanwide Holdings, gave $160m to his alma mater Fudan University, China Oceanwide Foundation (again, donating to the related family foundation and corporate foundation), among others.

Trends in giving

As giving in China continues to grow steadily, new trends are emerging in the sector:

Philanthropy with a global outlook

Chinese philanthropists aspire to make an international impact and, therefore, are looking abroad to increase their global reach. The Chinese government supports this approach as it pushes for China to take a greater role in the international arena.

An example of this is the real estate tycoon couple, Zhang Xin and Pan Shiyi, that donated 15 million and 10 million to Harvard and Yale respectively, providing support for Chinese undergraduates to study abroad. While many criticized them for donating to foreign institutions, the move reflected their willingness to look beyond China to cultivate the next generation of leaders. Since 2018, they have said that they are scanning several other prospective partner schools to expand their scholarship program.

Tech for Good

The tech revolution has had a tremendous impact on the expansion and “opening up” of China. Because private foundations and social organizations are prohibited from public fund-raising, new technology solutions like crowd-funding, online banking and electronic payment platforms have helped to increase public awareness about social causes and substantially raised total giving in China.

With 648 million web-users in China (and growing), online donation platforms, such as 51Give.org, Tencent, Alibaba, and Sina have the potential to transform the philanthropic sector.

New emerging areas of giving

There is a clear emerging trend that reveals an increase in funding for traditionally under-funded causes in China.

For example, the Shunde Foundation for Innovation and Entrepreneurship - a grant-giving organization established in 2017 by He Xiangjian (named China’s most generous family philanthropist in 2018) – has provided USD 45 million to support young entrepreneurs.

Similarly, the One Foundation, established by Chinese actor Jet Li, created a One Lab to support youth-led social purpose organizations that serve local communities.

Another area that is gaining more interest is environmental protection and climate change. The Vanke Foundation, linked to a large residential real estate developer in China, has committed to mobilizing private resources to foster the creation of climate change solutions by China’s growing and influential business entrepreneurs.

Volunteering

Volunteering is also gaining in importance in China. Since the Beijing Olympics and the Sichuan earthquake in 2008, the number of volunteers has increased rapidly.

There is an increasing number of local corporates that are leveraging their business expertise, distribution networks, social capital, as well as engaging their employees in skills-based volunteering, to provide additional resources to maximize social impact.

An example of this is the Beijing Probono Foundation, which acts as an intermediary to connect professionals with non-profits for skill-based volunteering opportunities.

Future outlook

Despite the positive developments within China’s growing philanthropic sector, the challenges facing charitable giving in China are significant. These include a continued lack of transparency and a lack of trust among the public or low pay and poor career prospects that prevent talent from joining the sector.

Nevertheless, as public awareness and opportunities to support social causes increase, the Chinese philanthropic sector may further professionalize, develop the necessary human capital and leverage the use of technology to bring more transparency and achieve greater impact in the future.

China

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