Where but in China would a private company list contributions to the police and armed forces among its charitable activities? With the government tapping `social forces' to fund social service delivery and an emerging non-profit sector keen to lap up any funding sources it can, corporate philanthropy may well play a significant future role in community and social development efforts. But the present evidence suggests that corporate donations are by no means clearly focused, and charitable non-government organisations are seldom first in the queue to receive them.
The amount of money given away by Chinese companies is already substantial. In the first survey of its kind, conducted last year in Shanghai by the Shanghai Academy of Social Sciences' Sociology Institute, questionnaires on donation policy were distributed to 950 state-owned, collective, privately owned and joint venture companies. Of 503 respondents, 92.5 percent had made donations in cash, goods or services within the last year. This suggests that a majority of companies in Shanghai are engaged in corporate philanthropy at some level – even if it were assumed that the 447 which failed to respond had made no donations at all.
Of the Shanghai respondents, 53 percent had made contributions with a total value below Yn50,000, 36 percent in the range Yn50,000-300,000, 7 percent in range Yn300,000-1m, and 4 percent above Yn1m. This represented an average 0.4 percent of the donors' total business turnover, with private companies donating an average of 0.9 percent and state-owned enterprises less than 0.4 percent. Even if giving is much lower in poorer areas of the country, where the private sector is less well established, it still seems probable that total corporate donations in China amount at least to hundreds of millions of yuan, if not billions.
Where does the money go? Of the Shanghai donors, 57 percent said they had contributed to `poverty alleviation', 32 percent to `social welfare' and 23 percent to `education'. Slightly more than 40 percent was given for disaster relief (and this also features prominently in the examples presented in the table on page 20).
However, what is more remarkable about these examples is that, alongside the occasional tidbit for the army and police, they include several substantial donations, presumably made directly to government, to support basic infrastructure development or repair, such as road building and maintenance. The Kerui company even listed an US$85,000 donation to the Three Gorges dam and reservoir project.
This does not quite conform to rich country notions of corporate philanthropy. Two major factors bear on this. First, in the poorest areas, local governments often lack the resources necessary for infrastructure; corporate contributions are therefore solicited not just to fill gaps for groups with special needs, but to help supply some of the basics that are beyond the government's means to provide.
Second, there appears to have been a well-established tradition, predating the Deng Xiaoping reform period, of government agencies going cap in hand to state-owned enterprises to ask for contributions to new projects. It was not unusual for enterprise bosses to fix a tariff, graduated according to income and status, that all employees would be expected to meet: this much for middle managers, that much for shop floor workers.
Donating was thus not so much a matter of returning something to the community, much less promoting the company's public image, as a question of smoothing relations with officials. It might even be regarded as an informal tax. A more recent variant of this system, introduced in the early 1990s to `alleviate poverty,' was the twinning arrangement whereby all government departments and state enterprises were assigned poor areas – ranging, according to the size of the work unit, from a couple of villages to several counties. This almost certainly accounts for poverty alleviation topping the Shanghai donor list of causes.
Need for self promotion
In short, corporate giving, like pretty much everything else in China's recent history, has until now been largely directed by government; and the more recent appeal to `social forces' needs to be seen in this context. A good relationship with government officials remains an important asset, which looms large on the agenda of many corporate donors in both Chinese and foreign-invested enterprises.
However, in an increasingly market-driven economy, it seems likely that corporate giving will be de-linked from government, becoming progressively more autonomous but also more driven by corporations' need to promote themselves and their brands.
The Youth Foundation's Project Hope has, in this as in several other respects, served as a kind of bridge from government-led to market-led charitable work. It is a half-way house to a non-governmental organisation (NGO) and half way to voluntary, as opposed to government-directed, giving. It has been singularly successful in receiving corporate donations. The China Charities Federation, Poverty Alleviation Foundation, Soong Qing Ling Foundation and Family Planning Association have also attracted substantial corporate support; but most other government-initiated organisations and more autonomous groups do not yet have well developed corporate fund-raising programmes. It appears, therefore, that most corporate donations still go directly to government agencies.
Might this now be set to change? This was one of the implicit questions posed by an October 2000 conference on enterprises and public welfare, hosted by the Shanghai Pudong Social Development Foundation, the Chinese Academy of Social Sciences' Social Policy Research Centre and the Shanghai Jianguo Foundation. The event brought together researchers, corporate donors and a range of foundations and NGOs mainly interested to learn how to access corporate funds. It was at this conference that the Sociology Institute presented its philanthropy survey.
Another presentation, by the Hong Kong Bank Foundation, showed the potential for a more thoughtful form of giving than merely writing a check. As the first `corporate founder' of the China Charities Federation, the bank did write a substantial check – for HK$25m (US$3.2m). It has since set up a Hong Kong Bank Foundation-China Charities Fund which provides a guaranteed 10 percent annual interest to sup-port projects through the federation's regional affiliates. But since 1997 the foundation has also been introducing to the Mainland an approach, developed in Hong Kong, to supplement grant making with `matched giving' and volunteering schemes for bank employees. Care for older people is the framework within which this operates.
Thus, through provincial charity foundations, the Bank Foundation contributes to establishing retirement homes, which staff in the bank's 10 Mainland branches may further support with their time or personal donations. Meanwhile, provincial programmes aim to retrain laid off o workers as care staff for the homes, and the Bank Foundation directly supports Hong Kong-Mainland training exchanges for care staff and management. The entire programme therefore aims to add value through, complementary activities which may have a useful impact on staff morale. It also helps to build a useful public image for the bank, as it positions itself for the liberalisation of China's financial sector that will follow WTO accession.
A more systematic approach
This kind of approach is several notches up the evolutionary scale from the existing philanthropic activities of Chinese companies, but the seeds of more systematic donation policies may already be germinating. The Sociology Institute found that 61 percent of Shanghai donors had assigned corporate giving to a specific department, and some had established community service divisions. Given the right legal and tax framework, some of these may evolve into corporate foundations.
One of the conference's sponsors, the Jianguo Foundation, appears to be the first and only private foundation to be set up in China by an entrepreneur, Mr Qu Jianguo, who made his fortune in bio-chemicals, transport and real estate. Established in 1993, the foundation runs school drop-out and university scholarship programmes, and several projects to assist older people. It also maintains a website where needy individuals and organisations can appeal for funds. Qu has yarned a small place in history through this initiative which may, perhaps, show the shape of things to come.
Qu treated the Shanghai conference to a presentation exploring options for trust fund management and investment. This is a subject close to the heart of many government-initiated foundations (see box). It does little, however, to address the fund-raising concerns of smaller and more autonomous organisations, which found no easy formulas here for opening the corporate purse.
They did, however, have a chance to eye up the opposition. Several senior managers from Shanghai hospitals were in attendance, and one hijacked a closing `report-back' session to outline his own vision of future funding for his institution. In the US, he said, more than 90 percent of hospitals' capital expenditure comes from donations, compared with less than 5 percent in Shanghai. Pie charts illustrated the point, leaving every-one in no doubt that the US model was the one he intended to pursue.
Good exposure for donors
Hospitals, universities, theatres and art galleries can offer corporate donors a good deal of exposure – notably, by having a ward or building named after them. The 1999 law on donations explicitly enshrines this as a donor's right. As corporate giving becomes more market driven, these are likely to be frequent beneficiaries, particularly in the most affluent, metropolitan areas.
Philanthropy of this kind has limited redistributive potential, and may even under-line regional disparities. The richest areas are home to the richest companies, and funds are naturally drawn to prestige institutions. Few market leaders would want their brands associated with a poor, provincial college or, for that matter, with a little group helping recovering drug addicts or psychiatric patients.
Corporate giving may also help to cover government's retreat from sectors, particularly public health, where many would argue that it should be investing more, not less. It remains to be seen whether budgetary savings from `social forces' will be diverted to poorer areas, or whether they too will increasingly have to rely on the amount of social force that can be mustered locally.
Meanwhile, small, grassroots organisations often depend for survival on knowing a local entrepreneur willing to help out. They might do better to develop a funding constituency among the general public, but few are yet confident of their legal right to do so, and the government has not yet given any clear signals on the subject.
This article first appeared in China Development Briefing, published quarterly by China Development Research Services.