Philanthropy in China is typically done on the quiet. Activities take place behind the scenes, far from the media spotlight. But Jack Ma is not known for his reticence. In late September, the Alibaba Group chairman and CEO broke with tradition by announcing that his firm would donate US$5 million to the micro-finance bank Grameen Trust to help establish Grameen China.
Ma explained the move in an internal memo to employees: "Money and wealth are two different concepts. If you have money, but have not turned this money into an experience to elevate your own or other people’s level of happiness, then you may very well only possess a lot of symbols and a mountain of very colorful pieces of paper."
Ma isn’t the only businessman involved in philanthropy. Since 2005, entrepreneurs such as Niu Gensheng of Mengniu Dairy, actor Jet Li and Chen Fashu of New Huadu Group, have set up individual and corporate private foundations or non-governmental organizations (NGOs).
As of the end of last year, there were 643 registered charitable foundations, but the total number could be considerably higher, as many foundations are not officially registered. According to the Chinese Academy of Social Sciences, total benefactions made by private foundations exceeded US$15.7 billion in 2008.
Donations by individuals have also grown. The 2009 Hurun Report noted that the majority of China’s rich are focusing their philanthropic efforts on education and poverty alleviation.
Much of the drive for entrepreneurs to set up foundations stems from dissatisfaction with the charitable foundations and NGOs already in operation.
"They have not been satisfied working with government-backed NGOs or the grassroots NGOs," said Grace Chiang, managing director of Social Venture Group, a philanthropic consultancy based in Shanghai. "Government NGOs are not so transparent and a little bit bureaucratic. The grassroots NGOs, meanwhile, are sometimes too small and too young to really handle the work."
Although the entrepreneurs may have their hearts in the right place, their activities often attract public skepticism. A widely held view is that CEOs and their companies use charitable foundations to advance their business interests. Writing on the blog CNReviews.com, Silicon Valley entrepreneur Elliott Ng speculated as much about Alibaba’s investment in Grameen. He said that the company’s true motivation was to gain insights about micro businesses that receive loans and then tailor services to their needs.
John Spelich, vice president of international communications for Alibaba Group, is adamant that this is not the case. "We didn’t do this in a strategic sense that … they’re going to grow up and become our customers," he said. "It’s in our DNA to help small companies, and what this effort will do is help small companies that can’t help themselves right now."
No hidden agenda
Spelich admitted that some of the micro businesses could potentially show up on Alibaba.com or its e-commerce site, Taobao, but this development is far off. The only reason Alibaba even decided to publicize the deal, Spelich added, was because it wanted to bring in other firms and investors to contribute to Grameen China. Jet Li’s One Foundation has already committed US$732,395 to the efforts.
The Grameen Trust did not respond to questions submitted by CHINA ECONOMIC REVIEW.
New Huadu’s Chen has also been dogged by accusations of philanthropic impropriety. Chinese media went as far as to suggest that Chen set up his US$1.2 billion foundation in order to avoid paying taxes. (See: Dispelling the hype: Charitable foundations aren’t for hiding money, p24)
The backlash seems to be largely driven by cultural and historical factors. In the past, the work of charitable foundations in China was done by the government – the first mainland Chinese private foundation was set up as recently as 2005 by Zhai Meiqin, president of Heung Kong Group, a household product company. As a result, many Chinese are unfamiliar with how charitable foundations operate.
A convoluted and to some extent ineffective registration process doesn’t help. To set up a foundation, an initial endowment of at least US$2.9 million is required, plus registration with the Ministry of Civil Affairs and a sponsorship commitment from a relevant government department in the sector. The department then takes responsibility for monitoring the foundation and ensures that it pays out at least 8% of its endowment every year according to the regulations. However, government departments are reluctant to get involved, which means foundations often either operate illegally or are run under the auspices of a company’s corporate social responsibility program.
This blurs the line between the aims of the individual who sets up the foundation and those of the company.
"In China, much of the wealth is still in the family, and the families still own the corporations," said Ben Morton Wright, president and group CEO of Global Philanthropic, a consultancy. "Therefore, when you talk about family giving or corporate giving or individual giving there’s no clear distinction."
The situation is compounded by the fact that many of those corporate foundations do not have their own staff and end up sharing resources with their associate companies.
The Ministry of Civil Affairs is working on revising the Charitable Foundation Law so that registration can become easier, but it may be some time before this comes into effect. Following the global economic crisis, the ministry has reassessed its priorities, according to Mark Yu-Ting Chen, managing director of New Philanthropy Partners, a consultancy.
Education required
Even then, legislation is only half the battle. People also need to learn about the social function of charitable foundations. Richard Brubaker, founder of volunteer group Collective Responsibility, is involved in discussions with individuals, academics, NGOs and firms on issues relating to civil society in China. The aim is to create a sense of transparency for NGOs.
"Through our platform we are building a foundation where different parties can come together to understand issues, define responsibilities, and then develop long-term partnerships," he said.
Entrepreneurs could also improve the image of their foundations through strategic giving – focusing on a few specific issues that have a visible impact. The Bill and Melinda Gates Foundation is currently the most effective exponent of this art, having drawn plaudits for its singular focus on malaria and HIV/AIDS. Morton Wright sees this as the next step for Chinese entrepreneurs in terms of getting their foundations accepted.
"They will become more strategic because that is where the world is going," he said. "This is good because it means they’ll use their money more effectively."
