The new Chinese philanthropy
By Michael Mackey
Bricks, golf and art for China's new rich (May 13, '05)
SHANGHAI - China is not only a place where fortunes are being made, but increasingly a place where they are being given away, as the new wealthy become the philanthropists of today and tomorrow.
A double - possibly even triple - take is needed to understand the significance of this phenomenon: the millionaires in allegedly communist China giving their money, or at least part of it, away voluntarily. Furthermore, there are enough benefactors for someone to have compiled a list - namely, the the 2005 China Philanthropy 50 compiled by Euromoney China - recording who gave how much to whom and releasing this to the public. That this is the second year the list has been compiled suggests growing corporate maturity.
This year China's most generous individual (quick, get me in his mobile phone directory) was Huang Rulun, 54, chairman of the Beijing-based Jinyuan Group. Huang has donated or pledged US$34.5 million to education, poverty alleviation and health causes since 2003, and it's his second year at the top of the charity tree. He is followed by Yu Pengnian of Pengnian Industries, the oldest on the list at 83, who, having made his money in trade and property in Guangdong, has now set up his own fund to support health and education projects. And for the second year running, the philanthropy bronze goes to Li Jinyuan, chairman of the direct-sales Tiens Group, for donating $10.1 million in health and education-related projects.
China also has an emerging corporate giving culture. At the head of that pack is APP, the Shanghai-based paper multinational, which has given $25 million to various educational causes. Beer drinkers will be pleased to know that China's Tsing Tao beer has donated some $2.9 million of corporate money to various charities.
The new philanthropy represents a profound change from recent times, although the scale of it is still relatively small. Statistics from the Chinese Ministry of Civil Affairs show that charitable donations were less than 1% of gross national product. A recent survey by China's charity administrators revealed that fewer than 100,000 of China's 10 million enterprises, or 1%, have records of donation. Many local donations are derived from the Chinese units of large multinational companies, according to some in the charity sector.
There are various explanations for the still-modest scale of charity in the country. China remains a society where the family and clan tend to take precedence over the broader community. There is also an absence of inheritance laws (which, ironically for a socialist state, encourages the retention of inherited wealth) and the charity sector itself is underdeveloped. But the small scale of philanthropy also reflects the point where China is on the development axis. "Uppermost in their [private entrepreneurs'] minds now is how to increase their wealth and further develop their enterprises. They don't have much energy to care about charity," is the candid assessment of Deng Shengguo, deputy director of the NGO Research Institute at Beijing's Tsinghua University.
Where it's happening, though, there can be no doubt about its significance. First, private wealth exists that can be given away, a sea change from the period when there was no wealth, period. "Twenty-five years ago there was no private wealth in China," says Rupert Hoogewerf, founder and compiler of the "China Rich List". "But now as the business environment has become more stable, you have millionaires who don't mind saying 'I've made it.' It's indicative of growing confidence in the business environment." Second, the wealth is being donated voluntarily, rather than confiscated during periods of political hysteria such as the "Speak Bitterness" campaign against the landlords, or the Cultural Revolution.
Government support, even encouragement, also needs to be factored in, as a research paper from consultancy firm Access Asia makes clear. In 2003, with the SARS epidemic at its height, in a bid to garner support, the State Taxation Administration raised the deductibility for cash and materials given to fight the deadly virus from 3% to 100%. Not surprisingly, donations soared. It is possible that emergency clause might remain in effect, which would give China "one of the most liberal [charity tax deductibility regulations] in the world in terms of encouraging donations." Since then, the government has also allowed five big charities to write "frapiao", or tax receipts, another sign of its wish to legitimize charitable giving. Practical politics are also involved. Beijing is very concerned that the emerging rich/poor divide in the country could threaten the regime's survival over the long term, and encouraging charity and corporate responsibility is one way to address the problem. As Jin Zhigou, president of Tsing Tao Brewery and a deputy of China's parliament, the National People's Congress, told reporters: "If the PRC is to develop a sustainable and harmonious society, then social responsibility is the key."
Interestingly, there is an international twist to this, in which the government didn't so much support as lead by example. When the tsunami hit Southeast Asia, Beijing's good neighbor policy meant donations both of cash and resources, with private donations following the public ones. But certain details of the Chinese response to the tsunami disaster suggest deeper changes within China. First, the public donated $18.11 million. "Such an outpouring of support from the public is phenomenal," said John Sparrow, Beijing spokesman for the International Red Cross, especially since it was composed of small individual donations in a country where the bulk of the population gets by on less than $1,000 a year and often less.
A second highly significant aspect was the fact that the money went to countries with no strong cultural links to China - a significant first, discounting small donations to Africa during the mid-eighties famines. Third, the volume was probably boosted by another change: the entertainment galas which plague Chinese television adapted their format to raise funds and hence increased public awareness of the tsunami. Lastly, the funds went to a specific cause rather than to a government committee, usually at the provincial level, with the responsibility for disbursing them. It is tempting, maybe too tempting, to suggest here that the changes reflected a desire for accountability; the public saw and gave, but consciously bypassed the government in the process. Regardless, the tsunami charity demonstrated the emerging civil society in China and the growing willingness of its people to think (and act) internationally.
Why philanthropists and companies donate within China is a complex question. Certainly, some might be shelling out to protect or increase their "guangxi" - the connections that move wealth and power in China - and buying face and prestige is no doubt a part of it. On the other hand, if the rise of philanthropy shows the environment in China is changing, isn't it possible that business is also undergoing a paradigm shift, becoming more aware that along with big profits comes a responsibility to be a good corporate citizen?
"We are seeing indications that these entrepreneurs are building long-term businesses, as opposed to short-term, get-out-quickly businesses, and are beginning to accept taking on social responsibility," said Hoogewerf. He points out that many foreign blue-chips have trumpeted their social responsibility, and this has not gone unnoticed in Chinese business circles. But he adds that "[on] an individual basis - there's a lot of self-fulfillment."
Clearly, education and health care are big concerns for the entrepreneurial class in China, since nearly all the top 50 donors on the list donated to education and health-related institutions, although other sectors - poverty alleviation and welfare - weren't entirely forgotten. Worryingly, given how polluted China, especially urban China, can be, the environment didn't get a single donation from the top givers. This pattern may serve as a crude indicator of China's development status. The concerns are basic - health care and education - with some other areas getting less attention. The US, with multiple foundations for the arts, environmental issues, and disabled in seemingly every city, is still a long way ahead in terms of philanthropic breadth.
Real estate, or property, was a recurring theme with 21 of the 50 top-giving companies. The explanation, according to Hoogewerf, is that real estate has been the greatest creator of wealth in China over the past 25 years. "It was state-owned land and they developed it," he said in an interview with Asia Times Online. Manufacturing-derived wealth is not as prominent on the charity list as one might expect; this is mostly because manufacturing in China is generally done by small and medium-sized enterprises, usually family owned, who have work subcontracted to them by overseas companies. The factory owners are typically well-off, but not millionaires, and their charitable giving tends to be small in scale and well below the Rich List radar.
Where the new philanthropy is happening is much less of a surprise: the newly industrializing belt, or rather its buckles, the Pearl River and Yangtze River deltas. Head offices for the companies involved were heavily concentrated in the latter, with 11 (over a fifth) in Zhejiang province alone. Zhejiang is the coastal province south of Shanghai, where a further 10 companies were headquartered - meaning some 40% of the biggest givers in China were in two neighboring provinces. Throw in the two top givers in Jiangsu province, and nearly half of China's corporate philanthropists come from the Yangtze River delta. The other big concentration is in Guangdong, across the border from Hong Kong, where seven of the companies are headquartered. Beijing is home to the head offices of four, suggesting the capital's governmental significance outweighs its economic, and charitable, clout.
This regional dispersal of charitable giving is another fact hinting at the emergence of a multipolar China, with economic power found mostly in the Shanghai region and Guangdong, and Beijing a lesser star - more evidence that China's future will be increasingly determined by its economy, not its politics.
Michael Mackey is a Shanghai-based freelance writer.
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