Prof. Mark Sidel is Doyle-Bascom Professor of Law and Public Affairs at the University of Wisconsin-Madison, and Consultant (Asia) at the International Center for Not-for Profit Law (ICNL). This interview was conducted in Beijing by CDB’s Chen Yimei on October 16 2015.
YC: So today there are two sets of questions. The first set will be related to international issues, and the second set will be on China. Starting off with the international issues, here’s the first question: since you have been a consultant with the International Center for Not-for-Profit Law (ICNL) for a long time, you have been involved in various research projects with ICNL. Could you give us a brief introduction to ICNL for Chinese readers?
Mark: ICNL is an international non-governmental organization based in Washington but working all over the world, in between 75 and 100 countries, to help activists, legislators, government officials, media and academics with improving the nonprofit legal regime in individual countries. It also works on the international legal regime for nonprofit and philanthropic organizations. But it primarily works with individual countries to try to expand civic space through the regulatory process. That is a very hard job. It has existed for more than 20 years and has grown to be a large international non-governmental organization because there’s a lot of demand out there from groups in different countries, from activists, academics, government officials and legislators for help, especially on laws and regulations relating to civic space.
In Asia, we have worked with a number of countries including China. In China, we worked with government agencies like the Ministry of Civil Affairs and other government groups. We’ve worked with research groups in universities such as Peking University, Beijing Normal University, Tsinghua University and others. But I think we mostly work on a demand basis, offering help not with US experience, but with comparative experience. We offer comments, we offer to do workshops. In addition to China, most of the work I do in Asia relates to India, Vietnam and a few other counties. But we have also completed some Asian regional work on problems in civic space, nonprofit space, and civil society space in Asia. We produced a report which points out that there are severe pressures on civil society space or civic space in India, Vietnam, Pakistan, Bangladesh, China and a variety of countries with different social and political systems in Asia. Governments throughout the region are worried about civic space and the role of civil society, and are seeking to place limits on them. The report points out various legal and regulatory ways in which governments are doing this, not focusing on one country but focusing on sixteen countries. We released that report at a UN meeting on civic space in Asia in Bangkok this August.
I should point out that ICNL is an international rather than a US organization. Our work to assist China in recent years has been funded primarily by the MacArthur Foundation, which is based in Chicago and has worked in India, China and other parts of Asia. That is some basic information about ICNL. I do this as a supplement to the academic work I do and it fits very closely with my academic work, which is also research on civil society law and civil society space.
YC: Are there any specific cases where your work at ICNL or your own work has involved international philanthropic laws or other laws that were adapted to local practices?
Mark: Developing national laws on nonprofits and philanthropy are country-run processes by activists, legislators, and government officials, with academics often involved as well. Outside groups are rarely more than a small part, providing comparative experience and perhaps commenting on drafts. Having said that, I think ICNL has played a useful, assisting and comparative role in some countries. Here in China, ICNL’s role has been occasional and to provide comparative experience. We have come to do single workshops. We comment on some specific drafts when that is requested. We’ve commented recently, for example, on the draft of the Overseas NGO Management Law. We’ve commented on the Charity Law draft. But always the most important are the domestic actors that are focused on these matters.
We are viewed in a number of countries as a resource. When our Indian colleagues, for example, are concerned about restrictions on foreign funding, something which has been a significant topic in India for thirty years, ICNL has helped to provide comparative information on how other countries regulate foreign funding.
YC: Moving on to your experiences in China, the first question regards your own history in China, which started in 1972. You have been involved on demand with China’s legislation and various research projects. Are there any particular highlights?
Mark: I’ve been coming to China for 43 years, since 1972. And I’ve of course seen tremendous change in China and a significantly expanded role for civil society in China. When I started coming to China in 1972, it was a different world. At that time, the only civic organizations that we would identify as philanthropic or nonprofit organizations today were a few organizations like the Soong Ching Ling Foundation and the “Gungho” (Gonghe) group.
So we have seen tremendous changes in China and tremendous changes in nonprofit activity in China. But along with these changes and the growth in nonprofit and civil society activities in China has come over the years in different waves an increasing concern from the Chinese government about the space for such civic initiatives and civil society. I’ve seen those waves over time. The concern has certainly never disappeared. At the same time, viewed over time, it is clear that the civic space and civic initiatives have expanded very significantly since the 1970s and 1980s. So when I first came here, it was the Soong Ching Ling Foundation and Gonghe activities and a few things like that. When I came to teach in China after I graduated from college in the U.S. in 1979, there were some charity activities and volunteer activities, but not a lot of organizational activities at that point.
Organizational activities began to expand in the 1980s. When I came back to China in late 1987 as part of the group that started the Ford Foundation office in China, we started with about six people in two rooms at the Jianguo Hotel in December 1987, January 1988. At that point, there were enough activities that in the summer of 1989 we brought in summer interns from the US to do the first report in English on the emergence of nonprofit activities in China. That was the first report. My colleagues and I agreed very quickly that although we were not yet fully programming in this area, we were seeing think tank activities, volunteer activities, social service activities, advocacy activities, and that it would be useful to get an initial mapping of nonprofit civic activities in China. The intern we chose was a graduate student from the University of Michigan. They came out and did a report on, basically, the emergence of civil society in China.
We then began to work with the Ministry of Civil Affairs. The first project, certainly on nonprofit law, but also more generally on civil society and civic activities in China of this kind, was with the Ministry of Civil Affairs in 1988 and 1989. I remember the first meetings my colleague and I had with the Ministry of Civil Affairs, bringing over specialists to respond to their questions about how foundations were organized, how nonprofits were organized, social organizations and things like, and that expanded to workshops, it expanded to support for groups like Project Hope and other such groups. Now there is a wide variety of groups working on these issues and a wide variety of foreign donor organizations and domestic donor organizations working on these issues. I should really say that this began with the Ford activities in 1988 and 1989. This was also a period in which the expansion of nonprofit space and civic initiatives were going on. We’d all seen it in various programs and decided to contribute to it. That was how the Ford activities began.
I’ve seen this tremendous expansion. But I have also seen the Chinese state being very wary and very cautious about that expansion of the activity, and at various points seeking to limit certain kinds of activities. Over many years, the way that I have thought about this, which may be wrong because I am a foreigner that looks on from afar, is that China has sought to increase the space for social service organizations, for what we call the third sector, while limiting the space for advocacy organizations, for what we might call the civil society sector. So the third sector has expanded tremendously. But the advocacy side, or civil society advocacy side, has been under a lot of pressure over the years and remains under sustained pressure today. So that is a brief introduction.
YC: What about philanthropy?
Mark: Philanthropy is something I’ve also studied or been involved with here. When I became involved with China, there were very few indigenous philanthropy groups because of the particular time at which I got involved. But even then, although people do not always identify it today as going back that far, there was the Soong Ching Ling Foundation and several other recognized indigenous foundations that were alive before the Cultural Revolution and stayed alive. They expanded their activities in the late 1970s and early 1980s. So I don’t think it’s correct to say that indigenous philanthropy in China somehow sprang up from nothing in the 1990s. I think China has always had forms of indigenous philanthropy and we saw some of those institutions remain in existence even during the pre-cultural revolution and Cultural Revolution days. Of course, the situation is very different now. There has been an enormous growth of private philanthropy in China. Mostly private philanthropy focused on social services, providing services to individuals. Not so much private philanthropy focused on advocacy or policy development. A substantial amount of private philanthropy focused on what we call operating programs. Less private philanthropy focused on grant making programs. That is because of the specific conditions and situations here in China. But there is no doubt that one of the great developments over the past 20 years in the civil field is the enormous growth of Chinese indigenous philanthropy.
The real question for the future is where Chinese philanthropy will go. Will it remain focused on local level social services in substitution for (or in addition to) the services provided by the Chinese state, or will it have, as it does in many other countries, a broader role in terms of policy development, policy research, interaction and engagement with government, advocacy activities and things like that? I think that question is not yet answered. The role in terms of social services in substitution for what the state used to do is clear and is encouraged. The question of the broader role of philanthropy I think remains undetermined at the stage.
YC: We have talked a lot about modern philanthropy, but even in the US, a bigger percentage of philanthropy is in traditional charity.
Mark: Very true. We see this tension, in every country with domestic philanthropy, between philanthropy that carries out more traditional charitable tasks and philanthropy that is focused on developing better policies and changing society. The vast majority of American philanthropy is also about providing services and helping individual people or groups of people. So we see these different sides of philanthropy in virtually every country. In some countries, the government encourages one side more than the other. So we see in many countries including those in Asia that I follow in ICNL, that governments would prefer for the most part that philanthropy work to provide social services and charitable services for people and not get so involved in policy development. Governments have various ways to make that clear to the philanthropic community.
China now has a very active and rapidly growing philanthropic community. I think that at this point the Chinese philanthropic community is almost certainly the fastest growing philanthropic community in Asia, and it may be the fastest growing philanthropic community in the world in terms of the new numbers of organizations that are formed every year. I am not certain about that. But it is a very rapidly growing category and so it has attracted some government attention and is going to attract more.
Another place where indigenous philanthropy is growing very rapidly based on a traditional philanthropic base, as it is in China, in India. I think there is a lot more room for contact between the new Indian philanthropists and the Chinese philanthropists. Many of them are coming from personal wealth, some of that is technology, real estate or manufacturing driven. There have been quite a lot of contacts between Chinese and American philanthropy or Chinese and British philanthropy. I think it will be very interesting to see direct contact between Chinese and Indian philanthropy because they are both growing rapidly and they are both faced with the question of how to have an impact in their countries and how to deal with their governments.
YC: Mark, you have an academic background in law. Let’s focus on legal issues. Over the past five to ten years, what are the major changes in Chinese law and regulations regarding the nonprofit sector? What are the positive changes and challenges?
Mark: I think these issues fall into two categories: one is the domestic side in which China has developed a series of regulations and policies over a long period of time, in some form going back to the 1950s but mainly going back to the 1980s, which guides the development of different parts of the philanthropic community. We have regulations on foundations, social organizations, and 民非，or private non-enterprise units, respectively. There has been debate in China about whether to stick with the function-by-function regulation or whether to move to some kind of an overall legal framework. That has been a long debate and a tremendous amount of work has been done on that. It remains not quite resolved at this stage, though of course the much-drafted and much-debated Charity Law will likely soon be passed. That is one set of debates that I have seen in China. My experience of these discussions goes back to the very initial discussions that we had with the Ministry of Civil Affairs in 1988. Even back in 1988 and 1989, the question was coming up – should we have an overall framework law or should we be regulating sectoral piece by sectoral piece.
I think on the domestic side those issues are not quite resolved. A charity law has been drafted with great efforts over a period of many years. One of the positive approaches of drafting an overall framework is that it can take into account some of the reforms that have been experimented in Guangdong and in other parts of China over the last five to eight years. There is no doubt that the draft of the charity law begins to move some of those experiments up to the national level. So that is one set of debates and discussions that we see. But we do not know what the end point will be. What will they do about the specific regulations if a framework law comes out? These questions are not fully answered and it’s a very complicated process that I cannot fully understand as someone who looks at it from the outside.
The second range of questions has always clearly been the treatment of foreign organizations. China has dealt with foreign organizations and foundations with extraordinary effectiveness – a combination of control and flexibility – for over thirty years, defining foreign organizations by where they come from and what they do, setting up systems for them to register and allowing them to be active in China, having them have partner organizations to keep track of what they do, and of course having other Chinese government agencies that are also responsible for knowing what they do. That has been an effective system that has worked for NGOs, foundations, universities, trade associations and other groups for well over 30 years. It is a system that has different pieces to it. So foundations are treated a somewhat differently from foreign NGOs like Save the Children, organizations like the University of Wisconsin, or foreign trade organizations. There have been multiple streams of policy and regulations. It is a system that has worked very well for China. But in recent years, for reasons we all can see, there has been some pressure for some framework law that would cover, like an umbrella, the entire overseas NGO sector. That is what has emerged over the past years in the debate on the overseas NGO management law, which would transfer ultimate authority over NGOs, foundations and other types of activities to the Ministry of Public Security and provide a very different approach to this matter. This has been controversial in China and exceptionally controversial outside of China. Many of us do feel that the system that has been in place up until now has actually worked very well for China. China has more than enough agencies and laws to take care of particularly troublesome foreign NGOs and foundations and has shown the ability to do that. China is a strong state. We do not know exactly what is going to happen with this, as we discuss this in October 2015. That is the other stream of discussion that I have seen over many years – how to regulate the foreign sector.
What has been proposed recently, in my view, is a sharp departure from an effective framework. This is something that ICNL has been asked to comment on and did, and a lot of other organizations also commented on it. We will see what the results are. If this new framework law for overseas NGOs and foundations and other nonprofits is introduced, foreign organizations will try to cope with that as best as they can, and in that process some will leave, going to countries that are more hospitable to foreign philanthropic capital. But we do not know what the future will hold for a large range of foreign organizations and foreign activities in China and the support and funding they provide for Chinese organizations. We do not know what will happen if the framework comes into place.
YC: Any predictions?
Mark: If I had to predict, based on conversations in Beijing, I would say that some version of the overseas NGO law will be enacted. I also think there will be some changes from the second draft that was released in May. We do not know what the changes would be and we do not know, and this is particularly important, how this law will be implemented. But if I had to predict, I would say that some version of that law will come into force at some point.
But we have also seen counter-examples over the years. We have seen, for example with the Charity Law, that drafting processes can take a long time in the midst of disagreements and new developments. If the overseas NGO law is enacted, then foreign and overseas organizations here, ranging from large NGOs to small NGOs, large foundations to small foundations, universities, hundreds of trade associations and chambers of commerce will have to deal with that. Most importantly, the Chinese partners that they are working with will have to figure out what they have to do under these new circumstances.
Philanthropic capital, like business capital, can move. Burma has a number of international NGOs and foundations that are working there. By next year, I think it is safe to predict, there will be a number of international NGOs and foundations working in Iran. International NGOs and foundations are already flocking to Cuba to consider working there. So philanthropic capital is not static. If the restrictions are such that they can’t do work that they consider to be both valuable and lawful in China, some of them will move to other places. Burma, Iran, Cuba, Vietnam, some parts of Africa and parts of Latin America will welcome NGO and philanthropic capital that is now continuing to come to China. It’s not clear how much of a concern that is here, but there are a lot of places in the world that need NGO and philanthropic capital. Despite the fact that China is tremendously important and influential, if the restrictions become particularly hard to bear both for international organizations and their domestic Chinese partners, I think we can see organizations who tend to be restless anyway, as NGOs, foundations, and universities are moving to places where it is easier to work. I also think that the Chinese government is aware of all of this, and is looking at our comments made in June and is having discussions with a number of organizations. I don’t know their impact on the final legislation. But I don’t think this issue will be ignored.
YC: As you are talking about how NGO and philanthropic capital can move, I would like to continue with this topic further. Is there a trend for Chinese NGO and philanthropic capital to move into the international arena and do you think it is already on the agenda here?
Mark: It is clearly, absolutely, on the agenda. We’ve seen a variety of generally larger groups, Chinese NGOs, social organizations, and foundations that are interested in working internationally and beginning to do so. The American philanthropic and NGO sector began to work internationally 100 years ago. It is a perfectly natural thing for large, growing and influential nonprofit sectors in other countries to work internationally as well. It has already begun in China. I must say that although there has been some research on this, basically case-based research, there has not yet been comprehensive following or tracking research on this fascinating phenomenon of Chinese foundations and nonprofits moving overseas, particularly to perhaps Africa and to other places as well. How does that relate to the ODA official development system in China? How does it relate to other donors doing related work in the same country where Chinese aid is moving, especially private aid? So it is a very fertile research topic, which should involve travel, for anyone who is interested, to the places themselves.
So it would be very useful to look at whether there is any coordination and communication between what Chinese private aid, like foundations and NGOs, is doing and what Chinese public aid is doing in particular countries. I know that Professor Deng Guosheng and others have been working on this, but I think there is space for more work on this, and to link up with researchers in other parts of the world where we are also seeing rapidly developing indigenous philanthropic and nonprofit sectors spreading out beyond their boarders, for example in Brazil and, just beginning and less than China, in India. In India, there are some regulatory restrictions that make that more complicated than in China. But we are seeing among some of the BRICS countries a moving out, or internationalization, in terms of philanthropic and nonprofit involvement. I have no doubt that we are going to see more of that.
My sense is, although I have not studied this so much, that the Chinese regulatory and policy environment is more favorable to this internationalization than it is for example in India. I would personally hope that as Chinese organizations move out of China in terms of deploying the philanthropic and nonprofit capital that they do so with as much flexibility and as much space as they can manage. I think the process will be more effective if the Chinese state does not try to micromanage those activities. But it is up to the Chinese government and other governments to regulate the internationalization of their indigenous philanthropic and nonprofit sectors.
One of the lessons we have from the movement of philanthropic and nonprofit capital abroad in the US and other contexts going back 100 years is that the flexibility to choose where you have a comparative advantage and where you can actually do some good, and organizations themselves having the flexibility to determine that, making mistakes, correcting mistakes and doing better next time – all of that leads to better programs.
So my hope is that whether it is Brazil, India, China or South Africa, the government that regulates internationalizing philanthropic capital does not put too many restrictions on these movements, and doesn’t try to ensure a perfect alignment between public (governmental) and private deployment of capital for philanthropic and nonprofit purposes. It is hard for governments to decide not to do that. The instinct for government is always to align, to control, to channel donations. I think in the long term the results will be better if flexibility is allowed. For example, if the government says that your investments, in order to achieve some kind of tax incentives or to be lawful, need to be charitable in nature, need to fit within broad categories- science, education, health or the public interest. Going beyond that in terms of regulation I think is somewhat problematic.
YC: I have two more questions. One is for you to describe briefly what has brought you to China this time. The other is about the discussion that is going on within Chinese NGOs on the relationship between the ‘for profit’ and ‘not for profit’ sectors. Do you think that there should be a boundary?
Mark: What kind of boundary has been proposed?
YC: The rough observation is that the boundary between ‘for profit’ and ‘not for profit’ is more and more blurred.
Mark: So in terms of what brings me here to China this time [October 2015], I am here for the China-US Legal Experts Dialogue. The specific reason I am here as part of the US group is because the two sides agreed that the issue of the registration and regulation of nonprofit organizations would be on the agenda of the China-US Legal Experts Dialogue this year. In particular, it is not the whole field of registration and regulation of nonprofit organizations that is the issue. The reason why that topic was put on the agenda is because of the controversies caused by the Overseas NGO Management Law [境外非政府组织管理法], and so I was asked to join the group because I have followed this very closely for ICNL and as part of my own research.
We had the dialogue yesterday, and we had a good conversation about the registration and regulation of not for profit organizations, including the Overseas NGO Management Law. When I said before that the Chinese government is aware of the controversy and the deep concern of the international community about the potential impact of that law, part of my sense of that comes from the fact that my Chinese colleagues yesterday, including personnel from the Ministry of Public Security, seemed very much aware of those concerns. Now we have no idea whether those concerns will be addressed. But no one here can fail to be aware of the views of the international community and some Chinese organizations, based on yesterday’s dialogue and more importantly based on a range of discussions over the last six months to a year.
On your second question, on the blurring between not-for-profit and business organizational forms and activities, we see this going on all over the world. It takes many forms. Sometimes we call this social entrepreneurship, sometimes hybrid models or mixed models, and sometimes corporate social responsibility. We see many situations in which philanthropic or nonprofit forms are using business models to raise revenues, for example. I think the key question is how the nonprofit and philanthropic community and governments react to this and how it will impact the nonprofit and philanthropic community. Sometimes governments want to keep business, including business philanthropic activities, and private, nonprofit activities in separate systems.
But increasingly actual philanthropic and nonprofit practice is not so divided. We see business entities that are behaving like social entities. We see philanthropic and nonprofit entities that have as their primary model fundamentally a business model. The regulatory forms, whether in the US, the UK, India or China, that are traditionally used are ill suited to this development of hybridization between business models and nonprofit models. Virtually every country that I am aware of, including smaller countries with what you may call less-developed philanthropic and nonprofit sectors in economic terms, is dealing with this, because the work business people want to do on social activities or that philanthropic and nonprofit people want to do, and the revenue they need to raise to do their good work, doesn’t necessarily follow the traditional legal categories. Every country is facing this set of issues. In the US and the UK, this has resulted very initially in the development of some new legal forms that allow more revenue-based business activities, but give the entity the power fundamentally to be a nonprofit organization, which is what we would call a hybrid organization.
Other countries may use other methods to do this. They may allow business entities to focus less on the bottom line, dividends and profits, especially if they are not publicly enlisted entities. They may allow nonprofit entities to take in more business revenue without penalty, and without necessarily attracting large taxation. This is a significant debate in India. Fundamentally, this debate is going on around the world, not in an international way but a way very much grounded in local context.
The way in which China thinks about or approaches these issues is not necessarily going to be the way that other countries think about these issues. It often depends on the local context and on how civil society, philanthropic, nonprofit and business actors are trying to move within the system. In India, just to give an example, one of the key issues on the philanthropic and nonprofit side, especially on the nonprofit side, is “will we be able to generate revenue from business activities and will we be penalized for doing it”. At the same time, the government urges the business sector to increase their social cooperate responsibility, including through a soft requirement of two percent of net profits. So these debates have been going on perhaps in different ways in India than in China. But they are all part of the same broad question.
This question of hybridization or the relationship between business and the nonprofit sector gives rise to a new generation of social entrepreneurs sometimes called venture philanthropists. We see those groups forming clearly in China. So I think the debate is different in different countries and how government reacts is very important. In India for example, the government has responded by encouraging business philanthropic activities, but has been very slow to respond to the nonprofit’s demand to be able to generate more revenue from business activity. This is a very sensitive topic in many countries not only because of tax issues but also because nonprofit generation of business revenue sometimes threatens for-profit companies. It won’t be resolved at the international level. There is not an international best practice model. It really depends on what happens in the context of specific countries.
Overall, let me close this interview with one remaining observation. I see tremendous and laudable activity in China to strengthen and promote the role of charitable and philanthropic organizations, sometimes called third sector organizations, including foundations. At the same time, I see activities in China to circumvent the role of nonprofit organizations that seek to increase people’s ability to understand or exercise their rights, or to contribute to policymaking on key social issues. China’s strengthening of the role of charitable and philanthropic organizations is laudable. But it is also very important to encourage Chinese nonprofit organizations and citizens to participate in defending citizen’s rights and to contribute to policymaking that is pro-poor, and to identify social problems in Chinese society. I hope that as the years pass, China does not wind up only with a strong charitable and philanthropic sector that focuses largely on social services. I hope that a strong China, and a strong Chinese government, understands the need for a strong nonprofit sector as well.