Sun Yat-Sen university’s Ma Hua explains the changes and challenges of Guangdong’s new registration policy for social organizations.
Over the past 20 years, the “dual management” system has gone from being perceived as a breakthrough policy that would facilitate the establishment of social organizations to one that is a serious obstacle to their development [editor’s note: social organizations are an official term for NGOs in China. There are three official categories of social organizations in China: membership based social organizations (社会团体)， privately operated non-enterprise unit（民办非企业单位）, and foundations(基金会)]. By looking in practical terms at how social organizations have registered in Guangdong using the new registration policy, this paper attempts to explore and understand the logic behind registration policy reform across Guangdong, examine deficiencies encountered in the process, and suggest policy recommendations based on its findings.
Since Guangdong brought the new system of direct registration for social organizations into full force in May 2012 – a system, it should be clarified, that does not apply to organizations engaged in the provision of private education, healthcare and training that are required to go through pre-registration inspections and audits by government departments based on relevant laws and administrative regulations – all other social organizations can now apply to register directly with the Civil Affairs authorities. This new system has in fact been actively encouraged by the Guangzhou city government from the beginning of 2012. Specifically, this change means that social organizations in the following categories – professional associations, chambers of commerce , charities, and other organizations that provide social, economic, scientific, technological, sporting and cultural services – can apply to register directly with the appropriate Civil Affairs bureau without a professional supervising unit.
The new registration policy was extended across the whole of Guangdong Province from July 2012, meaning that social organizations that want to register there can do so directly with Civil Affairs, rather than first seek permission from the department which most closely matches their area of service delivery.
In fact, policy experimentation relating to the registration of social organizations began in Guangdong much earlier. In 2009, the Shenzhen government signed a national-level agreement with the Ministry of Civil Affairs (MoCA) to “Promote the Reform of Civil Affairs Undertakings”. Since then, the growth of social organizations and non-enterprise units has been continuous, rising from 3,759 to 4,661 over three and a half years – an increase of nearly one thousand. With the change to the new registration system province-wide, the pattern of registration displayed some remarkable trends: during a two-months period leading up to July 2012, 18 social organizations registered at the city-level throughout Guangdong while a further 15 were poised to begin operations, following official approval of their names.
Despite the liberalization of certain aspects of Guangdong’s “lenient, but also strictly implemented” registration policy (which generally makes registration easier than ever) there are no guarantees that the process will always be plain sailing. In fact, organizations that have registered under the new policy still report the following problems:
(1) The conceptual definition of “public interest charity”
Name registration is the first step for social organizations, at which point Civil Affairs departments will (i) take the opportunity to make a preliminary assessment of whether the applicant meets the conditions of registration and (ii) assess whether the applicant needs to be assigned an advisory units (业务指导单位)(editor’s note: it is a transitional policy to replace a supervisory unit with an advisory unit, in order to relax restrictions of social management in Guangdong). Guangdong’s “Program for Further Fostering the Development and Standardization of Management Practices for Social Organizations” (hereinafter referred to as the “Program”) clearly allows any organization that falls into the category of a public interest charity to use words that reflect the characteristics of the organization. This is an important means of breaking through the monopoly of GONGOs in the past and distinguishing a charitable entity from other entities, as well as a means by which organizations can continue to build on their branding and image after registration.
However, many social organizations still encounter problems during registration because Civil Affairs departments lack a clear definition of the term “public interest”. In practice, Civil Affairs departments at all levels across the country adopt their own definitions to the extent that even Civil Affairs staff working in the same building have differing interpretations, meaning that some less “progressive” parts of the administration may reject applications at first. Indeed, many organizations report that the process for obtaining a name is very technical, and this can become costly, particularly for those that are unfamiliar with registration techniques.
From the end of 2011 Guangzhou Huangpu Shenxin Feixiang Psychological Aid Service Center (hereafter Shenxin Feixiang) began to keep an eye out for information on the registration process via all channels, also consulting with the authorities at provincial and city-level in Guangzhou. They initially hoped to register as a membership based social organization (社团) under the name of “Guangdong and Guangzhou Youth Psychological Aid Center” and therefore started consulting with the provincial authorities during September 2011. However the authorities provided no specific feedback, other than telling them to seek out the Provincial Communist Youth League to be its “supervising unit” (主管单位) because its work involved young people. Thereafter, Shenxin Feixiang re-consulted with the city-level authorities and submitted an application, but were concurrently advised (as part of the name registration process) to seek out under the Guangzhou Youth League. In the end they decided to abandon the process in order to retain their independence, however city-level officials did provide detailed feedback on the difference between membership based social organizations and non-enterprise unit, also advising Shenxin Feixiang that it would be better to try to register as either a public interest non-enterprise unit (公益类民非) or as a social work organization (社工机构). Shenxin Feixiang subsequently decided to attempt to register at district level.
Unfortunately, at the end of 2011 details of the new policy changes had still not been disseminated at district-level in Guangzhou, leaving staff from Shenxin Feixiang running between civil affairs offices in three different districts – Haizhu, Yuexiu and Panyu – right up until they contacted the Huangpu District Civil Affairs Bureau who had received formal notification of the policy change. While they told Shenxin Feixiang that the requirement for social organizations to find a sponsor unit (主管单位) had been removed, details of implementing the new policy had yet to be worked out. The director of the Huangpu District Civil Affairs Bureau responsible for registration even paid a visit to the municipal bureau inquiring about the new policy and got the same answer. In the end, Shenxin Feixiang then went through the old rules for registration and gained approval on November 23rd 2011, after which a further fortnight was spent on the naming process – opting to register as a non-enterprise unit (民非机构) required the word “youth” to be removed and replaced with ” Shenxin Feixiang ” (身心飞翔) – before moving onto the next step. Then in February 2012, when all of the registration documents were finally in place, local-level officials from MoCA informed Shenxin Feixiang that a new application process was in place, rendering the old obsolete, further saying that they should re-submit their application afresh.
By contrast, Guangzhou Green Point Environmental Promotion Association (广州市绿点公益环保促进会, hereinafter referred to as “Green Point”) did not encounter the same kind of registration difficulties, but nonetheless expended much effort on the naming process. Initially, Green Point wanted to use “education center” within their official title to register as a social organization, however relevant officials of the civil affairs department considered such language to be too similar to names used by governmental institutions (事业单位), therefore Green Point had to choose “Promotion Association” (促进会) instead.
As far as some less experienced, policy-critical organizations are concerned, the registration process remains as difficult as ever. For example, A Qiang, the executive director of PFLAG China (同性恋亲友会), an association that represents the interests of gay relatives and friends (hereinafter referred to as “PFLAG”), made seven visits to the provincial-level Bureau for the Management of social organizations to go over the process, meeting variously with team officials, team heads, the divisional head, deputy director general and director general, before finally receiving a letter which advised PFLAG to “take up your case with the city-level Civil Affairs department.” Having done so, the later responded verbally to say that “There is no law that states that homosexuality is legal, therefore we cannot, for the moment, deal with your application.” “On the contrary”, responded A Qiang, “China has no law that states homosexuality is illegal; and, moreover, no law that states heterosexuality is legal. If you are unable to assist us in the registration process, please provide a clear explanation in writing.” With both sides at loggerheads, PFLAG did not manage to make further progress with its registration application.
(2) Finding suitable premises
Finding suitable premises in which to conduct operations is a frequently raised issue among social organizations. Official guidelines from MoCA stipulate that applicants must provide documentation that proves they have the right to use the premises where they are based. Equally, although there is no explicit provision within the guidelines that precludes applicants from using a residential address to register, some civil affairs departments have insisted on a commercial address for the purposes of registration.
Although well-resourced social organizations can meet the above requirements fairly easily, the same cannot be said for those just starting out. For instance, Bike Guangzhou (拜客广州), having registered its name, now faces the even bigger challenge of finding suitable premises. Previously, Bike Guangzhou shared an office with another organization, however because their co-tenant had already registered at this address, Bike Guangzhou could not use the same address on their application. Currently, Bike Guangzhou is unable to afford its own premises, due to its low funding base and small staff capacity, and is therefore hoping to secure free office space, simply so that it can provide a commercial address for the purposes of its application.
Green Point circumvented this issue by setting up a company that provided it with the necessary ‘right of use’. However, this method cannot be relied upon in the future since there is no guarantee that future policy will continue to allow a social organization to register using the same address with an institution of different status such as a company. Actually, current policies do not explicitly preclude organizations from using a residential address to register, but rather merely require proof that premises have passed relevant safety and fire safety inspection tests, which are not always easy to provide in respect of residential buildings. Moreover, MoCA’s position is also fairly vague, stating that “Providing that no training activities or group gatherings take place, the relevant leading official will exercise his or her discretion in making a final judgment.”
(3) The discretionary powers of the civil affairs departments at all level are too great
“Guangzhou’s policy of direct registration for social organizations” was included on the Social Affairs Committee’s list of special social innovation projects. The responsibility to register non-enterprise unit now falls on district (and county) authorities. In other words, restrictions on the registration of non-enterprise units have essentially been lifted within the city’s boundaries. Such a change represents a positive development for social organizations, since they can now choose to register with the MoCA bureau nearest to their base. However, those wanting to register should be aware that further problems may arise due to inconsistent application of the new policy by different Civil Affairs departments.
Firstly, different Civil Affairs departments apply different standards to decide who can register as a “public interest” (公益) organization. For instance, Bike Guangzhou reported that, despite signing up with the social organization incubation project in Yuexiu District, staff at the corresponding Civil Affairs bureau advised that organizations originally formed within universities should either register as a bike club or become a volunteer-led organization under the Communist Youth League, rather than register as a fully independent and privately run non-profit organization. Since this clearly was not the outcome desired by Bike Guangzhou they subsequently abandoned plans to register in Yuexiu. However, there was a more open attitude from officials in Haizhu District who said that while they could not guarantee success, they would do all they could to provide the correct documentation. In the end, the naming process (in Haizhu) turned out to be very smooth and was soon approved.
Secondly, different civil affairs bureaus have different levels of understanding of operational procedures, bringing no end of trouble to organizations wanting to register. When Chi Heng Guangzhou LGBT Center (智行广州) tried to register for the second time, management approval authority for their application was delegated to the district-level bureau in Yuexiu. However, because this bureau was not well acquainted with the new policy – in itself still in the process of constant amendment – both district officers (and the applicant) needed to consult upwards to clarify whether the (ever-changing) application documents were current. At the same time, the applicant was asked to provide further background information in respect of the organizer, leaving the overall impression that civil affairs information requirements at district-level are even stricter.
Some organizations also experienced the inconvenience of having to provide the same registration information twice. For example, when the Guangzhou Sunflower Women Workers Center (广州向阳花女工活动中心， hereinafter referred to as Sunflower) tried to register, one of the application forms required the inclusion of a project description. Following a series of amendments made by Civil Affairs officials to the original draft, the form had to be rewritten three times, taking up much valuable time and energy. Moreover, having opted to register as a social work organization, Sunflower were initially told the process would only require one legal representative to have either a qualification or background in social work, but later this was expanded to include a number of conditions, including one which stipulated that at least one third of the personnel (defined as the founder, the management board and staff) should have a social work qualification in order to register. In the end, Sunflower resolved the issue by asking its staff to seek accreditation.
(4) Registration capital
Securing registration capital is also an issue for emerging social organizations. Current policy requires organizations that want to register as a non-enterprise unit at sub-provincial level to submit registration capital worth CNY 30,000. However, Sunflower points out that project fundraising is the main form of income generation for organizations in their situation and that, conversely, it is difficult to find donors willing to provide funds for registration. Subsequently, the burden of finding this considerable sum of money will most likely fall upon the founder.
An additional problem relates to expenses incurred during the registration process. Bike Guangzhou says that, in addition to the CNY 30,000 registration capital, the organization needed to pay related expenses, including CNY 700 to open a bank account, CNY 1,200 for a capital verification report, as well as other fees needed to authenticate documents which makes the additional costs an NGO has to pay for registration the same as the one has to pay when registering a company. In addition the CNY 30,000 (taken as a proportion of the total capital requirement) an organization has to provide, represent up to 10% of its registered capital while the CNY 300,000 required to set up a company represents just 1%. Such a situation is deeply unreasonable for non-profit organizations.
(5) Foreign organizations
Although Guangdong’s “Program” was clearly intended to show that the registration process was open to foreign organizations, the emphasis placed on promoting “service providers in Hong Kong and Macao to establish privately run enterprise units that offer welfare services targeted at the elderly and those with disabilities” appears narrowly focused.
More importantly, civil affairs departments have yet to publish their specific registration management approach regarding foreign institutions, and China still has no law to govern the activities of INGOs based in China. As a result, besides from a few social organizations, the majority of non-enterprise units and foundations remain unregistered. According to data from 2009, the total number of international organizations registered across China came to just 18 foundations and 56 non-enterprise units, all of which are basically registered with the Ministry of civil affairs at national level.
“Organization M” (hereinafter referred to as “M”) has been working in China for more than 20 years and was encouraged when it heard that Guangdong had introduced a new, liberalized registration policy for foreign organizations. Because of internal policies, M does not want a Chinese national to act as its legal representative. However, with the new regulations, it is now possible for an overseas resident to become a legal representative.
Because M is unable to register in an official way, it is not recognized as a legal entity in the mainland, and therefore has to rely on individuals to bring foreign currency into the mainland to support its operations. However, this complicates the delivery of larger, more costly projects since Chinese citizens can only exchange foreign currency worth CNY 50,000 per year. Even if M registered as an industrial and commercial entity, the organization would still need to pay a 5% tax on each sum of money received. Further, since civil affairs departments have issued new policies aiming at reinforcing the support and management of public interest organizations, the Department of Industry and Commerce has become particularly cautious over the registration as companies by public interest organizations.
Despite its long-standing relationship with Chinese governments in project implementation, M still aspires to having its own legal status. In this regard, Yunnan’s relatively open attitude towards foreign organizations is illustrative of how foreign organizations can be attracted to set up base: as of August 2010 13 INGOs had signed agreements with and has been put in official record（备案）by the Yunnan provincial government ; and by December the number reached 140. In Guangdong, where the level of international exchange is greater due to proximity to Hong Kong and Macao, the demand is even greater.
(6) Post-registration difficulties
Some have likened the registration process for social organizations to “being under siege” – with those on the outside wanting to get in and vice-versa. Such an expression is symbolic of the various problems that organizations face post-registration.
The most significant difficulty faced by Shenxin Feiyang was financial. For instance, organizations are required to pay taxes following registration, which accounts for a huge slice of expenditure. Moreover, social organizations still face great difficulties to be eligible for corporate income tax exemptions and acquiring qualification to deliver invoices for their company donors to deduct the donation as expenditure before paying tax. Additionally, all of Shenxin Feiyang’s organizational costs are presently divided between volunteers and staff, which places a significant strain on volunteers.
Social organizations have also generally maintained their own methods and standards in relation to financial record keeping, making financial disclosures in line with donor requirements. Conversely, most have only a partial understanding of the Ministry of civil affairs’ compliance requirements and therefore have adopted a “move slowly” approach to give themselves time to feel their way around the new system.
Lastly, organizations are also reporting that time spent on compliance has increased dramatically post-registration. For instance, Guangzhou Gold Ribbon Special Children Parents Centre (金丝带互助中心) says that it has had to sign vouchers for disbursement almost every day since registration. Meanwhile, the introduction of more complex processes has also put greater pressure on its team of volunteers, upon which it relies heavily to deliver services.
(7) Policy recommendations
Based on the above analysis, the following specific policy recommendations are proposed:
(i) Continue to relax and clarify the scope of what constitutes a public-interest charity. Following the introduction of the new system of direct registration, organizations already known by the public, such as some environmental and social work organizations may still encounter certain challenges (e.g. in terms of registered capital and premises), those challenges can be overcome through hard work. However, for those organizations that are not publicly recognized by society, such as the PLFAG example quoted above, registration remains as tough as ever. Research now shows that the number of gay people in China may have reached as many as 50 million, up from around 5-10 million when figures were first published in 2004. Therefore, the authorities should include the organizations that support and help gay people and there families in “public-interest” organizations. Further, the scope of what constitutes a “public-interest charity” should also continue to be broadened.
(ii) There should be greater consistency between civil affairs departments at different levels of the administrative system. As mentioned above, there are currently competing definitions of a “public interest charity” as well as operational procedures that need to be streamlined. Guangzhou’s city level civil affairs bureau should maximize efforts to streamline policy implementation through better coordination and delivery of standardized training to counterparts at district-level.
(iii) The requirements in relation to finding acceptable premises should be reduced. Many fledgling social organizations do not require large premises, so sharing venues and office space is actually a very practical approach. Civil affairs officials should acknowledge the situation on the ground and make appropriate adjustments to the current policy, which restricts different organizations from registering with the same address.
(iv) The Ministry of civil affairs needs to work with greater care and be sensitive to the fact that some seemingly minor issues may actually place a significant strain on some social organizations. For example, when Shenxin Feixiang was issued with its certificate the character “district” had been omitted which, so far as the civil affairs department was concerned, did not cause any concerns. However, Shenxin Feixiang’s application for a bank account was nonetheless turned down, since the bank was unable to reliably verify the identity of the organization. In the end, it was only after representatives from Shenxin Feixiang had liaised with staff from both sides that the organization was finally able to convince civil affairs to issue a further confirmation of proof that finally allowed them to successfully open a bank account.
(v) The Ministry of civil affairs should coordinate with other parties to reduce the overall cost of registration. Currently, the various fees charged to social organizations and commercial organizations are the same when in fact fees to the former should be reduced.
(vi) Since Guangdong’s blueprint has already made reference to the registration of foreign organizations, specific regulations for these entities should therefore be released as soon as possible, in order to avoid accusations of another false dawn. This would also assist the large number of INGOs already working in Guangdong that would like to secure their legal status in China.
(vii) Coordinate and approve the tax-exempt status of social organizations as soon as possible after registration. In July 2012 research conducted by the Sun Yat-sen University Philanthropy Research Center revealed that social organizations found it difficult to obtain such exemptions, leading to a corresponding increase in their administrative costs, when in fact government should be supporting social organizations through effective tax relief measures. Moreover, MoCA should coordinate with the tax department to ensure that tax exemptions are obtained as soon as possible after registration.
(viii) Civil affairs departments should develop more training for social organizations in respect of registration, finance, and annual compliance checks so that they can begin to work in line with standardized practices more quickly. Since MoCA began to deliver annual compliance training to registered organizations, the feedback from many has been that such training is essential while others complain that they were unaware of such provision, due to ineffective advertising. Civil affairs departments should therefore increase both training provision and communication efforts, in order to reach out to organizations that would like to register.