On May 10, 2016, Council on Foundations (COF) and International Center for Not-for-Profit Law (ICNL) convened over one hundred organizations to discuss new Chinese legislation that may restrict the work of overseas, Hong Kong, and Taiwan-based foundations and other nonprofits in China. Members can access a recording of the call.
Mark Sidel, Doyle-Bascom Professor of Law and Public Affairs at the University of Wisconsin – Madison and Consultant for Asia at ICNL, spoke on the call with Suzanne Siskel, Executive Vice President and Chief Operating Officer at the Asia Foundation. Natalie Ross, Global Philanthropy Director at the Council, moderated.
Sidel discussed the “securitization” of management and control of foreign NGOs and foundations in China and a decision to shift responsibility for drafting this legislation from the Ministry of Civil Affairs to the Ministry of Public Security. The first draft was made available on a confidential basis to the Chinese national legislature in December 2014. A second draft was made widely available for comment in April 2015. This draft elicited widespread criticism from foreign foundations and NGOs and within China, including official comments submitted by the Council.
After a year of redrafting in response to comments from foreign NGOs and foundations, a version for discussion and adoption by the Standing Committee of the National People’s Congress was made public in April 2016. The final draft was adopted by the Congress on April 28, 2016.
Summary of the Law
- The law “securitizes” registration, reporting, and management of foreign foundations and NGOs by moving that responsibility to the Ministry of Public Security.
- The law provides for two types of licensing by public security authorities: 1) registration, generally for foreign groups with an office and activities in China and 2) a temporary activities permit, for foreign groups with certain kinds of activities in China but without an office there. The new law prohibits organizations from being unregistered, a common practice at present.
- The law generally requires that funds for activities in China be made available to Chinese partners and spent by them.
- The law requires that foreign groups seeking registration in China must have an approved Chinese partner organization (“professional supervisory unit”), which enters into an agreement with the foreign organization and takes responsibility for its activities in China. China will issue list(s) of approved Chinese professional supervisory units.
- The law requires that organizations provide advance notice of activities to be undertaken during a forthcoming year, then report on activities undertaken after the year is over.
Unclear Areas of the Law
- Given the summary nature of the new law, the law’s implementing regulations and other implementing documents are particularly important. China has committed to providing these by January 1, 2017, when the law goes into effect. There has been considerable official and non-official pressure from outside China for those affected by the law to have an opportunity to comment on draft implementing regulations before they are promulgated.
- The law provides that certain activities relating to academic exchanges and cooperation will not be governed by the new law, but by earlier legislation and regulation. Which foreign academic activities in China will be covered by the new law (potentially requiring registration or temporary activities permits) and which will be covered by existing regulation remains unclear. Guidance is expected sometime in 2016.
- Will there be some sort of easier process for registration or temporary activities permits for foreign organizations that are already registered in China – for example, as a foreign foundation with the Ministry of Civil Affairs or a corporate entity through the State Administration for Industry and Commerce (each typically with an agreement in place with a Chinese partner)? In very general terms, Chinese officials have said that there will be some kind of less complicated process to re-register already registered groups, but no details are public yet.
- For foreign organizations providing funds for activities in China, must all such funds be sent to and programmed through Chinese partners? This appears to be a general requirement in the new law, at least for organizations with temporary activity permits, and it is one that concerns many foreign organizations. , particularly foreign nonprofit organizations that “sub-grant” or “re-grant” to Chinese organizations for activities in China; such activities appear to be substantially restricted or perhaps barred under the new law. Further guidance is expected in the implementing regulations.
- Some foreign organizations in China have built relationships with multiple Chinese partner organizations. In some cases, they have several different organizational forms or registrations, including at the provincial level. It is not yet clear how these issues will be handled by Chinese authorities, though the new law suggests only one key Chinese partner organization (professional supervisory unit) for each foreign group.
- Foreign organizations and their Chinese partner organizations are already planning 2017 activities. The law goes into effect on January 1, 2017, but at this point there is no guidance for registration or temporary activity permits. This is a significant planning and operational problem for foreign organizations and their Chinese partners; officially, organizations would be out of status (illegal) on January 1, 2017 unless this situation is clarified. Clarifications are expected.
Recommendations to Currently Registered NGOs
Though official advice cannot be provided for foreign organizations and their Chinese partners, Sidel mentioned the following in response to how groups might proceed:
- Foreign organizations should listen very carefully to Chinese partners in this complex transition period between an earlier framework (including multiple channels) governing foreign organizations in China, and the new framework under the law and the Ministry of Public Security. Chinese partners will often have earlier and better information than some foreign organizations. Write down exactly what they say, particularly the Chinese terms used for types of activities, status, elements of partnership, pathways to registration or permission, and other matters. Return to Chinese partners later in 2016 to listen very carefully again to what they are learning about the situation, and how to proceed when some implementing information becomes available.
- If a foreign organization has some kind of current registration/legal status (e.g. a registration through the State Administration for Industry and Commerce, Ministry of Civil Affairs, another central ministry, or a province), they should consider trying to keep that registration intact this year. That may or may not help in the new processes to follow under the law; each organization’s situation is different, but having some sort of legalized status in China, is likely to be better than having no legalized status.
- Be very careful on current legal matters in China. Make sure that foreign and domestic employees’ taxes are being paid. Make sure that visa status for foreign personnel is up to date, at least where currently possible in 2016. Consider carefully, perhaps particularly in some more sensitive parts of China, whether use of agreed-upon provision of certain kinds of project equipment (e.g. GPS, scanners, binoculars, drones, and other technology) might be better deferred to a time when the situation is more clear.
- All foreign personnel working on nonprofit activities in China should register with the U.S. State Department. Organizations should have detailed processes in place in case questions are asked of foreign personnel, Chinese personnel, or Chinese partners.
Resources and Updates
ICNL will continue to monitor and gather information on this transition in China, particularly on implementing regulations and documents and on the choices that foreign organizations and their Chinese partners are making under this new framework. ICNL will continue to report to the foreign and Chinese nonprofit and philanthropic communities on these issues going forward. The Council will track and share updates as they are available.
Recent commentaries (June 2016) are located at following links:
- http://foreignpolicy.com/2016/04/29/it-just-got-harder-to-make-a-difference-in-china-harsh-new-ngo-law-clamps-down-on-foreign-organizations/ (registration required or contact Sidel)
Thanks to Our Speakers
Doyle-Bascom Professor of Law and Public Affairs | University of Madison - Wisconsin
Consultant (Asia) | International Center for Not-for-Profit Law
Executive Vice President & Chief Operating Officer | Asia Foundation