Dec 25, 2020 07:15 PM

China to Revise Charity Law as Over-Regulation Stifles Online Growth, Source Says

China’s national legislature is expected to revise the country’s Charity Law to regulate online donations, a source said.
China’s national legislature is expected to revise the country’s Charity Law to regulate online donations, a source said.

China’s national legislature is expected to revise the Charity Law in an effort to loosen overly stringent regulations governing online donations that are threatening to throttle the fast-growing practice, a source with direct knowledge of the matter told Caixin.

The move comes after the National People’s Congress Standing Committee (NPCSC), the top decision-making body of the national legislature, conducted an inspection tour of five provinces in August and September to look into enforcement of the country’s four-year-old Charity Law. In a subsequent report, the team noted that the law was in need of revision to clearly define legal boundaries, stipulate fundraising methods and legal responsibilities, as well as strengthen the screening of online platforms. The source, who declined to be identified, did not specify when the revisions might be made.

In recent years online donations in China have soared, exceeding 5.4 billion yuan ($826.4 million) in 2019, a jump of 68% from the year before. However, loopholes in regulating money donated via online platforms resulted in high profile scandals involving fake fundraising drives. And while the amount of donations has soared, the number of newly registered charities has declined every year since the law came into force, dwindling to just 1,017 last year from 3,450 in 2017, statistics show.

Indicative of the widespread frustration within the industry, more than 60 high-profile members of the country’s academic, political and business sectors, wrote in a set of recommendations submitted in October to the NPCSC’s Charity Law inspection team that the law in its current form is “impractical” and gives rise to “over-regulation.” They argued that officials in charge of enforcing the law should adopt a more hands-off approach so that charities have more freedom to operate.

“Over-regulation is seen as one of the most important reasons why the development of charitable organizations has been hindered since the implementation of the Charity Law,” the experts wrote. “These methods run counter to the objectives and stipulations of the Charity Law and in practice undermine it.”

According to a report by the China Association of Social Security (CAOSS), there were more than 10 billion individual online crowdfunding actions in 2019, raising more than 5.4 billion yuan. Online personal appeals for donations to pay for medical treatment have also flourished over the past three years, raising more than 50 billion yuan.

“The Charity Law needs to keep pace with the times, while being more inclusive and flexible,” Yang Tuan, a researcher at the Chinese Academy of Social Science, said at a forum on Dec. 13.

In addition to online money raising ventures, charity services, community charities as well as those operated by industry organizations are also in need of an overhaul, with some in the industry proposing the establishment of an oversight system at the national level.

China had around 6,000 registered charities by the end of last year, accounting for less than 1% of the total number of social organizations across the country. Critics of the current system have said that the low number can be directly attributed to the shortcomings of the current law, which is not clearly defined, and over-regulation that has strangled the growth of charities.

The reputation of China’s charity organizations suffered a blow this year after vast numbers of public donations to groups working in Wuhan, formerly the epicenter of the country’s Covid-19 outbreak, failed to immediately relieve acute shortages of personal protective equipment for frontline medical staff.

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