China: the rise of a new philanthropic power

Jack Ma, ex-PDG d’Alibaba. © STR/ AFP

Billionaire Jack Ma, founder of the e-commerce site Alibaba, has retired from business. The former professor is leaving the reins of a group of 100,000 employees, valued at more than $450 billion, and says he wants to devote himself to philanthropy in the field of education, where his foundation is innovating.

“Events are the foam of history,” wrote Paul Valéry. In China, other personalities have long practiced philanthropy – understood as “voluntary private generosity for the public good” – often with discretion, even anonymity. But the size of the country’s first fortune (21ᵉ worldwide, estimated at USD 43 billion), an icon of the entrepreneur starting from scratch, combined with his ability to create media attention, indicates that we are at a turning point in the history of Chinese philanthropy.

The revival of a thousand-year-old philanthropic activity

One of the often misunderstood aspects of Chinese capitalism is the relative lack of private philanthropy from the wealthy to the lower classes until recently.

Yet, historically, China has a very old tradition of generosity dating back more than three millennia. It stagnated after 1949, in the early years of the People’s Republic: nationalization of assets; foreign organizations dissolved or expelled from the territory. The socialist state had to provide for social needs and private initiatives were discouraged. This chronology contrasts sharply with the economic history of the United States, where philanthropy emerged early as a remedy for the social ills of the “wild” capitalism of the late 19th century.

For more than a century, philanthropy has served as “soft power” for the countries that practice it. Historical examples abound, such as during the Cold War, when the West had to fight against Marxism. The developing world today is a vast area of multiple philanthropic influences, invoking the pursuit of the UN’s Sustainable Development Goals. There is already a growing number of researchers of Chinese origin in the academic community dedicated to non-profit organizations and philanthropy (ARNOVA 2019 conference), and China is being studied in increasing depth.

Since its opening to the market economy during the Deng Xiaoping era, China has experienced tremendous growth. As a side effect of this growth has been increasing inequality, the first private foundations sprang up in the 1980s and 1990s in an attempt to halt this process and support the state in its social spending. It was not until 1994 that the compatibility between philanthropy and socialism was officially recognized. Today we are witnessing a real renaissance of the spirit of private philanthropy in the country.

A strong tradition of generosity

The philosophical foundations of the Chinese philanthropic tradition are to be found in part in Confucian thought, a humanism based on values (goodness, righteousness, loyalty) and aimed at societal harmony, which however poses challenges to contemporary Chinese identity.

To this can be added the gratitude of the beneficiaries of economic modernization and their moral obligation to “give back” a share of their success, echoing the American social norm of “give-back”. Education is by far the largest recipient of private donations, as it is seen as a means of emancipating people from poverty. In China, companies or corporate foundations contributed 65% of the estimated US$23.4 billion in charitable donations in 2016. But philanthropy in China remains largely an individual affair, as a large proportion of the rich have acquired their wealth during their lifetime (“self-made”) and many entrepreneurs closely identify their own destiny with that of their firm. Of the 200 richest people in the country, almost a quarter have set up their own foundation to channel their donations. In 2014, total generosity represented about 0.2% of China’s GDP, compared to an average of 2% in the United States.

A booming sector

More than a billion Chinese use the Internet to make donations. In 2015, the Tencent company (leader in Internet and mobile services) launched “Philanthropy Day September 9”, an annual event dedicated to financing charitable projects. Several tens of millions of people have already taken part, which has helped to raise awareness on a large scale in China of the generosity of associations and foundations. The international GivingTuesday initiative is now also being relayed in China.

In 2018, Forbes’ 100 largest donors (individuals and corporations) contributed a total of more than 19 billion yuan ($2.8 billion USD) to charitable causes. Almost double the 10.4 billion yuan donated in 2016. To be included in this list, a minimum of 18 million yuan ($2.6 million USD) had to be donated in 2018 compared to 5 million yuan ($730,000 USD) in 2016. The top 48 donors have passed the 100 million yuan mark, and together account for 90% of the total. Donations were mainly directed towards education (49%) and poverty alleviation. These amounts are corroborated by the Hurun Philanthropy List 2019.

Multiplication of philanthropic billionaires

The multiplication of Chinese philanthropists is directly linked to the rate at which large fortunes are appearing. In 2017, the bank UBS counted 373 billionaires in mainland China (the second largest concentration in the world after the 585 billionaires living in the USA), including 89 new individuals, i.e. an average of nearly two new billionaires every week. Their number has fallen to 325 in 2018, in line with the global trend of a slight contraction in the number of ultra-rich people after five years of continuous growth.

Among the new generation of entrepreneurs who have built up their own fortunes, there are some great national figures who wish to inspire a new generation of philanthropists. For example, Dr. Charles Chen Yidan, co-founder of Tencent, left the company in 2013, after becoming one of the richest men in the country, to devote himself to promoting education. The Yidan Prize (US$3.8 million) is the world’s most generous award for educational research.

Dr Charles Chen Yidan, fondateur du Prix Yidan pour l’éducation.

Another prominent figure is Mrs. He Quiaonv, who in 2017 announced a pledge of US$1.5 billion for biodiversity conservation, the largest donation ever made for this cause. Tax incentives for philanthropy have recently been increased. Individuals can deduct donations up to 30 per cent of their taxable income, and corporations up to 12 per cent of their annual profits.

Observatories of philanthropy

There is a growing body of research on Chinese philanthropy, as well as institutions to support the growth of the sector and to train the managers of new foundations. Most notably, the China Foundation Center counted 5,545 foundations (created by wealthy individuals or using annual public collections) at the end of 2016, a figure that has more than quadrupled (+430%) in a decade since 2006. The number of foundations would then have grown to 6,322 in 2017 and 7,048 in 2018. By 2014, their total donations amounted to 102 billion yuan (USD 16.7 billion).

On the American side, Harvard University has created a database to collect the most accurate data possible on Chinese philanthropy. It also offers several high-level training courses for leaders in this emerging sector. The number of Chinese-American foundations listed in the US has quadrupled since 2000 to reach 1,300 entities in 2014. Bilateral cooperation is underway to try to align the interests and goals of the two global philanthropic giants.

For example, the China Global Philanthropy Institute was founded in 2015 by five Chinese and American philanthropists, including Bill Gates. The goal is to create a model for others by “developing exemplary philanthropists and professional leaders in the philanthropic sector” with a dual national and international focus. To achieve this, the Institute relies on a triptych of academic training, support for best practices, and study trips.

In addition, at the end of 2019, the China Philanthropy Big Data Research Institute has just been launched, with the aim of mobilizing the entire field of science and technology, including artificial intelligence, in favour of charitable activities, with a clear desire for global cooperation. These steps should be seen in the context of China’s broader activism in seeking pre-eminence in the field of financial transaction technologies, through the imminent adoption of electronic money or the mastery of the blockchain.

Predictable international projection

Greater China, including Hong Kong, is already the main source of external funding for American universities through alumni donations, far ahead of traditional sources such as the United Kingdom and Canada. These exchanges are not uncritical, in a more general context of tensions between China and the United States that affect universities.

On the other hand, Chinese foundations already make international donations, especially during natural disasters, on all continents. A dozen have even set up offices or run projects abroad. If the great masses of Chinese philanthropy are for the moment contained within national borders, all the ingredients are now in place for it to project itself exponentially internationally. This will mechanically lead to two consequences.

If the great masses of Chinese philanthropy are for the moment contained within national borders, all the ingredients are now in place for it to project itself internationally exponentially. This will mechanically lead to two consequences.

On the one hand, the international landscape of philanthropy will be influenced by the increased presence of Chinese actors, whose orientations nobody can say today which ones they will favour. How will they fit into existing networks in the sector? How will they contribute to the emergence of a global philanthropic infrastructure?

How will this rise and the redistribution of the cards within the international philanthropic ecosystem be approached, knowing that it is traditionally under strong Western influence, through its cardinal values, its financial networks and its operating methods?

Symmetrically, the Chinese foundations and philanthropists who will be active internationally will probably nourish, enrich, and no doubt influence their visions in contact with their foreign counterparts.

Will the international sharing of experiences be a source of inspiration for the evolution of the domestic philanthropic sector? How will China manage this two-way exchange of concepts, ideas, techniques, and perhaps even personnel?

Whatever the answers to these questions, in the coming years the Chinese philanthropic sector will face several challenges: managing internationalization, transparency of non-profit organizations, professionalization of agents, changing regulatory framework, broader consideration of social responsibility, and going green.

A global influence

On the world stage, China is more visibly involved than in the past, through its foreign direct investment and official development assistance, particularly in Africa.

As early as 2013, the “New Silk Roads” initiative was unveiled, linking the country to many trading partners via land and sea routes. In 2017, a cooperation component was added between 300 NGOs from 60 countries. In 2019, the authorities announced their wish for these trade routes to evolve towards “high quality”, emphasising their financial and environmental sustainability.

In 2017, President Xi Jinping presented his thoughts “on socialism with Chinese characteristics for a new era”, including a specific declination for diplomacy, called to be more active and to build “a common future for humanity”.

Should the authorities deploy a similar aim on the orientation of the gigantic potential of philanthropic flows outside the country with the same determination and long-term strategy, there is no doubt that China will reach the rank of “great philanthropic power”.

A force to be reckoned with well beyond its borders in the 21st century, and one that needs to be carefully observed today as one of the corollaries of the country’s upward trajectory.

Fabrice JaumontResearcher in educational sciences, Fondation Maison des Sciences de l’Homme (FMSH) – USPC

Charles SellenGlobal Philanthropy Fellow, Lilly Family School of Philanthropy, Indiana University

An article to be found on “The Conversation” website.