Giv­ing it away in China

How phil­an­thropic are China’s new bil­lion­aires and mil­lion­aires? Ex­perts in the world of giv­ing say the po­ten­tial is there, but the mo­ti­va­tion and mech­a­nisms for giv­ing may not be, re­ports JACK FREIFELDER from New York.

China Daily (Canada) - - IN DEPTH -

The num­ber of mil­lion­aires in China grew to 2.4 mil­lion last year, sec­ond only to the United States, which to­taled 7.1 mil­lion, ac­cord­ing to the Bos­ton Con­sult­ing Group (BCG). The num­ber of bil­lion­aires is up­ward of 300, ac­cord­ing to the 2013 China Rich List put out by the Hu­run Re­port, a lead­ing au­thor­ity on China’s high net-worth in­di­vid­u­als. And the most re­cent com­pi­la­tion of Forbes World’s Bil­lion­aires List in­cludes more than 130 Chi­nese in­di­vid­u­als with net worth that ex­ceeds nine dig­its. How giv­ing are these rich? China ranked 133 among 135 coun­tries for do­nat­ing money and last for vol­un­teer­ing, ac­cord­ing to the World Giv­ing In­dex 2013, an an­nual sur­vey by the Char­i­ties Aid Foun­da­tion, a non-gov­ern­men­tal or­ga­ni­za­tion (NGO).

And where does the world’s sec­ond-big­gest econ­omy stand on char­i­ta­ble do­na­tions ver­sus the world’s big­gest econ­omy, the US?

To­tal char­i­ta­ble giv­ing in China was just 4 per­cent of the US level in 2013, ac­cord­ing to Shang­hai-based Hu­run.

In 2013, China’s top 100 phi­lan­thropists gave away a to­tal of $890 mil­lion — about $100 mil­lion less than the $992.2 mil­lion that Face­book CEO and co-founder Mark Zucker­berg and his wife do­nated that year.

In the US in 2013, in­di­vid­u­als gave roughly $240.6 bil­lion, or 72 per­cent, of the to­tal amount given to char­i­ta­ble or­ga­ni­za­tions, $335.17 bil­lion. That was about 2 per­cent of GDP and a 4.2 per­cent in­crease over 2012.

Ac­cord­ing to the Giv­ing USA Fed­er­a­tion’s most re­cent data, foun­da­tions gave $48.96 bil­lion (up 5.7 per­cent), and cor­po­rate giv­ing ac­counted for just 5 per­cent of the to­tal, or $17.88 bil­lion (down 1.9 per­cent), down pri­mar­ily be­cause of the slow growth in cor­po­rate pre-tax prof­its.

Un­like China where in­di­vid­ual wealth has oc­curred in the last decade or so, the ac­cu­mu­la­tion of wealth in the US by in­di­vid­u­als has a much longer his­tory, go­ing back to such en­trepreneurs as John D. Rock­e­feller Sr and An­drew Carnegie in the early 1900s. To­day’s most no­table US phi­lan­thropists are Mi­crosoft Corp founder Bill Gates and busi­ness mag­nate and in­vestor War­ren Buf­fett.

The long his­tory of phi­lan­thropy by Amer­i­cans is also be­cause the US of­fers its cit­i­zens — and cor­po­ra­tions — who give to char­i­ties some of the world’s most gen­er­ous tax in­cen­tives. If the ex­tremely wealthy do not give away some por­tion of their in­come or put it in some type of tax shel­ter, it goes to the tax col­lec­tor.

“The po­ten­tial is there in China as a re­sult of the growth in the coun­try’s num­ber of mil­lion­aires and bil­lion­aires,” said Yanzhong Huang, a se­nior fel­low for global health at the New York­based Coun­cil on For­eign Re­la­tions (CFR). “But we have to keep in mind that just hav­ing the ca­pa­bil­ity to do­nate does not mean there’s an in­cen­tive. Mo­ti­va­tion could be pro­vided by the govern­ment or in the form of tax­a­tion ben­e­fits, but there’s not much there.” The givers Some in­di­vid­u­als like bil­lion­aire real es­tate de­vel­oper Xu Ji­ayin serve as ex­am­ples of that po­ten­tial.

Xu, chair­man of the Ever­grande Real Es­tate Group, gave $68 mil­lion to char­ity in 2013, mak­ing him the big­gest phi­lan­thropist in China, ac­cord­ing to Forbes 2013 China Phi­lan­thropy List.

Other no­table names on the list in­clude: Wang Jian­lin, chair­man of Dalian Wanda Group Corp, China’s largest entertainment group ($42 mil­lion, third over­all); Ma Hu­ateng, founder and CEO of Ten­cent Hold­ings Ltd ($23 mil­lion, sixth over­all); and Jack Ma co-founder of Alibaba Group Hold­ing Ltd ($8 mil­lion, 29th over­all).

In Au­gust, Ma’s Alibaba is ex­pected to launch its IPO, the value of which may hit at least $120 bil­lion, ac­cord­ing to mar­ket ob­servers.

The Wall Street Jour­nal re­ported in April that Alibaba is set­ting up “one of Asia’s largest phil­an­thropic trusts”. The fund will be backed by stock op­tions that rep­re­sent about 2 per­cent of the com­pany’s cur­rent value, and would fo­cus on ar­eas like health care, ed­u­ca­tion and the en­vi­ron­ment, Ma told the news­pa­per.

Alibaba’s trust is “by far the largest en­dow­ment of its kind in China,” and it could even ri­val the one named af­ter Hong Kong bil­lion­aire Li Ka-shing, chair­man of Hutchi­son Wham­poa Lim­ited, a Hong Kong-based multi­na­tional con­glom­er­ate, the Jour­nal re­ported.

The 86-year-old Li is the rich­est man in Asia, oc­cu­py­ing the 11th spot with a worth of $36 bil­lion, ac­cord­ing to the lat­est Forbes an­nual list of global bil­lion­aires.

Over the past four decades, the Li Ka Shing Foun­da­tion (LKSF) has raised more than $1.8 bil­lion, al­most 90 per­cent in sup­port of ed­u­ca­tion re­form ini­tia­tives and med­i­cal ser­vices in the Greater China re­gion.

His foun­da­tion’s main goals are to pro­mote pos­i­tive and sus­tain­able ed­u­ca­tion re­form, sup­port re­search and devel­op­ment in the health­care field, and en­cour­age and help in­still a mod­ern cul­ture of phi­lan­thropy in China.

In 2006, Li said that tra­di­tional Asian val­ues “en­cour­age and even de­mand that wealth and means pass through lin­eage,” but he said it was his hope that his foun­da­tion could help per­suade peo­ple in Asia to “tran­scend this tra­di­tional be­lief”.

But be­cause there is no in­her­i­tance tax in China, some en­trepreneurs are not shy about keep­ing their money within their im­me­di­ate fam­i­lies, said Dien S Yuen, man­ag­ing direc­tor of Kor­dant Phi­lan­thropy Ad­vi­sors, a San Fran­cisco-based global phi­lan­thropy re­search and ad­vi­sory firm.

“China is in what I call the ‘ac­cu­mu­la­tion of • Net worth of $15.8 bil­lion (No 64 on

Forbes Bil­lion­aires List) • $42 mil­lion in char­ity (No 3 on

Forbes China Phi­lan­thropy List) • Net worth of $14.4 bil­lion (No 80 on

Forbes Bil­lion­aires List) • $23 mil­lion in char­ity (No 6 on

Forbes Phi­lan­thropy List) wealth stage,’ and they are still build­ing their busi­nesses and grow­ing, which I think is one of the rea­sons you’re not see­ing an out­burst of phi­lan­thropy,” Yuen said in an in­ter­view with China Daily.

Yuen said she ex­pects phi­lan­thropy in China will grow to be more stan­dard­ized in the fu­ture, but with­out an “en­abling en­vi­ron­ment” to fos­ter the proper in­fra­struc­ture, she said in­di­vid­u­als will con­tinue to ab­stain from giv­ing be­cause of the at­ten­tion and po­ten­tial back­lash that goes hand-in-hand with high pro­file phi­lan­thropy.

“Af­ter you’ve made all this money as a busi­ness­man, you’re ex­pected to give back and help the peo­ple who moved you to this po­si­tion,” Yuen said. “So the tricky part or one of the big­ger is­sues is how much do you give?

“A lot of peo­ple have been giv­ing and I think they’re just very pri­vate about it, al­most anony­mous,” she said. “And they take ex­tra pre­cau­tions in be­ing anony­mous prob­a­bly be­cause they don’t want the pub­lic shame of ‘you’re worth $100 bil­lion, so why did you only give $1 bil­lion?’ There’s re­ally never a magic num­ber.”

Whether there is a grow­ing cul­ture of Chi­nese phi­lan­thropy and if so, how it will take shape go­ing for­ward was the topic of dis­cus­sion in June among ex­perts on for­eign phi­lan­thropy at the Asia So­ci­ety in New York.

Melissa Berman, pres­i­dent and CEO of Rock­e­feller Phi­lan­thropy Ad­vi­sors Inc (RPA), said at the event that the “ro­bust non-profit sec­tor” in the US has al­lowed cit­i­zens to de­velop trust in phil­an­thropic or­ga­ni­za­tions, a sen­ti­ment that she said has not yet emerged in China.

“Phi­lan­thropy is based on trust and con­fi­dence in the non-profit sec­tor,’’ she told China Daily in an in­ter­view. “So get­ting that non-profit sec­tor ac­cel­er­ated and de­vel­oped is re­ally go­ing to change the land­scape of phi­lan­thropy in China.”

Berman said that within the last decade leg­is­la­tion from the Chi­nese govern­ment has helped en­cour­age the for­ma­tion of pri­vate foun­da­tions. “That helps give [these or­ga­ni­za­tions] le­git­i­macy and will help build the in­fra­struc­ture of trust in non­prof­its, which will in­crease con­fi­dence in the whole idea of phi­lan­thropy,’’ she said.

“Pri­vate foun­da­tions have been per­mis­si­ble for 10 years now and pri­vate phi­lan­thropy has been grow­ing rapidly since the 2008 earthquake in Sichuan,” she said.

Eileen R Heis­man, pres­i­dent and CEO of the Na­tional Phil­an­thropic Trust (NPT), wrote in a Septem­ber 2013 ar­ti­cle for Non­profit Quar­terly that “a water­shed mo­ment” in the phil­an­thropic aware­ness among Chi­nese was in 2008 when close to 80,000 peo­ple were killed in the Sichuan earthquake.

In that year, an­nual do­na­tion to­tals in China reached nearly $16 bil­lion — three times more than the pre­vi­ous year, and in­di­vid­ual do­na­tions in China ac­counted for 54 per­cent of the to­tal in 2008.

“Phi­lan­thropy can be very con­ta­gious in dif­fer­ent ways,” Heis­man said in an in­ter­view with China Daily. “The un­der­ly­ing phi­los­o­phy of phi­lan­thropy is com­pas­sion and there’s def­i­nitely a strong sense of com­pas­sion among the peo­ple in China.” Hu­man ser­vices Heis­man said that China’s main fo­cus for phi­lan­thropy is hu­man ser­vices, like health and wel­fare is­sues, and it “could take some time” be­fore any evo­lu­tion in the trends.

“There are some tax in­cen­tives for char­i­ta­ble giv­ing in China but they are not as well de­vel­oped as in the US,” said Mary Brown Bul­lock, chair­man of the China Med­i­cal Board (CMB), who took part the panel dis­cus­sions at the Asia So­ci­ety. “That’s some­thing that will evolve over time, and it will be fas­ci­nat­ing to watch how an in­creas­ingly af­flu­ent so­ci­ety be­gins to set up the in­sti­tu­tions and struc­ture for phi­lan­thropy.”

CMB was started in 1914 and was en­dowed by Rock­e­feller as an in­de­pen­dent Amer­i­can foun­da­tion to ad­vance health in China and Asia by strength­en­ing med­i­cal ed­u­ca­tion, re­search and poli­cies.

Yuen, with Kor­dant Phi­lan­thropy, said the due dili­gence re­quired from peo­ple look­ing to give to char­ity in China is also a bit of a de­ter­rent in the over­all trend of Chi­nese phi­lan­thropy.

“If you want to give in the US, you can go on­line, send a check, so it’s very easy,” Yuen said. “In China, if you want to have a tax de­duc­tion for your gift, you have to check and make sure the non­profit you worked with is reg­is­tered so you can get that tax de­duc­tion.”

“The US is such a hos­pitable place for phi­lan­thropy that some Chi­nese are set­ting up their phi­lan­thropy here,” she said. “There’s much more of an in­cen­tive in the US for taxes, and a lot of these in­di­vid­u­als un­der­stand this.”

Heis­man said de­spite chal­lenges like mod­est tax in­cen­tives for phi­lan­thropists and trans­parency is­sues for non­prof­its and NGOs alike, China’s non­profit sec­tor is grow­ing. But phi­lan­thropists in China will have to find a bet­ter way to en­cour­age po­ten­tial donors go­ing for­ward, she said.

A Fe­bru­ary re­port on China from the Coun­cil on Foun­da­tions, a phi­lan­thropy ad­vo­cacy group, said: “Re­cent changes in tax leg­is­la­tion have in­creased the por­tion of tax­able in­come that in­di­vid­u­als (30 per­cent) and en­ter­prises (12 per­cent) can deduct for pub­lic ben­e­fit do­na­tions to qual­i­fy­ing non­prof­its.”

Huang with the CFR said in a May 30 post on the CFR’s Asia Un­bound blog that mid­dling growth in China’s phil­an­thropic sec­tor stems from a lack of trans­parency and ac­count­abil­ity. But peo­ple in China are al­ready ask­ing for change in these ar­eas, he wrote.

“The Third Ple­nary ses­sion of the 18th CPC Cen­tral Com­mit­tee al­ready sent a sig­nal, say­ing that the govern­ment is go­ing to en­cour­age and pro­mote so­cial or­ga­ni­za­tions — the terms used to re­fer to the non-gov­ern­men­tal or­ga­ni­za­tions,” Huang said in an in­ter­view with China Daily. “They are also go­ing to sim­plify the regis­tra­tion and ap­proval of the so­cial or­ga­ni­za­tions. These are all pos­i­tive de­vel­op­ments.” The fu­ture What is the fu­ture of phi­lan­thropy in China? “The rapid rise of so­cial me­dia and the ad­vent of on­line giv­ing have em­pow­ered new donors and grantees alike,’’ wrote Emily Weaver on the Asia Foun­da­tion’s web­site in April. Weaver served as pro­gram ad­viser for the foun­da­tion in China from Septem­ber 2012 through March 2014.

“By be­ing able to do­nate on­line eas­ily while gam­ing, shop­ping, or so­cial­iz­ing, or­di­nary cit­i­zens are able to re­spond in­stantly to is­sues they care about through sites such as Ten­cent On­line Do­na­tion Plat­form, Sina Mi­cro-Phi­lan­thropy Plat­form, and Ali­pay E-Phi­lan­thropy Plat­form,’’ Weaver wrote.

Ac­cord­ing to the China On­line Do­na­tions Re­port, to­tal on­line do­na­tions through third­party so­cial net­work do­na­tion plat­forms sur­passed $83 mil­lion in 2013.

Weaver noted that dur­ing the Lushan earthquake in April 2013 many donors turned to on­line plat­forms for giv­ing and that more than $48 mil­lion was raised in just 10 days, ac­cord­ing to the China On­line Do­na­tions Re­port.

Heis­man also high­lighted the growth of so­cial me­dia in giv­ing in China.

“This is my pre­dic­tion,’’ she wrote in a Septem­ber 2013 ar­ti­cle for the Non-profit Quar­terly. “Chi­nese phi­lan­thropy will leapfrog over Amer­i­can phi­lan­thropy. They will seize so­cial me­dia and new tech­nolo­gies be­cause USbased tech­niques, like di­rect mail and checks, won’t be part of their ‘old guard’ or ex­ist­ing in­fra­struc­ture.”

“I, for one, will not be sur­prised when the day comes that we look to China’s non-profit or­ga­ni­za­tions’ achieve­ments and won­der, “How’d they do that?” Con­tact the writer at jack­freifelder@chi­nadai­lyusa.com

CHINA DAILY

Xu Ji­ayin, chair­man of Ever­grande Real Es­tate Group, and Jack Ma, founder and ex­ec­u­tive chair­man of Alibaba Group, give a thumbs-up at a re­cent event. Xu was China’s big­gest phi­lan­thropist in 2013 with do­na­tions to­tal­ing $68 mil­lion. His net worth has been put at $6.3 bil­lion by Forbes Bil­lion­aires List.

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