CSR and the Development of Public Welfare in China

Charity and philanthropy is not only the business of some rich entrepreneurs but also of the general public in China

By Wen Shanshan, PhD Candidate, Department of Management, CUHK Business School

“Not only should entrepreneurs contribute to charity, but the general public should also do the same,” said Zi Zhongyun, honorary academician and former director of Institute of American Studies in the Chinese Academy of Social Science. “However, due to the uneven distribution of wealth in the Chinese society, entrepreneurs naturally have more money to contribute to philanthropic activities.”

Zi was speaking in a public lecture themed “Public Lectures on History and Business in China 2013-2014,” organized by the Department of History of the Chinese University of Hong Kong (CUHK) and the Leisure and Cultural Services Department of Hong Kong.

Born in 1930, Zi was one of the first Chinese exchange scholars to the United States in the early 1980s. She is considered a trailblazer in the studies of the history of US-China relationship, an outstanding scholar in international studies and an early contributor to China’s international scholarly exchanges with the Western world.

During the lecture, she briefly discussed the development history of charity and philanthropy in China since the late Qing Dynasty, and shared her personal views on the current situation and problems of China’s public welfare.

The Long History of Philanthrophy

According to Zi, philanthropy has existed for a long time in China. Mercy and empathy toward fellow human beings have always been highly valued, and those who believe in the concept of “karma” particularly tend to contribute to charity. In addition, rich people prefer not to intensify social conflicts that result from wealth disparity. When it comes to the concept of educating the masses, it is traditionally related to the idea of “saving the country”; whereas in the United States, education is for creating opportunities for people to compete in the job market.

Zi pointed out that during the Republic of China (1912-1949), industry became increasingly developed and many entrepreneurs not only made profits but started to do charity work. For example, Wu Yunchu, the “King of MSG” (monosodium glutamate) in China, donated all of his stocks to establish a charity foundation. It is said that he was very cautions and did not want to spoil his children, so he gave away all his wealth. The special characteristic of Chinese philanthropy in this period was to “save the country and improve the society.”

Zi went on to discuss the development of public welfare in China since 1949. In the beginning of the Communist regime, all private assets were confiscated by the State. The government intended to take care of all people from cradle to grave, so “charity” as a concept was rendered unnecessary.

“The word ‘charity’ or ‘philanthropy’ was a derogatory term at that time,” Zi said. “It was treated as a tool used by the capitalist to paralyze the working class.”

After the Chinese economic reforms in the 1980s, the government realized its limitations in taking care of people’s welfare. Some transitional organizations emerged alongside government agencies, like the international aids organization Red Cross and official foundations, i.e., Government Owned Non-Government Organizations, or GONGOs. In mid to late 1990’s, some NGOs emerged. By that time, many people had accumulated wealth so that they were capable of contributing to charity.

First Generation of Entrepreneurs

The first generation of entrepreneurs, who came from villages or towns, did charity work in their own villages or hometowns but not in the broader society. Other entrepreneurs, who came back from overseas, felt responsible for the public’s general welfare and used a modern way to carry out philanthropic activities. For example, Wu Qing, the daughter of the famous author Bing Xin, has established a school for young ladies from poor rural families. The girls in this school learn skills such as hair-dressing, housekeeping, typing, singing and more.

Since 2004, an enterprise civil forum is being held in China every year. Many enterprises have also started to publish CSR reports; however, those reports might not necessarily reflect the reality,  Zi said.

In 2011, 58 percent of all donations to China’s public welfare came from enterprises. The beneficiaries included some well-recognized charitable organizations, like A LA Shan, Nan Du Foundation and Le Ping Foundation.

At the same time, China saw the emergence of social enterprises. These are organizations that apply commercial strategies to maximize improvements in human and environmental well-being, rather than maximizing profits for external shareholders. These enterprises perform charity work by using the money they have earned. “These enterprises pursue the maximization of social welfare instead of the maximization of profits,” she explained.

Problems of Chinese Charity

Lastly, Zi talked about the problems of Chinese charity. According to her, the size of NGOs is relatively small. Among the 3,000 NGOs in China, fewer than 100 have more than RMB 1 million in funds. The tax policy is unfair for the NGOs compared with that for the GONGOs. Besides, NGOs are not allowed to build schools or get involved in politics.

Another issue is that some enterprises are not mature enough in their development and have engaged in charity work only for the sake of increasing their fame.

Fueling the problem is the media, which is only concerned about how much money enterprises donate instead of how the money is used.

On the other hand, some of the entrepreneurs who engage in philanthropy and practice CSR in the true sense of the word feel that they have not yet attained the social status they deserve.

In conclusion, Chinese enterprises are becoming increasingly familiar with the concept of CSR, she said. Driven by the demand of the general public, the government has improved its regulatory policy concerning NGOs. Specifically, it has loosened the restrictions on establishing NGOs.

“The development of CSR in China can ease social conflicts that result from an unequal distribution of wealth,” said Zi. “This can be seen as a sign of advancement of civic society.”