Bill Gates and Warren Buffet must have been puzzled when they flew back from China, having failed to solicit donations to charity from China’s wealthiest.
Prior to going to China, Gates, the second-richest man on the planet, and Buffet, the third-richest, had successfully convinced 40 billionaires to pledge at least half their net worth to charity in the United States. Why don’t Chinese billionaires donate to charity in the same way as their U.S. counterparts?
Charity is not new to the Chinese—it can be traced back 2,000 years. In the Han Dynasty and the first 200 years of the Tang Dynasty, charity was mostly practiced by Buddhist and Taoist temples, but in A.D. 841, Emperor Wu-Tsung ordered the destruction of the Buddhist temples.
During the Yuan (Mongol occupation) and Song dynasties and subsequent dynasties, charity was mostly controlled by the imperial government. However, after the Opium War (1839–1842), the imperial treasury couldn’t afford charity, and private charities played an increasingly important role in society.
After the extreme drought of 1876, modern, private charity was born. At the time, the richest Chinese who made their fortune during the Westernization Movement of the late Qing Dynasty became the most active in private charity. After the collapse of the Qing Dynasty, private charity matured, with the help of Western missionaries’ ideas and practices.
For 1,000 years, the local rich always contributed to local education and road and bridge building, with the belief that contributions would accumulate virtue for the afterlife or the next reincarnation. The charity organization established during the 1876 drought also carried the mission of moral education. Charity recipients were expected to conform to traditional morality. Other than the imperial-dominated period, religion always played the most important role in Chinese history.
Unfortunately, this whole story ended in 1949 when the Chinese Communist Party (CCP) took over mainland China. Missionary-related charity was criticized as the “cultural invasion of Western Imperialism,” and the contributors to private charities were mostly considered enemies of the communist revolution. Except for the lucky ones who went to Taiwan with the National Army, they were either killed or imprisoned. The Communist Party and its leaders were to be the only saviors of the Chinese people. Nobody should share the “glory.”
The economic reform that started 30 years ago is not strange to many Chinese. It just borrowed some ideas from the well-established capitalism of the West. Actually, the reform just turned the clock back 30 years to the point before the CCP took over China. This economic reform has been summarized in two phrases: “untying the hands” (sometimes translated as deregulation) and “crossing the river by groping for the stones underfoot.”
But the obstacles to restoring charity in China are much more complicated than those to reviving capitalism.
In ancient China, when the imperial government fully controlled charity, especially in the Song and Yuan dynasties, or mostly controlled charity, such as in the Ming and Qing dynasties, the main concern of the rulers was that the emperors should take all the credit for the charity. Nobody else was allowed to take even partial credit.
On the other hand, the emperors were fully responsible for the money used on charity. This was called “infinite royal graciousness” in China. Only when the Qing Dynasty could no longer afford charity did it allow private charity to take over some of the work.
Prior to going to China, Gates, the second-richest man on the planet, and Buffet, the third-richest, had successfully convinced 40 billionaires to pledge at least half their net worth to charity in the United States. Why don’t Chinese billionaires donate to charity in the same way as their U.S. counterparts?
Religious Roots of Charity
Charity is not new to the Chinese—it can be traced back 2,000 years. In the Han Dynasty and the first 200 years of the Tang Dynasty, charity was mostly practiced by Buddhist and Taoist temples, but in A.D. 841, Emperor Wu-Tsung ordered the destruction of the Buddhist temples.
During the Yuan (Mongol occupation) and Song dynasties and subsequent dynasties, charity was mostly controlled by the imperial government. However, after the Opium War (1839–1842), the imperial treasury couldn’t afford charity, and private charities played an increasingly important role in society.
After the extreme drought of 1876, modern, private charity was born. At the time, the richest Chinese who made their fortune during the Westernization Movement of the late Qing Dynasty became the most active in private charity. After the collapse of the Qing Dynasty, private charity matured, with the help of Western missionaries’ ideas and practices.
For 1,000 years, the local rich always contributed to local education and road and bridge building, with the belief that contributions would accumulate virtue for the afterlife or the next reincarnation. The charity organization established during the 1876 drought also carried the mission of moral education. Charity recipients were expected to conform to traditional morality. Other than the imperial-dominated period, religion always played the most important role in Chinese history.
Unfortunately, this whole story ended in 1949 when the Chinese Communist Party (CCP) took over mainland China. Missionary-related charity was criticized as the “cultural invasion of Western Imperialism,” and the contributors to private charities were mostly considered enemies of the communist revolution. Except for the lucky ones who went to Taiwan with the National Army, they were either killed or imprisoned. The Communist Party and its leaders were to be the only saviors of the Chinese people. Nobody should share the “glory.”
The economic reform that started 30 years ago is not strange to many Chinese. It just borrowed some ideas from the well-established capitalism of the West. Actually, the reform just turned the clock back 30 years to the point before the CCP took over China. This economic reform has been summarized in two phrases: “untying the hands” (sometimes translated as deregulation) and “crossing the river by groping for the stones underfoot.”
But the obstacles to restoring charity in China are much more complicated than those to reviving capitalism.
Who Contributes, Who Takes Credit
In ancient China, when the imperial government fully controlled charity, especially in the Song and Yuan dynasties, or mostly controlled charity, such as in the Ming and Qing dynasties, the main concern of the rulers was that the emperors should take all the credit for the charity. Nobody else was allowed to take even partial credit.
On the other hand, the emperors were fully responsible for the money used on charity. This was called “infinite royal graciousness” in China. Only when the Qing Dynasty could no longer afford charity did it allow private charity to take over some of the work.
In today’s China, the state asks or even forces private citizens and businesses to contribute to disaster relief, while the state (or, more accurately, the CCP) not only takes all the credit but also the right to use the money.
Only 43 days after the Yushu earthquake, on May 27, the State Council issued an “Opinion” that ordered the relevant central organizations, the Red Cross and the China Charity Federation, to wire all currency donations to Qinghai Province, where Yushu is located. All the money would be used by Qinghai Provincial officials for the reconstruction after the disaster.
Forty days later, another joint notice issued by five Ministries detailed the transfer. All 13 state-level charity organizations must transfer all donations to any of the following: Qinghai Provincial Bureau of Civil Affairs, China Red Cross, or China Charity Federation. Then these three must hand over all money to the Qinghai Provincial officials. The decision shocked those involved in Chinese charity and triggered a debate that is still going on.
The Chinese state is neither transparent nor trustworthy in how it spends the donations for disaster relief. According to research carried out by Deng Guosheng of Tsinghua University, more than 80 percent of the donations made after the Sichuan earthquake finally flowed to the state at the central, provincial, or local level and became part of the state’s budget expenditure.
Unlike the transparency practiced by non-profit organizations in the United States, the state budget in China is sometimes considered a state secret. In 2001, four migrants who were displaced by the Three Gorges Dam were sentenced to jail terms for “leaking state secrets” to a Hong Kong news outlet. The “state secrets” turned out to be the amount of the resettlement money the migrants were supposed to have gotten but didn’t.
Most people consider disaster relief one of the major functions of the state, which the taxes already should cover. If donations go into the black hole of the state’s pocket, people feel they are being double taxed. To make matters worse, those who contribute money do not have the right to know what the money has been used for, nor do they get any credit for aid given to disaster victims.
In China, no private charity organizations are allowed. Any non-profit organization must be registered under the umbrella of a state entity. The existing charity organizations are more or less controlled by the state.
But if the big semi-government charity organizations at the state level can’t keep and manage the money they have received, where should people contribute their money, should they want to do so?
The martial arts actor Jet Li’s One Foundation is facing this problem now. One Foundation is not independent, as it is registered under the umbrella of the China Red Cross Association, a state entity. But One Foundation raises money, which it is not legally authorized to do, and the money it raises goes to the China Red Cross, which is inconvenient for the One Foundation. It has been advised that it should register independently, but there is no legal means for doing so. The three-year contract between One Foundation and the China Red Cross will expire soon. The One Foundation has been functioning since 2007 in a gray area, and no one knows how long it can continue in this way.
The richest in China have their own problems. Cao Jianhai, the director of the Investment and Marketing Research Institute of Chinese Academy of Social Sciences, has divided the richest people into five categories: the princelings, the grass-roots rich, the high tech, the local representatives of foreign firms, and the stars of the entertainment businesses.
The first group, the princelings, holds the political power. The other four have to depend on political power.
Those who belong to the princelings are the richest with the lowest profiles. They have their own small circle. They don’t show their fortunes to the public; their names never show up on any list of the wealthy.
They think the whole country belongs to them. Charity is not in their vocabulary: They only take and never give. They got rich by taking advantage of their parents’ power and connections. According to an article published by the Far Eastern Economic Review in 2007, to the end of March 2006, out of 3,220 rich people whose fortune was worth more than 100 million yuan (US$15 million), 2,932 were princelings. That’s more than 90 percent.
Those in the other categories, especially the grass-roots wealthy, made their fortunes by themselves, working their way up from the bottom. However, in China, nobody can make a big fortune by following the law. The rich who are not princelings have to constantly walk on a tightrope.
To keep themselves out of trouble with the law, they have to keep a good relationship with Party and state officials, sometimes with personal contributions to the officials’ pockets. Those who are in power keep their eyes on the pockets of the grass-roots wealthy. Any mistake by one of the grass-roots could mean losing fortune, freedom, or even life.
In recent years, of those who have been on the Hurun Report’s “Richest People in China List,” 17 have already been accused, tried, and put in jail. Among them are Wu Ying, who was sentenced to death in December 2009, and Huang Guangyu of the GOME Group, who is now serving a jail term of 14 years.
For most of the grass-roots wealthy, the uncertainty of the future is another reason to prevent them from making contributions.
Only 43 days after the Yushu earthquake, on May 27, the State Council issued an “Opinion” that ordered the relevant central organizations, the Red Cross and the China Charity Federation, to wire all currency donations to Qinghai Province, where Yushu is located. All the money would be used by Qinghai Provincial officials for the reconstruction after the disaster.
Forty days later, another joint notice issued by five Ministries detailed the transfer. All 13 state-level charity organizations must transfer all donations to any of the following: Qinghai Provincial Bureau of Civil Affairs, China Red Cross, or China Charity Federation. Then these three must hand over all money to the Qinghai Provincial officials. The decision shocked those involved in Chinese charity and triggered a debate that is still going on.
The Chinese state is neither transparent nor trustworthy in how it spends the donations for disaster relief. According to research carried out by Deng Guosheng of Tsinghua University, more than 80 percent of the donations made after the Sichuan earthquake finally flowed to the state at the central, provincial, or local level and became part of the state’s budget expenditure.
Unlike the transparency practiced by non-profit organizations in the United States, the state budget in China is sometimes considered a state secret. In 2001, four migrants who were displaced by the Three Gorges Dam were sentenced to jail terms for “leaking state secrets” to a Hong Kong news outlet. The “state secrets” turned out to be the amount of the resettlement money the migrants were supposed to have gotten but didn’t.
Most people consider disaster relief one of the major functions of the state, which the taxes already should cover. If donations go into the black hole of the state’s pocket, people feel they are being double taxed. To make matters worse, those who contribute money do not have the right to know what the money has been used for, nor do they get any credit for aid given to disaster victims.
In China, no private charity organizations are allowed. Any non-profit organization must be registered under the umbrella of a state entity. The existing charity organizations are more or less controlled by the state.
But if the big semi-government charity organizations at the state level can’t keep and manage the money they have received, where should people contribute their money, should they want to do so?
The martial arts actor Jet Li’s One Foundation is facing this problem now. One Foundation is not independent, as it is registered under the umbrella of the China Red Cross Association, a state entity. But One Foundation raises money, which it is not legally authorized to do, and the money it raises goes to the China Red Cross, which is inconvenient for the One Foundation. It has been advised that it should register independently, but there is no legal means for doing so. The three-year contract between One Foundation and the China Red Cross will expire soon. The One Foundation has been functioning since 2007 in a gray area, and no one knows how long it can continue in this way.
The Richest in China
The richest in China have their own problems. Cao Jianhai, the director of the Investment and Marketing Research Institute of Chinese Academy of Social Sciences, has divided the richest people into five categories: the princelings, the grass-roots rich, the high tech, the local representatives of foreign firms, and the stars of the entertainment businesses.
The first group, the princelings, holds the political power. The other four have to depend on political power.
Those who belong to the princelings are the richest with the lowest profiles. They have their own small circle. They don’t show their fortunes to the public; their names never show up on any list of the wealthy.
They think the whole country belongs to them. Charity is not in their vocabulary: They only take and never give. They got rich by taking advantage of their parents’ power and connections. According to an article published by the Far Eastern Economic Review in 2007, to the end of March 2006, out of 3,220 rich people whose fortune was worth more than 100 million yuan (US$15 million), 2,932 were princelings. That’s more than 90 percent.
Those in the other categories, especially the grass-roots wealthy, made their fortunes by themselves, working their way up from the bottom. However, in China, nobody can make a big fortune by following the law. The rich who are not princelings have to constantly walk on a tightrope.
To keep themselves out of trouble with the law, they have to keep a good relationship with Party and state officials, sometimes with personal contributions to the officials’ pockets. Those who are in power keep their eyes on the pockets of the grass-roots wealthy. Any mistake by one of the grass-roots could mean losing fortune, freedom, or even life.
In recent years, of those who have been on the Hurun Report’s “Richest People in China List,” 17 have already been accused, tried, and put in jail. Among them are Wu Ying, who was sentenced to death in December 2009, and Huang Guangyu of the GOME Group, who is now serving a jail term of 14 years.
For most of the grass-roots wealthy, the uncertainty of the future is another reason to prevent them from making contributions.
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