Philanthropy as an Emerging Contributor to Development Cooperation: The case of China

This article is an edited and abridged version of a report commissioned by the UNDP. The changes were made with permission of the author and the UNDP, and focus entirely on the China section included in the original. The unabridged report can be found here.

The world is at a pivotal moment for global cooperation. Planning for the Post-2015 Development Agenda and Sustainable Development Goals (SDGs) is well underway. These processes are led by UN Member States and multilateral agencies. Other crucially important stakeholders, notably civil society organizations and the business sector, have gradually established their roles and are acknowledged as non-state actors who should at times be included. But one distinct set of actors – those in the philanthropy sector – are rarely engaged.

Development aid, and more broadly international public finance for sustainable development, will remain essential in the decades to come. But more attention and analysis is going to the shrinking proportion of ODA within total financial flows to the South. At the same time, private flows have grown significantly. The largest proportion comes from foreign direct investment, portfolio and equity flows; the second largest is remittances; and the third is private philanthropy. All three of these can contribute to philanthropic outcomes, but philanthropy, if deployed well, can be particularly strategic and additive. The opportunity is enormous, since a broader range of philanthropists is emerging and becoming engaged in international giving, and domestic giving within developing countries itself is increasing.

But the emergence of philanthropy should not be viewed principally as a “gap filler” for ODA. Philanthropy often supports under-funded sectors like social inclusion, human rights, and gender equality. Moreover, a distinctive added value of philanthropy to the non-profit sector is through the creation of grantmaking portfolios that help build communities of practice, disciplinary fields, and social movements for positive change. Given the growing importance and enthusiasm around South-South cooperation and linkages, the burgeoning philanthropy originating in the global South, which has not been well-documented, is particularly important to explore and analyze.

Resourcing Development and the Changing Shape of Global Financial Flows

Today, so-called developing countries (in this paper referred to as the global South) are driving global economic growth, principally but not only in middle-income countries. The 2013 Human Development Report The Rise of the South: Human Progress in a Diverse World, notes that for the first time in 150 years, the combined GDP of the three largest economies of the South – China, India and Brazil – almost equals the combined GDP of the longstanding industrialized powers of the North (Canada, France, Germany, Italy, UK and the US)1. The power and influence of these countries has grown, accompanied by independence from traditional multilateral and bilateral aid donors. Each year more middle-income countries become donors (even as they continue to receive aid from wealthier countries), to the point where the boundary of giver and receiver is blurred.

 

The Expansion of Private Flows and Philanthropy’s Contribution to Global Development

Private flows from North to South have increased enormously in recent years. In 2011, private capital investment, remittances and philanthropy from the 23 developed donor country DAC members amounted to about $577 billion, over four times larger than official flows that year. Private capital flows remained largest at $322 billion, and remittances from all DAC donors to the developing world were $196 billion, a slight increase from $190 billion in 2010. Total philanthropy from all DAC donors was reported to be $59 billion in 2011, though the Hudson Institute, a leading analyst of such data, considers this underreported2.

Two of the institutions that have done detailed studies of giving in rapidly-growing economies are the Hudson Institute’s Center for Global Prosperity and WINGS. The Hudson Institute has begun an in-depth analysis and comparison of Brazil, China, India and South Africa. These four nations have become deeply involved in foreign assistance not only through government aid but also through private investment, philanthropy, and remittances. Compared to their ODA-type flows which reached a maximum estimate of $3.7 billion, according to World Bank data, remittances from these countries to developing countries amounted to $14.2 billion in 2011. And the Center for Global Prosperity estimates another $366 million was philanthropic contributions to international causes in the developing world3.

 

Building Trust and Effectiveness of Philanthropy and Civil Society

An ingredient of enabling philanthropy to engage more meaningfully in development cooperation is the need to build trust not only in the role of philanthropic institutions, but in civil society more broadly. The Hudson Institute in 2013 completed a pilot study of 13 countries’ philanthropic freedom or ease of giving, demonstrating that ease of giving can be successfully measured, and countries ranked and compared on their philanthropic freedom4.There must be trust that civil society is a force for good in society and that individual organizations are worth funding, making good use of money and achieving their stated goals. Governments have a key role to play by helping civil society to earn that trust from society, but not by excessive regulation, registration, and reporting requirements, which can be counterproductive. Excessive control has been shown to discourage philanthropic giving, both domestically and across borders. Where governments create an enabling environment for civil society by establishing a regulatory environment that is clear, accessible, impartial, and not overly burdensome, philanthropy and civil society can become true partners in the development of prosperous and inclusive societies.

 

The Case of China

Chinese philanthropy is of particular interest because of the country’s size, skyrocketing generation of wealth, and its growing global footprint in terms of business and development assistance. The Hurun Research Institute in Shanghai estimates that China had more than 230 billionaires by 20125. In China, as elsewhere, philanthropy has a long history. Rockefeller family historian Mary Bullock Brown located an archival document describing John D. Rockefeller’s 1921 encounter with the Chinese business community’s Chamber of Commerce, in which relating his own growing philanthropy in China spurred each of them to describe their many contributions to local schools and hospitals6. But even today international philanthropy is restricted in its scope, with only 18 foundations formally registered today [Editors note: according to the MOCA this figure is 23]. They have made an impact on the non-profit and philanthropy sectors nonetheless, as has the generosity of Hong Kong entrepreneurs like Li Ka-shing. His 2006 commitment to give one third of his wealth to his foundations is an inspiration for a growing number of Chinese philanthropists.

The Chinese government’s approach to philanthropy and civil society has generally been to control it, and scandals over the years have tarnished the reputation of the sector. Most substantial charitable entities that receive donations are likely to be government-operated or –affiliated NGOs, and independent grassroots NGOs are often not registered, small in scale, and lacking in established management systems and/or transparency. This not only inhibits philanthropy, but leads many donors with significant resources to operate their own programs. Nevertheless, the leadership today, while carefully monitoring civil society activity, has accepted that philanthropy has an important role to play in the nation and internationally. In 2004 the first regulations on foundations came into being and provided for the establishment of private foundations (including family, corporate, and endowed), most of them government controlled. Around 2007 a philanthropic boom began, and private initiative in the social sector has grown, just as it had in the economic sector. A modern-day “golden age” has been launched, in the words of China Development Brief’s Chen Yimei. This growth is attributed by a range of sources to the impact of the Sichuan earthquake of 2008, which led many potential donors to view privately-governed entities as more accountable and effective than government-operated organizations. Large and reputable foundations like the Narada Foundation, Kaifeng Foundation, One Foundation, China Social Enterprise Foundation, and the Vantone Foundation are coveted partners for civil society, business and international philanthropy alike. More recently the main founder of e-commerce group Ali Baba, Jack Ma, has pledged US$3 billion to set up his new foundation. At the other end of the spectrum, very localized people-to-people lending and bottom-up philanthropy is also growing, enabled by companies such as CreditEase.

According to the China Foundation Center, there were over 3,600 foundations in China by the end of 2013. About 1300 of these are non-governmental in origin7. Less than 200 have their own endowments. The rest receive funding from the government, or raise and spend money from the public on an ongoing basis. It is estimated that only 50-100 are actual, pure grantmaking organizations who accept applications and fund a variety of grantees. About 600 of China’s foundations are corporate and family foundations which give grants to others, but this generally represents a conduit to the same organization(s) year after year or are used implement projects of government origin, often in traditional areas like schools and hospitals.

China learns philanthropic practice through constant international exchange visits, advisory services, formal courses and curricula, and the internet, and is in some ways leapfrogging in practice. Of note – after learning about and creating a partnership with the US Foundation Center, within a year the newly-established China Foundation Center had used their software to amass 90% of the data on Chinese philanthropy. Their website is an authoritative and comprehensive source of information on philanthropy in China8. Expanding such databases in other countries will be important in registering philanthropy’s contributions to global and national development goals.

There is also a shared sense of changes needed in the sector, summarized by Xu Yongguang as a diversification of the sector for the benefit of public welfare, a weakening of the state monopoly on charitable resources, and greater transparency across the field9. The China Foundation Center’s Transparency Index will nurture this trend. The last Party Congress made an enormously important shift when it formally separated the notions of government and society, just as it had years ago separated government and the economy. The implications for domestic philanthropy are important, as it shifts the role of government and the Party to that of monitoring the social sectors rather than controlling them10. This bodes well for more space to develop partnerships across a range of issues, not least the Post-2015 Agenda, if they can be translated into locally relevant targets and activities to which a multiplicity of stakeholders can contribute. Areas like livelihoods, environment and health are enormous challenges that philanthropy can work with governments to address. Most China philanthropy watchers eagerly anticipate the ability of philanthropy to enable a more effective and innovative NGO sector. So today‘s landscape, even if constrained, poses enormous possibilities in terms of finding partners for official development cooperation.

According to the China Foundation Center’s information on Chinese giving across borders, about 50 Chinese foundations provide grants to other countries, generally in Asia and Africa. Many coordinate with the government of China or are government-affiliated foundations. For example, some provide foundation funding to countries where their parent state-owned enterprise has oil drilling operations. Chinese foundations operating abroad are likely to coordinate with the national or local government, even if they eventually choose to fund local NGOs.

One example of a Chinese foundation partnering with official development partners is the Hainan Airlines Foundation, which in May 2013 announced a contribution to the World Food Program (WFP) of 10 million Yuan (about US$1.6 million) over 10 years. This funds the Take Home Rations project, part of a Ghana school feeding program. This followed earlier contributions from the Hainan Airlines Foundation to projects in Zimbabwe, Malawi and Mozambique providing free eye surgery11. In 2013 it pledged 10 million Yuan over five years for UNICEF’s Change for Good program12. These contributions reflect the fact that HNA Group provided the investment capital for the establishment of Africa World Airlines in Ghana in 2012, the first African civil airline to be invested in by a Chinese company.

Chinese philanthropy experts note that China’s investments in Africa, and benefits that come from natural resources there, should, and will, be accompanied by a philanthropic component to bolster responsible investing. The benefits of growing international philanthropy is undoubtedly the minority view in China given the country’s own needs. But expectations on China’s philanthropy sector to grow their international giving are inevitable. Inclusion in broader multi-stakeholder partnership processes that build long-term engagements would be an innovative future step.

 

Conservation beyond Borders

An entirely different example is a recent donation from a group of Chinese philanthropists toward what grantee The Nature Conservancy (TNC) calls a new era of conservation philanthropy. The China Global Conservation Fund, initiated by Jack Ma and other members of the Conservancy’s China Board of Trustees, is part of a cross-regional initiative, Conservation Beyond Borders, which will connect development projects in Africa, Latin America, and Asia Pacific with Chinese businesses, banks and agencies to find solutions that better balance development and conservation. A budget of $500,000 aims to save the endangered hirola antelope and help efforts to hone and perfect a model of community-led conservation for future expansion to other priority landscapes in Africa. Local partners are the Northern Rangelands Trust, the Kenya Wildlife Service and Fauna & Flora International TNC notes that environmental problems no longer stop at political borders. Ma himself said, “We are now all part of a global economy, and China’s economic rise has created an opportunity and also a responsibility for the Chinese people to play a leading role in helping address the world’s environmental problems.”

 

Some Conclusions

Philanthropy across the world resists easy definition and categorization. That may make it difficult to track its contribution to specific development goals. But it need not impede philanthropy’s ascent into deep engagement with others in international development cooperation. Philanthropy, no matter where it originates, is driven by the imperative to meet human needs, alleviate suffering, and tackle the systemic challenges that prevent human development and progress. Social sectors have their own discourses and practices, and those of philanthropy and official development aid and cooperation are dissimilar. But philanthropy has much to offer, and therefore the headline must be: huge potential, but too little action to date. On one end of the spectrum it can be pathbreaking, supporting innovation, field building, first movers and fast movers – and at the other, it provides patient capital for long-term challenges that require painstaking efforts that go beyond political winds and shorter-term business interests. Philanthropy needs to leverage the larger resources and expertise of official development cooperation actors; while governments and the UN system need to leverage the insights, innovations and more nimble approaches of philanthropy and those organizations who the sector supports. Philanthropy reaches across borders and silos to create a better and safer world for all. The power of joining the forces of official development cooperation and philanthropy in the service of the SDGs will make a substantial difference. But this will require new mindsets, partnerships and forms of collaboration amongst the UN system, governments and the philanthropic sector alike. The challenge is worth surmounting for the leverage and greater impact it will bring. As noted historian of China Jonathan Spence put it recently, a new kind of internationalism is edging into the field of the possible.

 


  1. Human Development Report 2013: The Rise of the South: Human Progress in a Diverse World (New York: United Nations Development Programme, 2013), http://hdr.undp.org/sites/default/files/reports/14/hdr2013_en_complete.pdf. A telling point is that philanthropy is not mentioned at all in this report. 

  2. Index of Global Philanthropy. 

  3. Philanthropic Freedom: If You Can’t Measure It, You Can’t Improve It (Washington, D.C.: Hudson Institute, 2013), http://s3.amazonaws.com/media.hudson.org/files/publications/FinalOnlineVersionPhilanthropicFreedomAPilotStudy.pdf. 

  4. Cited in: Joan E. Spero,Charity and Philanthropy in Russia, China, India and Brazil (New York: Foundation Center, 2014), p. 8. 

  5. Mary Brown Bullock, author of The Oil Prince’s Legacy, personal communication. 

  6. This is calculated by subtracting foundations of state-owned enterprises and university foundations (since universities are by nature public). 

  7. China Foundation Center,http://en.foundationcenter.org.cn/. 

  8. Xu Yongguang, “Towards a Healthier Philanthropy: Reforming China’s Philanthropic Sector,” in Philanthropy for Health in China, eds. Jennifer Ryan, Lincoln C. Chen, and Tony Saich(Bloomington, IN: Indiana University Press, 2014). 

  9. While true, instances of pressure, such as corporate philanthropy giving to the Olympics, will no doubt continue. 

  10. “HNA Group Forms Strategic Partnership with World Food Programme — World’s Largest Humanitarian Organization,” Africa World Airlines, published May 22, 2013, http://www.flyafricaworld.com/details.cfm?corpnews_scatid=30&corpnews_catid=9&corpnews_scatlinkid=34. 

  11. “Hainan Airlines to Raise Money for UN Children’s Fund,” ECNS, August 16, 2013, http://www.ecns.cn/business/2013/08-16/77498.shtml. 

  12. “Chinese Philanthropists Support Hirola Sanctuary,” The Nature Conservancy,http://www.nature.org/ourinitiatives/regions/africa/explore/chinese-hirola-gift.xml. 

Heather Grady was commissioned to write the report by the United Nations Development Program as a Background Paper for the conference International Development Cooperation: Trends and Emerging Opportunities – Perspectives of the New Actors in Istanbul, June 2014. Heather currently works for Rockefeller Philanthropy Advisors.

Reviewed by Tom Bannister

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