How to Encourage the Chinese Wealthy to Donate More

The Wall Street Journal published a series of articles on Chinese philanthropy yesterday, focusing on donations from wealthy Chinese – What’s the status of their donation?  Why they are, or are not, engaged in philanthropy? What should be done to encourage their donations?

Statistics from various sources show Chinese charitable giving has decreased in 2012.  “Total donations in China dropped 17% year on year, according to a recent study released by China’s Social Science Academy. ” reported Wei Gu in her article In China, Philanthropy Gains Cachet.

The drop in total giving is beyond dispute, but the statistics should not lead to some simple conclusion like Chinese are less interested or active in charity than previous years.  We should also be careful when we tend to attribute the decrease solely to the plummet of public credibility due to scandals around public charities, such as Red Cross Society of China.  Oliver Rui of the CEIBS Kaifeng Centre for Family Heritage pointed out in an WSJ interview that many entrepreneurs have channeled their charitable giving into their companies’ CSR activities, which were not necessarily reflected in the report of China’s Social Science Academy.   Meanwhile, I think it also makes sense to examine the decrease from a perspective on the preferred way of giving in China.  For historical reasons, giving in China is still very much charity-oriented, so whenever there is a natural disaster, the amount of giving would surge.  There were several disasters in 2012, but none of them were comparable to the scale of what happened in previous years.

In the same article, Ms. Gu reported more and more wealthy people are involved in philanthropy.  “Businessmen are increasingly turning to nonprofits where they feel they can contribute. For example, the Society of Entrepreneurs and Ecology, a non-profit organization run by property developers, uses its $4.7 million of assets on projects such as waste-water treatment. ”

This article continues to observe:

Philanthropy is on the rise in China as many realize that charitable giving can bring substantial benefits to their finances, careers and families. Being perceived as a caring entrepreneur can helpful in a society that tends to resent those who get rich fast.

According to one study by the Center for Family Heritage at China Europe International Business School, entrepreneurs who rank higher in terms of philanthropy are less likely to suffer from government investigations, stock-price declines, and reduced government subsidies.

These observations are true to a large extent. But it would be wrong to assume seeking tangible returns from philanthropic activities is the only motivation of all Chinese philanthropists.  A case in point is Jack Ma – He stepped down as CEO from Alibaba on May 10; On the very next day, May 11, he assumed the role of his latest endeavor: to help restore China’s environment by becoming the Chairman of the Board for The Nature Conservancy’s China Program.   Jack Ma is not alone among his peer entrepreneurs and fellow philanthropists in China.

I admit there is partial truth in such arguments as “Drop in charitable giving is due to the decrease of public confidence in public charities”, or “Business engaged in charity expects to receive tangible benefits from the government and the public in return.”, however, I think such beliefs are putting a cap on the true impact philanthropy can achieve and on the real potential a philanthropist can reach.  The hard question is how to help people look through the ostensible obstacles or benefits and unleash the inner power of doing good.

The article quoted HuRun that total charitable giving in the country is just 4% of the U.S. level, despite China surpassing the U.S. this year as the country with the most billionaires.  Asked what should be done to encourage rich people to donate more in China, Oliver Rui shared his thoughts on the measures government should take:  1) Institutionalize a framework to encourage wealthy people to give more money, such as tax reduction policy;  2) Train more professionals to be able to manage foundations more effectively and more efficiently;  3) Engage media and education to create a culture and an environment to encourage rich people to donate more.

I do agree with Mr. Rui on his suggestions. These measures, if taken, will undoubtedly advance philanthropy in China.  But I also realize that these are more on the technical side, and very much rely on the government attitudes.  Equally important, I think we need to spark inspirations that can reach the heart of people, stimulate dialogues on why and how people are giving around the world, and help people achieve and see the impact from their giving.  Done correctly, these activities will help grow disaster-driven giving into a more sustainable and resilient force for philanthropy.