China Philanthropy News
March 2011
Issue 024

Click here for PDF version of this publication

China Philanthropy News is produced by Grantmakers Without Borders (Gw/oB) for grantmaking organizations, donors and individuals interested in philanthropic engagement with China. It provides current news on giving, links to useful research, books reviews and other resources to provide a better understanding of the landscape of philanthropy in the country. For more information about Grantmakers Without Borders, visit www.gwob.net.

CONTENTS

Current NEWS

Philanthropy and Civil Society
1) Jet Li's One Foundation goes public
2) China reports decline in charity donations
3) New Regulation allows direct registration of civic groups in Zhongguancun
4) China promises action on software piracy
5) Government gets big into Microblogging

Human Rights
6) China's war on dissent and activism
7) Report: Beijing's rights promises unfulfilled
8) Suspicious death of village leader sparks outrage in China
9) China blocks "Egypt" from internet searches
10) China's economic growth picks up pace
11) China labor shortage spreads

The Environment
12) China sets new pollution controls
13) China to develop controversial Nu River hydro projects
14) Chinese gold miner Zijin fined $4.6 million for toxic spill
15) Hundreds of children poisoned by lead

Useful Resources
16) China Environment Series 11 by China Environment Forum
17) China Clean Revolution Report III: Low Carbon Development in Cities
18) Asian Development Bank Report: Rural Finance in Poverty-Stricken Areas in the People's Republic of China
19) HIV and AIDS related employment discrimination in China
20) Study: Human capital, economic growth, and regional inequality in China
21) Climate change and human activities: a case study in Xinjiang, China

Voices of China
22) Interview with Casey Wilson, Co-founder & CEO of Wokai.

Current NEWS

Philanthropy and Civil Society

1) Jet Li's One Foundation goes public
One Foundation, established by Chinese movie star Jet Li, celebrated its official registration as a public foundation last month. Since its establishment in 2007, One Foundation has been running as a private charitable project under the Red Cross Society of China, and encountered legal problems when it tried to fundraise as an independent organization. Under an agreement between the Ministry of Civil Affairs and the Shenzhen government, the city is a pilot site for civil affairs reform, including foundation registration. The move signals the start of a new era for China's charities, experts said. More at: http://plushasia.com/article/12114

2) China reports decline in charity donations
China's government and non-governmental organizations received charitable donations of 54.2 billion yuan (about $8.09 billion) last year, according to the latest report published by he China Charity and Donation Information Center, a non-governmental organization that has long-researched the country's charity donations and issued annual reports since 2008. The figure was far less than the 107 billion yuan of donations the country received in 2008, mainly because the year 2008 witnessed a serious earthquake in southwest China's Sichuan Province on May 12, 2008. More at: http://english.peopledaily.com.cn/90001/90776/90882/7242156.html

3) New Regulation allows direct registration of civic groups in Zhongguancun
A new regulation for Zhongguancun National Innovation Demonstration Zone was passed to allow civic groups, foundations and Non-profit organizations within the demonstration zone to directly register to Civic Affair Department of Beijing. This is seen as a great breakthrough in the administration of civic groups in China. The Chinese version of this regulation can be accessed at: http://www.zgcdcia.org.cn/Html/2011/1/1153.html

4) China promises action on software piracy
In a move sure to cheer Silicon Valley, Chinese President Hu Jintao's visit to Washington has produced a pledge by China to crack down on software piracy and to eliminate policies that virtually barred foreign companies from lucrative government contracts. Hu's comments met with immediate skepticism from human rights advocates, who dismissed them as words backed by no real history of action. More at: http://www.mercurynews.com/top-stories/ci_17141348?nclick_check=1

5) Government gets big into microblogging
Reform-minded observers of Chinese media have characterized the rise of microblogging in the Middle Kingdom as a boon to dissidents and a challenge to the ruling regime. But, according to a report by the country's state-run news agency, Chinese authorities aren't ready to cede the technology to their critics. Hundreds of public security bureaus in China have launched their own microblogs as part of an attempt to better connect with the country's tech-savvy online population while also leveraging social media a as means to solving criminal cases. The number of registered microblog users in China grew to 75 million in 2010, from 8 million in 2009, according to a recent report by market research firm Analysys International, and that figure is expected to 240 million in 2012. Microblogs, known as "weibo" in Mandarin, are fast becoming one of the primary means by which Chinese web users access news and information with services like Sina.com's Sina Weibo playing an increasingly important role in pushing news coverage of major public affairs. As reported by Wall Street Journal at: http://blogs.wsj.com/chinarealtime/2011/01/14/government-gets-big-into-microblogging/

Human Rights

6) China's war on dissent and activism
The ferocity of the Chinese party-state's war on protesters, dissenters and activists will continue in the near future, and recent events demonstrate that it is increasingly determined to seek international support for its domestic actions. This column considers dissent in China from three perspectives: the relentlessness of efforts to repress dissent, the possibility that repression may be buttressed by some support from other nations, and need to avoid inflaming Chinese nationalism. Written by Stanly Luhman at: http://blogs.wsj.com/chinarealtime/2010/12/24/china%E2%80%99s-continuing-war-on-dissent-and-activism/

7) Report: Beijing's rights promises unfulfilled
An international human rights group is charging China's government with continuing to violate its citizens' human rights and undermining its own plan to protect civil and political rights during the past two years. China's government in April 2009 unveiled its first-ever National Human Rights Action Plan (NHRAP), which sought to promote and protect human rights for a two-year period that ended last month. Human Rights Watch released a critical report, "Promises Unfulfilled," that concluded the Chinese government had violated many of the key goals of the NHRAP by tightening restrictions on rights of free expression, association and assembly. The report can be accessed through Human Rights Watch at: http://www.hrw.org/en/reports/2011/01/11/promises-unfulfilled-0

8) Suspicious death of village leader sparks outrage in China
The suspicious death of a village chief in China sparks outrage on the local web. Villagers and police clashed outside the village one week to the day after Qian Yunhui, a popular local leader died under contested circumstances. The official story is that Qian was killed in a road accident and run over by a truck while crossing the road. But on discussion forums, a lot of doubt has been cast over this version of events. Qian was known for his work in helping villagers threatened with expropriation. And some believe his death was not accidental and that he was murdered by people who wanted to eliminate a troublemaker. Web users have decided to carry out their own investigations. The activist, Wu Gan procured a video filmed by the police just after the accident. He posted it on the Internet so that people can analyze it and form their own opinion. More at: http://www.france24.com/en/20110103-china-qian-yunhui-suspicious-death, Updates at BBC: http://www.bbc.co.uk/news/world-asia-pacific-12331816

9) China blocks 'Egypt' from internet searches
The country's Communist Party has ordered Internet censors to block the word "Egypt" from Twitter-like micro-blogging sites out of apparent concern events in the Middle East will stoke unrest closer to home, the Wall Street Journal reported. Chinese authorities are also busy having comments on the crisis in Egypt scrubbed from those sites. Restricting information on websites has been common in China in recent years, most recently in the wake of the failed pro-democracy movement in Iran in 2009. The country also cracked down on social media coverage of the riots that engulfed the northwestern Chinese region of Xinjiang that same year. But a state-run newspaper, the Global Times, did surface a cautionary editorial on the events in Egypt and Tunisia. More at Wall Street Journal: http://www.nydailynews.com/news/world/2011/01/31/2011-01-31_china_blocks_egypt_from_internet_searches_concerned_antihosni_mubarak_riots_coul.html

Economy

10) China's economic growth picks up pace
China's economy accelerated at the end of 2010, while inflation cooled slightly. China's gross domestic product, the broadest measure of economic output, grew at an annual rate of 9.8% during the fourth quarter of 2010, up from 9.6% growth in the prior quarter, according to figures from the National Bureau of Statistics. That rate is considered very rapid compared to sluggish growth in Western economies. The U.S. economy grew at a snail's pace of 2.6% in the third quarter. As reported by CNN news at: http://money.cnn.com/2011/01/19/news/international/china_gdp_cpi/

11) China labor shortage spreads
A labor shortage that has helped to drive up wages in China's burgeoning eastern provinces has widened to inland and southern areas following moves there by many companies, often with encouragement from a central government concerned at the country's large urban-rural earnings divide. More at: http://www.atimes.com/atimes/China_Business/MA29Cb01.html

The Environment

12) China sets new pollution controls
China took a step towards a smog-free future today with the announcement of a wide new set of pollution controls. For the first time, the Ministry of Environmental Protection added ammonia nitrogen and nitrogen oxide to its list of reduction targets. As part of efforts to cut these emissions by 1.5% this year, the ministry said greater efforts will be made to cut vehicles' exhausts and to tackle the worst polluting industries, such as paper-making, textiles and chemical plants. More at: http://www.guardian.co.uk/environment/2011/jan/14/china-pollution-controls

13) China to develop controversial Nu River hydro projects
China is ready to start building a series of controversial hydropower plants on the Nu River in the southwestern province of Yunnan, state media said. The construction of dams and reservoirs on the UNESCO-protected Nu River -- also known as the Salween -- was first proposed in 2004, but disputes among China's leadership and opposition from both Chinese and southeast Asian environmental groups has delayed the projects. The construction of big hydroelectric projects slowed in China after the completion of the world's largest facility at the Three Gorges on the Yangtze River, with China's leadership wary about the costs of relocating thousands of displaced residents as well as the environmental impact of massive reservoirs. But with China committed to increasing the share of non-fossil fuels in its total energy mix to 15 percent by 2020, there have been signs that the tide is turning, and the Nu River is one of a number of potential new projects now back on the agenda. More at Reuters: http://www.reuters.com/article/2011/02/01/us-china-energy-hydro-idUSTRE7100P620110201

14) Chinese gold miner Zijin fined $4.6 million for toxic spill
China's Zijin Mining Group said that it has been fined about $4.6 million over a toxic spill at one of its mines that wiped out local wildlife, with five unnamed defendants sentenced to jail. Last July, poisonous waste water from the mine in Fujian province operated by Zijin, China's top gold producer, contaminated a major river, devastating marine life and killing nearly 2,000 tons of fish. A district court in Fujian ordered it to pay 30 million yuan ($4.6 million), minus an earlier 9.56 million yuan fine imposed by the Fujian Environmental Protection Bureau. Individuals that are responsible for the incident received jail terms ranging from three to four-and-a-half years with unspecified fines, according to a statement filed to Hong Kong's stock exchange. More at AFP: http://www.google.com/hostednews/afp/article/ALeqM5j4KV5GdyWOeSoI5XazLibzXbHXGw?docId=CNG.cf327f3b10d421439a898050376b7c26.481

15) Hundreds of children poisoned by lead
Another pollution scandal in China, and in this case the victims are children: 24 children aged between nine months and 16 years were hospitalized for lead poisoning. About 200 children in the town of Gaohe in the eastern province of Anhui suffer from an excessive concentration of lead in their blood. This is the latest in a long series of incidents of pollution, often with heavy metals, which have affected the provinces of Shandong, Hunan, Shaanxi, Jiangsu and Guangdong in the past two years. The county government accuses Gahoe Boru battery factory for the pollution. As reported by Spero News at: http://www.speroforum.com/site/article.asp?idCategory=33&idsub=128&id=46317&t=China:+++Pollution+in+China:+Hundreds+of+children+poisoned+by+lead

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Useful RESOURCES

16) China Environment Series 11 by China Environment Forum
China's success in promoting clean energy technology has been a hot story over the past year as the China Environment Forum team pulled together this special Energy and Climate issue of the China Environment Series. This issue aims at creating an issue that takes a snapshot of major energy trends in China and understand some of the complexities in the U.S.-China energy and climate relations. Read the report at: http://www.wilsoncenter.org/index.cfm?topic_id=1421&fuseaction=topics.publications&group_id=643451

17) China Clean Revolution Report III: Low Carbon Development in Cities
The Climate Group published its first China's Clean Revolution report in 2008. The report highlighted the emergence of Chinese low carbon entrepreneurs and businesses that were beginning to lead the global market as China began an aggressive push to set itself on a cleaner development path. At the peak of the global financial crisis in 2009, the publication of China's Clean Revolution II reported on the continued growth of low carbon industry in China, as the government focused on creating a new domestic market for low carbon technologies. In 2010, as China gears up to announce its 12th Five-Year Plan (FYP) for its economic development between 2011 and 2015, China's Clean Revolution III: Cities, explores the vital role of China's local governments and businesses. The report considers the role cities will need to play in ensuring China's ambitious targets on the low carbon economy are met during a period of rapid urbanization and industry restructuring. English summary can be accessed at: http://www.theclimategroup.org.cn/publications/2010-12-Chinas_Clean_Revolution3_Summary.pdf
Complete Chinese version can be found at: http://www.theclimategroup.org.cn/publications/2010-12-Chinas_Clean_Revolution3.pdf

18) Asian Development Bank Report: Rural Finance in Poverty-Stricken Areas in the People's Republic of China
According to a report released by the Asian Development Bank, new laws are needed in the People's Republic of China to support microcredit institutions, financial cooperatives, and informal finance. The recently launched report entitled Rural Finance in Poverty-Stricken Areas in the People's Republic of China stressed fact that the PRC is required to reform its rural financial system in order to tackle poverty in the countryside and allow agriculture and local businesses to play a strong, long-term role in the domestic economy. Additionally, it also included recommendations to repeal laws that hindered establishment of a competitive financial market, including private banks, in the countryside. The report can be accessed at: http://www.adb.org/documents/books/rural-finance-prc/rural-finance-prc.pdf

19) HIV and AIDS related employment discrimination in China
This report released by the International Labor Organization reviews the current state of HIV and AIDS workplace discrimination in China and summarizes a broad body of existing research as well as reviews new research conducted by the ILO and Maries Stopes International. The findings point to a trend of increasing discrimination against workers that contradicts both national policies and international standards. This body of work highlights numerous cases of employment discrimination in several key practices and puts forward a set of recommendations aimed at improving the situation. Report can be downloaded at: http://www.ilo.org/asia/whatwedo/publications/lang--en/docName--WCMS_150386/index.htm

20) Study: Human capital, economic growth, and regional inequality in China
This paper shows how regional growth patterns in China depend on regional differences in physical, human, and infrastructure capital as well as on differences in foreign direct investment (FDI) flows. It also evaluates the impact of market reforms, especially the reforms that followed Deng Xiaoping's "South Trip" in 1992 those that resulted from serious hardening of budget constraints of state enterprises around 1997. Findings state that FDI had a much larger effect on TFP growth before 1994 than after, and the authors attribute this to the encouragement of and increasing success of private and quasi-private enterprises. Other findings relate to human capital, education and regional inequality.
Full paper at: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VBV-4VK02NP-2&_user=10&_coverDate=07/31/2010&_rdoc=1&_fmt=high&_orig=search&_origin=search&_sort=d&_docanchor=&view=c&_acct=C000050221&_version=1&_urlVersion=0&_userid=10&md5=e42d2ffd55772968036c143ce6379992&searchtype=a

21) Climate change and human activities: a case study in Xinjiang, China
This paper examined both long-term climate variability and anthropogenic contributions to current climate change for Xinjiang province of northwest China. Three major conclusions from these analyses are: 1) Although temperature varied considerably in Xinjiang over the last 200 years, it was non-directional until the last 50 years when a substantial warming trend occurred; 2) The semiarid North Xinjiang was representative of the northern hemisphere climate, while the more arid South Xinjiang resembled the southern hemisphere climate, meanwhile, 3) The entire Xinjiang province captured the global-scale climate signal. Full paper at: http://www.springerlink.com/content/9x431q5196k43v8l/fulltext.pdf

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VOICES of China

22) Interview: Casey Wilson, Co-founder & CEO of Wokai.
In this issue, we interview Casy Wilson, the Co-founder and CEO of Wokai. Wokai is a non-profit organization dedicated to alleviating poverty in China through microfinance. It uses the internet to allow contributors around the world to provide loan capital to borrowers in rural China, empowering them to lift themselves from poverty. In this interview, Casy talked about the work of Wokai and her experience of working in China .

Q: Why do you create Wokai in China? Can you introduce more about the market and future of microfinance in China?
A: I came to China to pursue a career in development; there were basically two reasons why I chose China. First of all, China has the second largest population in the world living under the poverty line. In terms of economic development and poverty alleviation, there's a huge amount that needs to be done. On the other side, in terms of learning about what fosters and hinders economic development, I felt like by living and working in development in China, I could see a significant amount of change in a very short period of time. That was the impetus for moving to China three years ago.

How I got specifically involved in microfinance was twofold. One part was meeting my partner, Courtney McColgan. She was on a Fulbright at the time studying loan sharks in the informal lending sector in Zhejiang Province and had been involved in microfinance in China for about 3 years. We were classmates at Qinghua University in a program called IUP for people who are either doing business in China or doing Master's and PhD work where their research is conducted in Chinese.

Seeing the way that growth is happening in China, where the cities are growing at such a rapid rate while the countryside has remained more stagnant and you have this expanding rural-urban divide, I thought that microfinance would be one of the only solutions to developing the rural economy. Courtney and I became roommates after we were classmates; it was then that we decided to combine our skills and interests to launch Wokai. The impetus was that we saw that microfinance in China is basically twenty years behind countries like India, Bangladesh and those in Latin America. Microfinance institutions that already existed in China really didn't have the capital to expand to new clients and increase their impact. By introducing a person-to-person model and connecting people from around the world that have a connection to China, we thought that would be a very powerful, scalable model that could have a big impact.

My motivation hasn't changed significantly over the past 3.5 years since we started. It's really the individual stories of people I've known in China, such as one of my good friends, Zhang Chunmiao who is a migrant worker in Beijing, who haven't had opportunities like microfinance and seeing where their lives are today, that motivate me. As our impact grows, our work and mission becomes more significant to me each day.

Q: Recently here have been many negative reviews of Microfinance in India. What do you think are the reasons, and how does Wokai avoid similar problems?
A: I was similarly alarmed when I see the headlines. I met with Maya Chorengel, our board member who's a managing partner at Elevar Equity, a microfinance equity fund whose majority holdings are in India. She said that the crisis has been resolved to a large part and the height of it was actually a number of weeks ago. What happened is that one of India's provinces issued statements repudiating overly high microfinance interest rates. For about two weeks, borrowers in that province weren't repaying their loans. Now, SKS, the largest microfinance group in India has 30% of its portfolio invested in this province, had already gotten back to 90% on-time repayment for borrowers in the province.

This issue was limited specifically to one province in India and he made it look as if the whole India microfinance sector, if not the global microfinance sector, is falling apart. This is part of a larger trend of articles over the past 9 months that have been critiquing various aspects of the microfinance sector, ranging from microfinance institutions (MFIs) that have IPO'd and high interest rates to person to person lending and the fact that some microfinance clients aren't that poor. I think that this is actually an important step in the process of gaining a more objective view of microfinance. The reality is that microfinance can take many forms, ranging from the poverty alleviation based microfinance that we support at Wokai, to credit, to SMEs / more affluent individuals who do it purely with a profit motive. Back in 2006 when Professor Yunus won the Nobel Peace Prize for microfinance and the concept entered the mainstream, people tended to think of microfinance as the blanket cure for poverty alleviation. Now we're on the opposite extreme in which there is a critiquing many aspects of microfinance. Hopefully, combining these two stages, we'll all end up with a much more objective view of microfinance and a sense that all forms of microfinance and microfinance practitioners are not made equal.

Q: What are the obstacles during the establishment and development of Wokai, and how do you deal with them? What is the most urgent problem Wokai is facing now, if any?
A: As with any start-up, we face new challenges each day. When we were starting Wokai, one of the first hurdles we ran into was not being able to register as a nonprofit in China, so alternatively we registered as an NGO in the US with a foreign representative office in China.

Secondly, when we first began, we wanted to introduce a lending model where you could lend capital that would then go to our microfinance institution partners on the ground and once that loan was repaid, you'd be able to take your capital back out of the system. However, due to financial sector regulations in China we were unable to do that. So, we encountered two problems: the regulatory issues that exist in the finance sector and the regulatory issues that directly impact NGOs such as not being able to register for non-profit status in China and not being able to fundraise domestically in China. Microfinance institutions are in a strange gray area where they're registered as NGOs but they're engaged in activity that is also regulated by the financial sector.

So, that's on a regulatory side, more generally, we faced the challenge of being two 23 year-olds starting an organization. Neither of us had ever written a business plan, fundraised, done marketing, microfinance due-diligence, or web development. Everything was new and our learning curves were incredibly steep. While we've gained significant experience in those areas over the past three and a half years, I'm always amazed at the new challenges that arise just when I think we've figured it all out.

While Wokai has received significant media coverage in China, with features in the China Daily, and Phoenix TV, and there is overwhelming demand on the part of Chinese nationals to give to its platform, Wokai is currently unable to fundraise in China due to government regulations prohibiting international non-profits from fundraising in China.

Q: Can you introduce some of the organizations Wokai is cooperating with in China? How does this cooperation work?
A: Utilizing the principle of microfinance, we connect you with people in rural China who want to start small businesses, but just need a little help getting there. You make a tax deductible contribution to sponsor that person's loan, watch as they grow their businesses, repay their loans, and lift themselves from poverty. At the end of the year, you re-invest your contribution and help another borrower start a businesses. {more details at: http://www.wokai.org/about}

This differs from Kiva in a number of ways. First, contributors on Wokai make loan capital donations that will be used year after year to fund new loans. On Kiva, lenders lend loan capital at no interest that then goes through their Field Partners on the ground to the end borrower. Once the loan is repaid, Kiva lenders then take their money out of the system.

The second difference is the type of institutions that we're working with. In microfinance, there's a pyramid of institutions with four tiers. The first tier of institutions are large with 100,000 clients or more, external ratings and audits, and they have the ability to access capital markets and/or debt and equity investments from larger funds or investors. The fourth tier microfinance institutions have 5,000 clients or less and are really grassroots organizations that need support both in terms of capacity-building and strengthening their internal financial structures and operations as well as capital to scale up. The types of institutions that Kiva works with are those first and second tier institutions that they're able to cooperate with remotely. We're working with fourth tier institutions- more of those grassroots institutions that exist in China- which not only need capital but also require offline support in terms of due diligence and helping them in the process of building up their internal strength in accounting and finance. Our model is based on contributions, rather than loans, from our users online and the type of institutions that we're working with are younger and, along with capital, need on-the-ground support to scale up.

So far, we've enabled over 500 loans for borrowers living under the poverty line in Inner Mongolia and Sichuan, the vast majority of which are women and almost all of them use the income that they earn from their businesses to send their children/grandchildren to school. Essentially they use the income that they gain from these loans to not only lift themselves, but also their families out of poverty. They take out loans for everything ranging from pig and rabbit farms to clothing shops and bubble tea stands.

So far we've had 99% repayment. When a borrower defaults, our Field Partners still work with the borrower to support him/her in repaying the delinquent loan. An example is one woman who failed in her business when her ducks contracted a disease and died. Our Field Partner has then been working with her so that she can still repay her loan. In the case of default, our Field Partners use their own funds to reimburse the contributors donated loan capital.

Q: What is the current plan of Wokai? Will there be any innovation or transformation? Will Wokai's service cover more regions? Will Wokai serve more customers besides farmers, such as offering tuition loans to students in poverty as well?
A: In the future, we're looking forward to expanding our global footprint, both in terms of contributors online (increasing our global contributor community - especially in Asia, as well as launching in the China contributor community) as well as the people and areas that we impact. Over the next year, we hope to grow to a total of USD $1 million in loan capital and 2,000 loans. Looking into the next 5 years, we aim to grow China's microfinance sector by $10 million/year, or 20,000 loans/year.

Q: Do you have any experience of cooperating with Chinese government (local or central level) or GONGOs? How do you evaluate their attitude towards microfinance and grassroots NGOs?
A: We have not yet worked with any GONGOs/government groups. However, we are currently exploring a GONGO partnership to begin fundraising here in mainland China. The Chinese government realizes that microfinance is really important for developing the countryside. However, they are really conservative in instituting policies to develop microfinance here because they're worried that if it doesn't develop in the right way, it could negatively impact the financial sector. In terms of the NGO sector largely, it seems like the government continues to liberalize policies.

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