Sunday, May 1, 2016

Overseas NGO Law FAQs

I’ve had a chance to look over the text of the law in Chinese, and below are my main takeaways in the form of FAQs[i]. The first few FAQs have to do with basic questions related to the how INGOs can operate in China under the law. The last two FAQs have to do with issues that I’d like to raise as deserving our attention. One is getting INGOs to think about where there are opportunities to participate in the implementation of the law. The second is how this law might affect Chinese grassroots NGOs which have long depended on INGOs for a significant amount of support.

I will be updating this list of FAQs regularly as a public service, so if you have any comments, insights, experiences, suggestions and other feedback, please comment to this post, or send me an email, and I’ll try my best to incorporate them into the next update.

Who are the Overseas NGOs covered in this law?

Article 2 of the law notes that the term Overseas NGOs refers to “not-for-profit, nongovernmental social organizations lawfully established outside of mainland China such as foundations, social associations, and think-tanks”.  By using the terms not-for-profit (commonly used in the U.S.), NGOs, and social organizations (the official Chinese term for not-for-profit, nongovernmental organizations), the drafting authorities’ intention was to have this law cover a wide range of organizations that include industry and trade associations, chambers of commerce, development and human rights NGOs, cultural organizations, sporting and recreational associations, and so on.

If your organization qualifies as a "Overseas NGO", then any collaboration, funding, and other activities you run in China either with a Chinese institutional partner or individual could potentially come under this law.

Who are the supervisory authorities under this law?

The Ministry of Public Security (MPS) and provincial-level Public Security Bureaus (PSBs) will be the registration authority for overseas NGOs (hereafter INGOs for short).

INGOs that want to set up a representative office will also need to get the formal approval of a professional supervisory unit (PSU) in order to register with the Public Security. The PSU is generally a designated government agency under the State Council. The PSU will play an important role in supervising the INGO’s operations and activities in China.

How can INGOs operate in China under this law?

INGOs will have two legal channels for working in China:

1)    They can set up a representative office; OR

2)  if they do not want to set up an office in China, they can “file a record” (bei’an, 备案) to carry out “temporary activities” (临时活动). (Article 9)

Article 9 of the Law states: “INGOs that do neither of these are not allowed to carry out activities either openly or covertly, or to authorize, fund or covertly authorize any Chinese work unit (danwei, 单位) or individual to carry out activities.”

This is a pretty comprehensive statement which essentially says any Chinese work unit or individual puts themselves at risk if they cooperate with an INGO that has not gone through one of the above two legal channels.

How does setting up an INGO representative office work?

The representative office will be under the “dual management” (shuangchong guanli, 双重管理) of a professional supervisory unit and the Public Security. The system of “dual management” requires that the INGO first needs to get the formal approval of a professional supervisory unit who is willing to be the INGO’s official sponsor and supervisor, before they register with Public Security (Article 11).

The MPS and provincial PSBs will publish a directory of eligible professional supervisory units.

Article 10 specifies the eligibility requirements for INGOs that wish to set up a representative office.

Article 12 specifies the materials INGOs need to submit in order to register.

There is no language in this law about what happens if the INGO cannot find an appropriate professional supervising unit, nor does it specify a time limit within which the registration authorities must provide a response to the INGO’s application for registration.

INGOs cannot set up branch representative offices in China unless otherwise allowed by State Council regulations (apparently the State Council has approved branches for certain types of INGOs) (Article 18).

By December 31 of every year, the representative office must send a activity plan (project implementation, use of funds, etc) for the following year to their PSU which needs to approve it and then “file on record” with the registration authorities within 10 days of approval (Article 19). Under special conditions, changes in the activity plan should be reported to the PS in a timely manner.

Article 31 also states that the INGO rep office needs to go through an annual inspection (niandu jiancha 年度检查).

The rep office must report information about the staff they hire to the registration authorities (Article 27).

How does “filing a record” work for INGOs wanting to carry out “temporary activities?

The “filing a record” procedure[ii] is the other legal channel for INGOs wanting to operate in China. It is intended for INGOs that do not want to set up a representative office but still want to carry out “temporary activities” even if those activities are not intended to be “temporary” in nature.  

The “filing a record” procedure looks like a potentially significant improvement from the second draft, which required INGOs to obtain a “temporary activities permit” from Public Security. Here we need to understand how the “filing a record” procedure has worked in practice in other areas where it has been used as an alternative to registration (see footnote 1). Obtaining a “temporary activities permit” would have meant getting the approval of a PSU and then getting approval of Public Security for such as permit.  “Filing a record” in theory looks easier. It means the INGO now does not need a PSU (e.g. it does not come under "dual management" like INGO representative offices), and does not need to apply for a permit from the Public Security authorities. It only needs to show an agreement with a “Chinese partner” and file certain materials with Public Security authorities, but does not need to wait for their approval.

To “file a record” with Public Security, the INGO needs to have a “Chinese partner” that is a government agency, mass organization (qunzhong zuzhi, 群众组织) (see footnote 2 for a list), public institution (shiye danwei, 事业单位) such as a public university, or a social organization (shehui zuzhi,社会组织) such as a membership association (shehui tuanti, 社会团体), social service provider (社会服务组织) or foundation (jijinhui, 基金会) (Article 16).  (Note: the “Chinese partner” is different from the PSU which is generally a government agency and acts in a supervisory role vis-à-vis the INGO, while the “Chinese partner” can be a quasi-governmental institution like a public university or research institute, or a social organization (e.g. the official Chinese term for a nonprofit, nongovernmental organization).

There is no further description of what constitutes a “social organization”, but presumably it should be a legally registered social organization (there are also many “social organizations” in China that are registered as businesses or unregistered). For some reason, for-profit businesses are left out of this list of potential partners.

To carry out activities, the Chinese partner must go through approval procedures as required by the Chinese government (it does not specify what those approval procedures are) at least 15 days before the activity, and “file a record” with the registration authority in that locality.

Article 17 lists the following materials that need to be filed:

a)     certification of the INGO’s legal establishment;
b)    the agreement between the INGO and the Chinese partner;
c)     materials about the name, goal, location, and time period for the “temporary activity”;
d)    materials certifying the project’s expenses and funding sources, and the Chinese partner’s bank account;
e)     approval documents for the activity from the Chinese partner;

The “temporary activity” cannot exceed one year. If the time period for the activity is to exceed one year, then the INGO needs to refile a record.

INGOs carrying out “temporary activities” need to use the bank accounts of their Chinese partners to manage funds, and must create a special account for their activities. Other than the bank accounts specified, either the INGO or the Chinese partner can use any other form to receive or use funds for these activities (Article 22).

INGOs carrying out “temporary activities” need to use the name they used in  “filing a record” to carry out activities.  INGOs and their Chinese partners need to submit a written report about the activity and use of funds to the registration authorities within 30 days of the activity’s completion.

What other measures apply to both INGOs with a representative office or INGOs carrying out “temporary activities”

The following are some of the more significant measures affecting both categories of INGOs, but certainly not an exhaustive list:

1) INGOs must abide by China’s foreign exchange regulations for foreign exchange transactions (Article 25).

2)    INGOs and their representative offices cannot carry out fundraising in China
(Article 21)

3)    INGO and their representative offices cannot recruit members within China unless
otherwise allowed by State Council regulations (Article 28).

4) Article 32 reiterates that any Chinese work unit or individual cannot be authorized to act for (weituo, 委托), fund, represent or covertly represent INGOs carrying out activities in China.

5) Public Security will place any INGO, whose registration has been revoked or activity been cancelled, on a list of INGOs that will not be allowed back into the country (Article 48).

6) The next to the last article (Article 53) states that overseas schools, hospitals, natural sciences, engineering and technology research organizations, and academic organizations that have exchanges and cooperate with similar Chinese organizations should carry out those exchanges and cooperation according to relevant government regulations. This article suggests, but does not explicitly state, that these INGOs may be exempt from this law.

Where is there room for INGOs to shape the implementation of the law?

In addition to thinking about how to comply with the law, INGOs and their Chinese partners need to think about how they can shape the implementation of the law. It’s often said that China has good laws on the books but they are often not implemented and enforced. In the years ahead, there will be plenty of areas to shape implementation and enforcement.  In this sense, INGOs should see this law as an opportunity to expand and deepen their interactions with Public Security and other implementing agencies. In the past, the relationship between Public Security and INGOs has been largely a one-way street in which Public Security has treated INGOs as an object of suspicion. This new law should provide INGOs with the opportunity to transform that channel into a two-way street in which public security will have to treat NGOs as "customers" and "clients" if they want to justify the substantial addition of staff and other resources that they will need to implement this law. Some people may not agree with me on this point, but I think it’s more productive for us in the long run for us to think about how we can improve the law’s implementation, instead of seeing the law as the state’s weapon to shut INGOs out of China. In short, we shouldn't reflexively see this law as closing the door for overseas NGOs, but as opening other doors. Below are some suggestions for where INGOs could participate and exercise some influence.

Detailed implementing regulations still need to be drafted, and Public Security may outsource some of that drafting to other Chinese academics and organizations who have more familiarity with the management of nonprofit, nongovernmental organizations and their programming.

In addition, and perhaps more challenging, Public Security will need to secure the coordination of the various agencies and institutions involved in the implementation of this law. This includes the Civil Affairs Bureaus, Finance and Tax Bureaus, banks, Human Resource and Social Security Bureaus, Foreign Exchange offices, and the various PSUs that will need to work together with Public Security to supervise the work of INGO representative offices. Who these PSUs are will depend on that INGO’s issue area. For example, an educational INGO’s PSU might be the Educational Bureau, a public health INGO would be the Health Bureau, and an environmental INGO might be the Environmental Protection Bureau.

There is language throughout this law about the Public Security and other government agencies providing services to INGOs to better implement this law. INGOs should hold government agencies accountable to what is in this law. Thus Article 7 of the law notes that Public Security and other relevant government agencies at or above the county level will carry out supervision and management, and provide services, within the scope of their duties, to INGOs carrying out activities in China.

Article 7 also states that the Chinese government will set up a supervising and management coordinating mechanism responsible for researching, coordinating and resolving major problems in supervision, management and service facilitation for INGOs carrying out activities in China.

Article 33 states that the Chinese government ensures and supports INGOs carrying out legal activities in China.  Relevant government departments at all levels should provide the necessary assistance and services to INGOs carrying out legal activities in China.

Article 34 states that the MPS and provincial PS will work with other relevant government departments to formulate a directory of activity areas and projects, and publicize a directory of professional supervisory units, in order to provide guidance to INGOs.

Relevant government departments at the county level and above should provide services such as policy advice and guidance on activities to INGOs.

Registration authorities should set up a unified website to issue procedures for INGOs looking to set up a rep office or to carry out “temporary activities” (Article 35).

INGO rep offices will be able to enjoy tax exemptions and other preferential policies (there is no specific mention of any exemptions or policies, and presumably the tax and finance authorities will need to issue more detailed regulations about this.) (Article 36).

What are the implications of the law for INGOs that work with grassroots organizations

Grassroots organization and groups have grown rapidly over the past 10-15 years. These are generally nonprofit, nongovernmental organizations with few or no ties with the government working on a wide range of issues, and should be distinguished from mass organizations and GONGOs[iii] who also call themselves NGOs. Grassroots organizations developed over the years by relying substantially on INGO funding and support. By regulating and possibly restricting the activities of INGOs in China, this law will potentially have a very significant negative impact on grassroots organizations. I’ll say more about this in my next update to these FAQs.

What else has been written on the Overseas NGO Law that is worth reading?

Below are some links to articles that have been written. This is by no means an exhaustive list, and if you feel an article that merits attention has been left out of this list, please let me know.

In an article she wrote for Caijing magazine and translated into English by China Development Brief before the law was approved, Jia Xijin, an expert on nonprofits and NGOs in China at Tsinghua wrote about the possible impact of the law, particularly on Chinese grassroots organizations and groups.

A comprehensive and concise New York Times article about the passage of the law.

A Guardian article about the law’s passage with quotes from Yirenping’s Lu Jun, and various human rights organizations.

Mark Sidel, a long-time expert on nonprofit law in China and other countries, has this very good and succinct Foreign Policy article.

Jin Jinping, a Beijing University law professor and one of China’s foremost experts on nonprofit law in China, has this Legal Daily op-ed in Chinese.

[i] An unofficial English-language translation can be found at China Development Brief and ChinaLawTranslate.
[ii] The “filing a record” procedure is often used by local government as a simply method for keeping track of small community-based organizations (CBOs) in their jurisdiction. It was also used in the Yunnan provincial government experiment a few years ago to regulate INGOs in the province. INGOs were asked to “file a record” and in return they would be allowed to operate in the province.
[iii] Mass organizations are organizations directly under the Communist Party of China and include the All-China Federation of Trade Unions, All-China Women’s Federation, Communist Youth League, All-China Federation of Industry and Commerce, All-China Federation of Youth, All-China Students' Federation, All-China Federation of Literary and Art Circles, and Chinese People's Association for Friendship with Foreign Countries. GONGOs are organizations that were either established by government and party agencies, or have close ties with the government/party. There are tens of thousands of GONGOs in China, perhaps hundreds of thousands if you include their local branch organizations. Some of the better known GONGOs include the All-China Environment Federation (established by the Ministry of Environmental Protection), the All-China Lawyers’ Association (the equivalent of China’s bar association), the Chinese Red Cross, the China Youth Development Foundation.