In The News

Mr. Gates and Mr. Buffett go to China; Is Mr. Li Staying Home?

September 29, 2010

On September 8, the Charities Aid Foundation released the first-ever “World Giving Index” (WGI). The Index ranks 153 countries according to answers interviewees gave to three questions: amount of money donated, amount of time volunteered, and whether or not those interviewed “helped a stranger” in the month preceding the interviews. While one may well question the reliability of the rankings and should not draw any sweeping conclusions from them, one of the most striking outcomes was China’s extremely low ranking: China came in 147th out of 153 countries surveyed. Perhaps even more significantly, only 11 percent of those interviewed in China said they had made any financial donations to charity. This percentage is anywhere from 5 to 7 times less than the top 50 countries ranked in the index.

According to official Chinese sources, in 2009, 121 of China’s biggest philanthropists donated a combined total of $272 million to charity. This figure is less than the amounts donated by any number of individual family foundations in the U.S. – and that excludes the Bill and Melinda Gates Foundation.

This is particularly noteworthy considering China now has 477,000 millionaires (in U.S. dollars), trailing only the U.S., Germany, and Japan, and second only to the U.S. in total number of billionaires.

So does this mean rich Chinese are cheap? If Hong Kong (which, after all, is a Special Administrative Region of China) is anything to go by, the answer is a resounding no. The WGI ranks Hong Kong 18th on its 153-country index. But in terms of making cash donations to charity, the figure is 70 percent for Hong Kong – as high a percentage as the number-one ranked country, Australia, and one of the highest among all of the countries surveyed.

Hong Kong’s wealthiest tycoon and one of the world’s richest men, Mr. Li Ka-shing, has contributed some $678 million in the last two years through his own foundation. Two-thirds of his giving has gone to mainland China recipients, about 20 percent to Hong Kong causes, and the balance to other international efforts. He is now putting one-third of his total assets into his foundation.

But at his company’s annual general meeting last month, when Mr. Li was asked whether or not he would be attending a dinner in Beijing on September 29, hosted by Bill Gates and Warren Buffett, Mr. Li basically dodged the question. Early this week, Messrs Gates and Buffett embarked on their Giving Pledge campaign in China. They invited about 40 of China’s wealthiest to the private dinner, which has been highly publicized, although the hosts had tried to assure anonymity and privacy in the lead-up to the event. Apparently, a number of those invited, perhaps including Mr. Li himself, were shy in accepting the invitation. Some commentators have attributed this reluctance (if it is that) to a fear of being pressured into pledging, even though Bill Gates has publicly stated this is a learning visit to exchange ideas, not a fund-raising jaunt. Other observers have noted the absence of a developed philanthropic culture in China as inhibiting a more favorable response.

But clearly the Hong Kong experience and Mr. Li’s own example prove this is not the case. So what gives (pardon the pun)? The answer lies not just with the donors’ attitudes but with the entire giving environment in China.

Hong Kong probably has Asia’s most “philanthropy friendly” legal and regulatory regime. Charities applying for tax deductibility face a very straightforward and easy-to-understand process. Non-profit status is easily granted, and tax deductions for donors are generous and liberal. While the public accountability of charitable recipients may still leave something to be desired, Hong Kong is pretty far advanced in the use of transparent and innovative ways of giving. The Li Ka Shing Foundation itself has set a new standard for democratic philanthropy when it recently announced that one class of grants it makes to Hong Kong recipients will be awarded on the basis of public on-line voting. Whoever gets the most votes gets the grant (albeit with screens and controls in place).

By contrast, in mainland China the legal and regulatory environment for donors and charitable recipients alike is an unfinished agenda. There is not a relevant nor complete body of civil law to facilitate the establishment of foundations and charities, and there are no easily attainable tax breaks for donors. The existing regulations and rules are vague and far from enabling for non-profits and donors. Movie star Jet Li recently remarked that the lack of a clearly defined regulatory environment for foundations in China may be jeopardizing his own One Foundation.

In addition, there has been an element of the public that has been skeptical about the non-profit sector in China. That skepticism, unfortunately, has in too many cases been fueled by a prevailing lack of transparency in the sector. Finally, as China has evolved from a planned to a market economy, public perceptions are still blurred when it comes to the dividing line between charity and government.

So Bill Gates and Warren Buffett might be well advised to keep in mind this bigger picture in their efforts to improve philanthropy in China. Better still, maybe Li Ka-shing should invite them to a dinner in Hong Kong.

Allen Choate is The Asia Foundation’s vice president, responsible for the Partners in Asian Development initiative, based in Singapore. He can be reached at achoate@asiafound.org.

View all posts by Allen Choate

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