Measuring China’s Nonprofit Sector

In the past 30 years, nonprofit organizations (NPOs) have proliferated in China, from just over 4,000 in 1988 to 816,000 in 2017. A 2017 report by the Ministry of Civil Affairs found that NPOs employ more than 800,000 people, in fields ranging from rural development and academic research to social services, culture and sports, and disaster relief both domestic and international. In 2015, Chinese NPOs, which had played an important role in the aftermath of the Sichuan Earthquake, mobilized to provide earthquake relief in neighboring Nepal, many of them venturing beyond their own national borders for the first time. Despite this robust development, however, the nonprofit sector’s contribution to China’s economy has not been systematically measured.

In July 2018, a research team from Beijing Wanzhong Social Innovation Institute (BWSII), led by Prof. Ma Qingyu of the Chinese Academy of Governance, released findings from their two-year study, Research on the Calculation of NPO-GDP in China, offering a first-of-its-kind portrait of China’s nonprofit economy. According to the report, NPOs contributed about 278.9 billion yuan to the Chinese economy in 2016, or roughly 0.37 percent of national GDP. This result was much higher than the calculation of the Ministry of Civil Affairs based on their internal data, but lower than many had expected, generating heated debate in the nonprofit sector. Mr. Xu Yongguang, chairman of the board of the Narada Foundation and an influential figure in Chinese philanthropy, suggested that, while Prof. Ma’s report had made a good start, ambiguities in China’s statistical system and its categorization of social organizations had left much room for improvement.

Since 2003, the United Nations’ System of National Accounts (SNA) has included standards for the statistical measurement of the so-called “third or social economy” (TSE)—essentially the nonprofit sector. To understand how Chinese methods differ from these international standards, The Asia Foundation and the BWSII hosted an international symposium in March in Beijing, “Measuring the Economic Scale of the Nonprofit Sector in China.”

As its centerpiece, the conference discussed the work of Professor Ma and his BWSII team and debated whether concepts used in that research and in China’s own system of national accounts were compatible with internationally accepted standards for measuring the TSE sector. The conference drew more than 50 participants, including Chinese government officials, representatives of Chinese social organizations, and international experts, among them Prof. Lester M. Salamon, a pioneer in the empirical study of the nonprofit sector and the principle author of the recently released UN handbook Satellite Account on Non-profit and Related Institutions and Volunteer Work (henceforth, the TSE Handbook).

In a conversation with The Asia Foundation, Salamon discussed the significance of Ma’s work and how the Chinese framework for measuring the TSE sector compares to the recommendations in the TSE Handbook.

Salamon called the Chinese research “a highly useful start,” pointing out: “The TSE sector in China has long remained somewhat murky in official statistics. China’s system of national accounts has contributed to this by assigning all nonprofit organizations to the general government sector.” The Ma study, which largely complied with the UN’s SNA norms, used a stratified sample of administrative records to measure key financial parameters of three classes of Chinese institutions—social groups, social service organizations, and foundations.

It’s important to measure the TSE sector, Salamon said, because of its growing global impact. “Governments are increasingly relying on these institutions to respond to societal problems, yet they lack systematic data on their capabilities and operating characteristics.” Better data can help governments make better use of these institutions and their unique expertise, while helping those working in the TSE sector to validate their activities. NPOs “have a distinctly different objective, function, and pattern of behavior from for-profit firms and governments,” he said. “Clarifying the scope and scale of the TSE sector can improve the validity of data on government and businesses, thus, ironically, improving understanding of these other sectors as well.”

Salamon pointed to a major difference between Ma’s analysis and the TSE Handbook: Ma and his team based their work on the considerably narrower definition of the TSE sector used by the Chinese Ministry of Civil Affairs, which excludes social enterprises, cooperatives, schools, and hospitals that earn significant market income through service charges and fees, even though, as NPOs, they do not distribute their profits. The Ma study also excluded volunteer work from its conception of the NPO sector—both individual volunteerism and organization-based volunteer work. It seems likely, as a consequence, that this pioneering study still significantly underestimates the economic scale of the TSE sector.

Asked whether China would take the next step and establish a dedicated TSE satellite account within its system of national accounts, officials from the National Bureau of Statistics said that a 2016 revision had already brought China’s SNA into close alignment with international standards, and that there were no immediate plans to establish a TSE satellite account. Prof. Salamon suggested that a private research effort might usefully pursue this task. BWSII, with the aid of legal experts, government officials, and sector experts, has the technical and organizational capacity for such an undertaking. At the end of the day, said Salamon, China has a significant story to tell about the development of its TSE sector, but without statistics consistent with emerging international usage, a convincing tale cannot be told. If this workshop succeeds in advancing the development of such statistics, it will have served its purpose well.

Hui Fang is a program officer for The Asia Foundation in China, specializing in China’s global engagement and strengthening the charitable sector. She can be reached at [email protected]. The views and opinions expressed here are those of the author, not those of The Asia Foundation.