Asia Catalyst, just came out with China’s New Nonprofit Regulations: Season of Instability, updating the situation for Non Governmental Organizations (NGOs) in China.
The post starts out discussing how NGOs can register as a not for profit entity in China only via government sponsorship, which effectively places the new NGO under Chinese government control. To avoid having this massive weight on its back, many NGOs register in China as a commercial enterprise (typically a WFOE, occasionally as a Joint Venture), which in turn subjects it to normal commercial tax burdens.
China’s new regulations create a two-step hurdle that makes it more difficult for these “commercial enterprises” to get funding:
- All NGOs have to open a special bank account for the foreign donations they receive.
- To open one of these special bank accounts, the NGO has to provide an application, a copy of their business license, a notarized contract with the overseas donor explaining the purpose of the donation, documents proving the overseas donor is legally registered in its home country, and, if the notary is unsatisfied with the documentation, other materials.
The notarization requirement is the real roadblock because “notarization of the contract between donor and grantee” requires “both the donor and the grantee . . . to have representatives physically present at the notarization office in person.” Obviously, having representatives for both the FOREIGN donor and the Chinese NGO physically present at the notarization office is, at the least, a significant inconvenience, and at worst, a deal-breaker. All of which is leading to a serious drought of funding for NGOs in China.
All of which begs these questions: why stifle NGOs and why now? What do you think?