BEIJING — The sweeping new law passed by the Chinese government this week that will impact thousands of foreign-run nongovernmental organizations operating in the country could also affect multinational firms that have partnerships with NGOs in China for branding as well as corporate social responsibility campaigns, according to analysts and legal experts.
The law, passed on Thursday and effective on Jan. 1, 2017, requires foreign NGOs to partner with a Chinese one and shifts supervision of operations to China’s public security ministry rather than the Ministry of Civil Affairs. Foreign NGOs will have to register with the police, which will monitor personnel and finances, according to a translation of the legislation posted on the China Law Translate blog.
The legislation has resulted in widespread outcry from overseas governments, activists and international nonprofits that say the new rules mark a major step backward for the country’s civil society and is yet another sign of Beijing’s ongoing crackdown on everything from the media to religious groups to internet censorship and human rights.
It is too early to tell how deep the impact will be on foreign civil society players, but some say that foreign companies need to pay heed as well, especially if they have forged or plan to forge partnerships with NGOs, a sector in China that has always had to tread carefully with the government. Multinationals that have launched their own charity projects may face new scrutiny. The law bans fundraising in China and covers a broad swath of organizations, ranging from think tanks and foundations to social groups founded overseas.
Analysis on the China Law Translate blog says the “overly broad definition of foreign NGO and the lack of any definition of activity” portend a wide range of activities fall under its purview.” Activities that could be included might be “a meeting of a professional association, or a performance by an arts troupe or a PGA tournament,” the authors wrote.
Analysts say the law essentially codifies a gray area in which overseas NGOs have always been subject to unwritten rules that have been unevenly enforced.
“It might hurt [foreign businesses’] charity work,” said Shaun Rein, managing director of China Market Research, a Shanghai-based consultancy. “They might be more wary to support charities they don’t completely trust or be concerned about supporting [the foreign NGO] with a Chinese partner now because there is a lot of fear about corruption in Chinese charities and misallocation of resources.”
A spokesperson with the American Chamber of Commerce in Shanghai said the group could not comment as member companies have not been consulted on potential concerns about the legislation.
Some companies, such as Nike, worked with partners to assist with natural disasters in China, such as a massive earthquake in 2013.
Large multinationals are likely already working with “well-established” Chinese NGOs, according to a social responsibility consultant who requested anonymity due to client confidentiality agreements. “I don’t see them being affected much — not at first blush anyway,” the consultant said.
“It is mostly going to affect potential beneficiary international NGO organizations they [foreign companies] may choose to partner with,” the consultant said. “It may put a crimp in that programming but honestly to even have effective local programming response they need to already be working with Chinese NGOs and the government anyway as part of the due diligence of that company’s office.”
Holly Chang, strategic consultant for nonprofits operating in China, said it is likely most multinationals have vetted any philanthropic partnerships forged in the country, as “they wouldn’t want to put their business at risk.”
“I imagine, from a risk management perspective, they’ve never given to an illegitimate nonprofit,” Chang said. “For people operating in China for a long time, it is probably pretty much business as usual.”
Critics of the new law say it is largely directed at national security, rendering it harder, if not impossible, for NGOs promoting human rights, religion or democracy to operate in China.
“We might see this new law as being the straw that will break the camel’s back for some organizations,” the consultant, who requested anonymity, said. “But for some the writing was already on the wall.”