The new PRC Charity Law (the “New PRC Charity Law") was passed on December 29, 2023, and will come into effect on September 5, 2024, the China Charity Day as prescribed in the current PRC Charity Law. As we understand, the New PRC Charity Law demonstrates that the Chinese government encourages international exchange and cooperation in the field of charity, whereas to some extent, it also marks Chinese competent authorities' determination to strengthen supervision on charitable activities. This article is intended to look into certain highlights in the amendments to the current PRC Charity Law, especially the potential impacts these amendments have on the charitable activities conducted by overseas organizations and individuals in China.

1. [Reporting Duty of Overseas Organizations] Would overseas organizations and individuals be required to share information about charitable activities with their Chinese partners under the New PRC Charity Law?

Yes, they may need to share relevant information pursuant to Article 13 and Article 102 of the New PRC Charity Law.

Article 13 of the New PRC Charity Law requires China-based charitable organizations to report annually their cooperation with overseas organizations or individuals. And pursuant to Article 102 of the New PRC Charity Law, if overseas organizations and individuals are to cooperate with their Chinese partners when carrying out relevant activities, their Chinese partners are required to seek approval from and fulfil record-keeping procedures with competent authorities. Therefore, for these purposes, overseas organizations and individuals may need to provide their Chinese partners with information related to their current or planned activities.

However, current laws and regulations in many regions in China remain silent on the depth and breadth of the aforesaid information to be submitted to competent authorities. 

2. [Definition of Overseas Organizations] Do the branches, offices, and representative offices of the overseas organizations established in China fall within the scope of “overseas organizations" under the New PRC Charity Law?

Yes. The concept of “overseas organization", which is not included in the current PRC Charity Law, is introduced in the New PRC Charity Law for the first time, but it is not clearly defined thereunder. The now abolished Measures for the Use of Encryption Products by Overseas Organizations and Individuals within China, however, defines an overseas organization as an organization established abroad in accordance with foreign laws, including any branches, offices, and representative offices of the organization set up within China. Therefore, we are of the opinion that branches, offices, and representative offices of overseas organizations established in China fall within the scope of “overseas organizations" under the New PRC Charity Law and are therefore subject to the New PRC Charity Law.

3. [Definition of Charitable Organization] Do the representative offices of UN agencies and INGOs in China fall within the scope of “charitable organizations" under the PRC Charity Law?

No. Charitable organizations under the PRC Charity Law only refer to nonprofit organizations established under the PRC law and legally registered with the competent PRC civil affairs authority.

Since INGOs are formed abroad under foreign laws and the UN is a legal entity established by international treaty, representative offices of INGOs and UN agencies in China are not regarded as charitable organizations under the PRC Charity Law.

4. [Regulation on Charitable Activities] Pursuant to the New PRC Charity Law, are overseas organizations and their China local partners required to seek the greenlight from local authorities prior to the launch of charitable activities?

Apart from Article 102 of the New PRC Charity Law, no further provision in the New PRC Charity Law stipulates this matter so far. As the regulatory regime is in its infancy, it is advisable to closely monitor regulatory updates before the New PRC Charity Law comes into effect in September 2024. In practice, we have found that currently some regions require charitable organizations to seek pre-implementation approval. Therefore, to play safe, we recommend maintaining close communication with competent authorities to stay informed and getting greenlighted in advance by local authorities.

5. [Public Fundraising Qualification] Does the New PRC Charity Law signal the intention of the PRC Ministry of Civil Affairs to expand the scope of charitable organizations with public fundraising qualification (“PFQ")?

Theoretically, yes, the New PRC Charity Law indicates an expanded scope of charitable organizations with PFQ as compared with the current PRC Charity Law. The requirement for applying for PFQ has been lowered - a charitable organization registered for only one year (not two years as previously prescribed) is qualified to apply for PFQ with the competent civil affairs authority. Moreover, the current PRC Charity Law prescribes that only foundations and social organizations are entitled to certificates of public fundraising, whereas the New PRC Charity Law expands the scope of public fundraising organizations to cover “non-profit organizations" in general.

6. [Effect of PFQ's Expansion] What benefits overseas organizations may expect as more charitable organizations are now eligible for PFQ?

Such expansion translates into more choices for overseas organizations when they seek competent partners in China to carry out charitable activities. Since overseas organizations are not charitable organizations under the PRC Charity Law, they are not qualified for fundraising in China. Hence, in order to raise funds in China, overseas organizations have to cooperate with their Chinese partners, and the expanded pool of charitable organizations with PFQ provides overseas organizations with more opportunities for cooperation.

7. [Public Fundraising under Emergencies] Could the New PRC Charity Law be regarded as a positive signal of a smoother fundraising campaign registration procedure in case of disaster relief?

We wouldn't say the registration procedure for public fundraising in case of major emergencies would be “smoother", but it seems to be more “flexible" according to the New PRC Charity Law. Pursuant to the newly added Article 73 under the New PRC Charity Law, in the event of major emergencies, if it is not possible for a charity to complete the registration procedure for public fundraising before its proposed fundraising campaign, then the time limit for registration could be extended to 10 days after the start of the fundraising. The above provision has already been incorporated into another regulation regarding administrative measures for charitable organizations, which is now added to the New PRC Charity Law, demonstrating the Chinese government is strengthening the supervision on fundraising campaign in relation to disaster relief.

8. [Venture Philanthropy] Could overseas organizations participate in venture philanthropy under the New PRC Charity Law independently? If not, is there any way for overseas organizations to somehow get involved in venture philanthropy in China?

No. Pursuant to relevant laws and regulations, overseas organizations cannot participate in venture philanthropy on their own. In China, there has been no regulation governing venture philanthropy that could be applied consistently nationwide. Some local governments have introduced measures for the management of venture philanthropy. Our research indicates that these measures only allow the social organizations that have been legally registered with competent civil affairs authorities and have the ability to assume civil liability independently (that is to say, the organizations could be regarded as legal persons) to participate in venture philanthropy. That is, overseas organizations are not qualified applicants for venture philanthropy. However, based on our research, we believe that overseas organizations could participate in venture philanthropy by cooperating with qualified Chinese partners.

9. [Beneficiary of Charitable Trust] What is the restriction on the beneficiary of a charitable trust pursuant to the New PRC Charity Law?

The New PRC Charity Law forbids the principal of a charitable trust from designating any interested party of the principal as a beneficiary. Moreover, when determining the beneficiary of a charitable trust, the trustee should comply with the principles of openness, fairness, and impartiality and shall not directly or indirectly designate any interested party of the trustee or any of its employees as the beneficiary. In the case of violation of the above provisions, the principal and the trustee of the charitable trust would be subject to relevant administrative penalties such as fines or warnings from a civil affairs authority.

10. [Fund Use of Charitable Trust] Does the New PRC Charity Law demonstrate strengthened supervision by the Chinese government over the annual expenditure and management expenses of charitable trusts?

Yes. Prior to the New PRC Charity Law, there was no restraint on annual expenditures and management expenses of charitable trusts, and the New PRC Charity Law empowers the Ministry of Civil Affairs, Ministry of Finance, State Taxation Administration, and the National Financial Regulatory Administration to set the specific standards for annual expenditures and management expenses of charitable trusts. Although no further regulations on setting such standards have been enacted so far, we believe that the New PRC Charity Law would to some extent affect the flexibility in charitable trusts' fund use.