In the last 15 years, a nascent and grassroots non-profit sector has been on the rise in China, initiated by Beijing in order to address many of the country’s social challenges.  The first wave of non-profits were generally hybrids of governmental organizations and local involvement, but their services were quickly overburdened by rising demand. Since 2000, there has been a new wave of grassroots-led non-profits, most of which are less than five years old, unregistered and have only one or two full-time staff. The legal infrastructure for the growth of the nonprofit sector is slowly evolving as well, with increasing tax benefits for donors and a comprehensive set of statutes aimed at promoting the sector, both currently in development. However, the sector remains embryonic due to China’s development path which is characterized by a pervasive over-reliance on governmental action to address social issues.

Chinese non-profits also face chronic shortages in funding and a dearth of domestic support. According to the McKinsey Quarterly’s August 2006 report on China’s non-profit sector, charitable contributions in 2005- including federally allocated funds for disaster relief, equaled only 0.05 percent of China’s overall GDP, compared with 0.09 percent in India, 0.18 in the South Korea, and close to 2 percent in the United States. Of these contributions, the overwhelming majority were from international sources. For instance, Chinese companies on average give less than 0.3 percent of their after-tax profit to charity, compared to almost 2 percent for Fortune 500 companies. Moreover, while grassroots non-profits make up over 90% of the existing sector in China, they receive only about 15% of the total funding, with the government-affiliated organizations attracting the rest. The immaturity of the sector and lack of transparency in the way funds are spent have hindered the growth of both total contributions and domestic giving specifically.

Table 1: Giving as a Percentage of GDP from McKinsey Quarterly, August 2006