Report published on the development of foundations in China over the past ten years

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The China Foundation Centre (CFC) celebrated its tenth anniversary this year. To mark the occasion, the centre has published a report full of new data on the development of foundations in China over the past decade. The report is divided into three sections, focusing respectively on numbers, finance and programs. The “Numbers” section reveals the total number of foundations in China, their geographical locations and the areas in which they have been working. “Finance” focuses on data of the net assets foundations possess, total incomes, expenditure on public interest events and investment activities. “Programs” includes the number of programs carried out by Chinese foundations, the cost of these programs and their growth rate.

According to the report, the number of Chinese foundations has been steadily increasing over the past ten years, yet the growth rate has been in decline since 2016. By the 30th of June 2020, it was estimated that there were a total of 8172 foundations in China, a number three times as high as in 2010. It should be noted that after the Charity Law of the PRC was passed in 2016, the growth rate in the number of Chinese foundations started to slow down. However, the gap in numbers between the foundations allowed to organise mutual funds and the foundations allowed to organise hedge funds is getting bigger. In 2010 there was an equal number of these two types of foundations, but the gap began to widen significantly after 2014. In 2015, the number of foundations allowed to have hedge funds was twice that of their counterparts. In 2020, the number of the former was as much as four times higher. In terms of size, small and medium-sized foundations are the majority; but large-sized foundations have been growing faster than the other two, and the resources owned by the larger foundations dwarf those of all the small and medium-sized foundations combined.

It can be observed that the number of foundations in different parts of China varies. Most of the foundations are based in the eastern coastal provinces, whereas in the central, northern and western parts of China numbers are much smaller and yet the growth rates much higher. The top three provinces with the highest growth rate in the number of foundations are Zhejiang, Shaanxi and Shandong. It is also reported that most foundations focus on education, disaster relief and disability, but foundations working in the areas of community development and public interest are rising rapidly.

Compared with foundations allowed to run mutual funds, the foundations with hedge funds often seem to possess less resources, but over the years the latter have actually accumulated more net assets than the former. All foundations have various sources of income, with 80% reported to come from donations. In particular, data from 2018 shows that community foundations and government-led foundations had more funding from the government than other types of foundations. Foundations spend 95% of their income on charity events, and there is a positive tendency for them to spend more on employees’ salaries and welfare and less on administrative costs. In order to secure their incomes, foundations are also involved in investment activities, with foundations with hedge funds investing more assets than foundations with mutual funds. The investment activities that foundations engage in are mainly of three types: short-term investments, long-term equity investments and long-term bond investments. A rising number of foundations make short-term investment activities, among which community foundations are the obvious winners with less assets invested and the highest percentage of returns on investment since 2011.

In 2018 the number of foundations in China was 7199, and they had run a total of 27,906 programmes, most of which focused on traditional areas such as poverty reduction, education and healthcare. It can be noted that in recent years, the total expenditure on programmes is rising while the rate of growth is slowing down. Programmes with the highest expenses are mostly initiated by foundations with mutual funds, and these foundations have been working in the nonprofit sector for a relatively long time. When it comes to programmes funded by more than one foundation, data from 2018 showed the total number to be over 7,000, or 26% of all programmes. 60% of the recipients of foundation-funded programmes were social organisations (an administrative category including foundations themselves, social groups and social service organisations).

The CFC hopes that this report will not only be a reflection of the latest data related to foundations in China, but also help enhance their social credibility and the communication and collaboration between foundations. Foundations in China still have a long way to go, and it can only be hoped that more people, especially the educated youth, will join this journey in the future.