Greater China Thursday, 9 May 2013 Panelists: Ding Li (Moderator), Vice President, Non-Profit Incubator Calvin Chin, Chief

ef Executive Officer, Transist Impact Labs Guangshen Gao, Vice General Secretary, Sun Culture Foundation Tao Ze, Vice President, China Foundation Center Xiao Rong, Representative for China, Give2Asia Summary: The first foundation in China was established in the 1980s, and even among the 3,000 foundations today, 45 percent are still government-organized non-governmental organizations (GONGOs). According to Ding, the China Red Cross scandal is not a charity foundation and the Ministry of Civil Affairs cannot supervise them, because they directly report to the Peoples Congress. Tao Ze, providing an overview of Chinas foundation sector, said that the sector needs to be healthy and robust. In 2010, select foundations initiated the China Foundation Center (CFC) to build trust in the sector. Over 3,000 foundations are included in this initiative. According to the transparency index template of the CFC, a few of the six indicators requested are: name, resume of the president, income, and expenditures. According to each foundations disclosure, the CFC gives them a score. This transparency index database is reviewed every night by the IT system and new rankings are posted. This is used to encourage more transparency, and CFC is hoping it can initiate some panAsian network to develop this sector. Xiao Rong, who is the China representative of Give2Asia, said Give2Asias professional philanthropic services include donor-advised grants, philanthropic consulting service, fiscal sponsorship, focused funds (urgent need for immediate release, such as disasters). They provide local, basic needs. They also provide information to its donor network to inform their grant-making. Annually, average grant-making is about $7-8 million dollars through Give2Asia. Its areas of support include education, poverty and the environment. Why should funders use Give2Asia? Because they will get tax deductions; an entity to serve as a bridge; and our on the ground network of local knowledge. They help donors understand how to achieve their goal (through project design, implementation, evaluation, or legal compliance). There are more and more regulations and technical issues for transferring funds (e.g. foreign currency bank accounts). For non-profit sector growth, there are 2,700 foundations in China, and a large gap exists between the supply of and demand for qualified leaders and staff to run Chinas foundations. Calvin talked about Transist Impact Labs focus on venture philanthropy. To be very successful, you need to be right about something that everyone else is wrong about, he said. You need to

differentiate or do something differently. In China, technology entrepreneurs put capital into something copied. They are not focused on customers, are not creative, and are focused on quickly making money. They are fairly questioned regarding their integrity. On the impact side, there is not a focus on impact. It is about helping others, a fear of political and economic trends, and a choice between taking care of self and others. There is a context for these beliefs. Transist Impact Labs is ready for innovation. There are Chinese people solving the problems of China; it is not about something that worked somewhere else. These are the social problems, the biggest problems. You can spend a lot of time to push people to believe in your ideas, but the most value is to pull people to see benefits, with data. Social innovation will happen in for-profit models, by people who have experience scaling businesses. Often, people talk about scale, but scale is about magnitude, not direction, he said. Scale without heading or vice versa is not going to work. Their belief is to do both. We invest, incubate, and incite. We have invested in 10 companies at about $10-25K each. Incubate: customer centric designs. Incite: ecosystem development (take a batch of Chinese entrepreneurs to US who have projects that are at an inflection point to excel growth). We seek to grow with magnitude and direction and contagion in mind. Guangshen said the Sun Culture Foundation is a family foundation focused on: 1) donor education, and 2) art education for underprivileged children. Sun is working with the Gates Foundation to be smart and responsible donors. Based on their learning, they organized five to six forums, with more than 170 high-level individuals. Compared with the top 100 donors in US, they found that in China, the average age is 15 years younger (51 years old versus 65). Also, the top 100 are first generation, and their US counterparts are third or fourth generation. Seventy four percent are concentrated in real estate, which is unstable and influenced by the government. For the Chinese super-rich, they have different reasons to do philanthropy. He added that Chinas social environment is at a very early stage the mindset of the super-rich is much more on charity, but they have very strong capacity in the commercial world. So how can we influence the super-rich to spend their resources in key sectors? We dont have a civil society with capable NGOs. The government spent a lot of money, but NPOs dont have enough capacity to absorb funds. So for big donors, they are faced with how to deal with social issues. Our mission is to introduce and address these issues, he said. According to Ding, 30 years ago, everything was controlled by the government. Now the private sector accounts for 80 percent of GDP, but this is not the case in the social sector. There are categories that are quite mixed or directly funded by the government. The NPI, Nonprofit Incubator, has a mission is to cultivate social entrepreneurs in China and to build an enabling environment in China, she said. Now, it has 150 employees working in 10 cities. NPI is also linked with the China Foundation Center (CFC) and has initiated the Shanghai United Foundation. NPI also publishes a Social Entrepreneur Magazine and a Capacity Building Programme.

In terms of what the next steps are for building transparency, Tao Ze said it is already a popular and fancy topic. He said that building a good city requires a lot of solid ground work. Solid ground work is transparency, trust, in the infrastructure. Right now, the opportunity to target is the Asian countries (unlike US and Europe). We are just at a starting point. We must start with this foundation and then build a beautiful city. Xiao Rong was of the view that for the future, we think we need a social enterprise model to help this sector. She said that four to five years ago, corporate donors working with Give2Asia were mostly initiated by them. They defined the partners while local partners had no involvement. Now it is more locally Chinese initiated. Multinationals have significant involvement identifying projects and urgent needs and involving employees from multi-national companies. These changes are in reference to when we are talking about international corporate giving. Domestic corporate giving is still about giving money to the government. Seventeen percent of grants in the earthquake went to government groups, which is too much, in her opinion. In China the giving habits of the rich are extremely complicated, according to Guangshen. He said that one investor once said he divides his investments into 70 percent commercial, 20 percent for social impact with a business return and 10 percent as donations to charity. When asked about what support the outside world could provide to China, Calvin said that there was not too much outsiders could do. China needs to solve Chinese problems with Chinese expertise, capital, and energy, he said. We often hear about adapting other business models to China. I think of overseas Chinese like myself, but I think it is when China and the venture philanthropy sector in China can get to contributing and not just taking. Then the world will have something to collaborate on. China has to develop its own sector and then it will have equal footing to have a discussion. Until then, outside influences are trying to make something else work in China, he said. Xiao Rong, on the other hand, said Chinas venture philanthropy sector needed international experience. China has gotten good at learning and copying, and it is also true for civil society development. Guangshen also talked about the governments willingness to encourage NPOs in China if they are providing social services. He said this administration is quite conservative compared to the previous one. Also, the majority of NPOs belong to the government system, so if they operate legally, this will strengthen the governments power. Takeaways: The philanthropy sector in China is benefiting from efforts to improve transparency. The China Foundation Centers Transparency Index provides a solid grounding for building a "beautiful city," a strong sector. Future efforts need to focus on creating a pan-Asian initiative to foster transparency, trust, and a strong infrastructure.

Chinas civil society sector is still in development, has a mindset focused on charity, and needs capacity building within both grant-making foundations and grantee NGOs. Ways to develop the sectors infrastructure include building leadership to serve as foundation administrators, cultivating social entrepreneurs, and educating Chinas super-rich on having clear objectives and selecting investment or giving approaches. The concepts of venture philanthropy and impact investing remain new and even unclear within the Chinese context. Social entrepreneurship is more widely understood. Giving to achieve social impact is not as much of a priority as visibility or reputation; however, presenting data, even on institutional operations (e.g. expenditures), is still important and compelling.