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March 27, 2019articles

China and the Power of Tech-Enabled Philanthropy

By Edward Tse | February 2019

Dr. Edward Tse’s article on China’s philanthropy was published in the augural issue of Social Investor, commissioned by the Chandler Foundation.

From e-commerce platforms and Internet mobility service providers to AI and blockchain developers, Chinese technologies companies are transforming China’s economy and changing entire industries – including philanthropy.

China has a long tradition of giving, although it stagnated for roughly three decades when wealth was nationalized under the rule of Mao Zedong. Today, China is home to more billionaires – 819 in terms of US dollars – than anywhere else in the world, outnumbering the US and topping the Hurun Global Rich List 2018. And China’s super-rich are increasingly engaging in philanthropic causes.

According to Harvard University and UBS, between 2010 and 2016, donations from the top 100 philanthropists in mainland China more than tripled to US$ 4.6bn, and 46 of the wealthiest 200 Chinese billionaires now have charity foundations. Giving is much more common among ordinary citizens as well. It was reported that early in 2016, more than 20% of the total charity in China came from individual donors, a number that has grown steadily over the years.

Corruption and Transparency Woes Impede Progress

Despite those growing numbers, the philanthropic industry has been plagued by corruption and a lack of transparency. These are especially prevalent with non-profit organizations that claim to be government-supported.

In 2011, for example, a woman named Guo Meimei received a substantive amount of money from an official at the Red Cross Society of China, then flaunted her luxurious lifestyle on social media. In 2012, to cite just one other example, the China Charities Aid Foundation was accused of money laundering and embezzling.

For private philanthropists, a number of institutional and social barriers make it difficult for them to build, promote, and sustain charitable organizations. Policies mandating high expenditure rates and low administrative costs are two such barriers. Private foundations are required to spend a minimum of 8% of their previous year’s assets, making it almost impossible to grow an endowment. As a result, philanthropy remains a largely monopolized, state-run sector, and donations are largely limited to a few causes: education, poverty alleviation, and healthcare.

 

Technology – the Great Gamechanger

However, new technologies have helped bring innovative approaches to philanthropy and encouraged broader participation.

Tech giants, in particular, have already learned to take advantage of their branded merchandises to involve the general public in philanthropic activities. For example, in response to the 2008 Wenchuan earthquake in Sichuan, Tencent, the company behind China’s biggest social network as well as the largest gaming company in the world, established an online donation platform. More than half a million people contributed, raising a total of US$ 2.9m. Tencent added donation options to WeChat, the instant messaging and social media app with one billion monthly active users, and allowed users to give any amount with a swipe of a finger, making philanthropic engagement easier than ever.

New technologies have created more diversified ways of giving. The rising popularity of fitness apps in China has inspired tech companies to incentivize giving among the younger, more health-conscious, generation. Through the Xingshan (“doing good”) app developed by the Beijing-based company iMore, users record the number of steps they take each day, which is then “donated” to charities through corporate sponsors. By the end of 2015, users of Xingshan had walked a total of 2.8 million kilometres, raising more than US$ 4.6m for 52 different public welfare organizations and projects.

Facing the troubled reputations of charitable organizations, new types of charity platforms have stepped in to address both transparency and accountability issues. Real-time updates on donation collections, along with different verification systems, guarantee the funding reaches the right people at the right time. For example, JIAN Charity – launched by Alibaba’s Cainiao Logistics in 2016 – is an online donation platform where people can place orders and then track the real-time location of the items they donated.

When it comes to smaller donations – often a much more manual process – this kind of tracking can be challenging. By encoding the lifecycle of each donation on a blockchain, Ant Financial, a subsidiary of the tech giant Alibaba Group, addresses these transparency concerns and significantly reduces operating costs.

Embedded within a larger digital ecosystem like that of Alibaba’s, philanthropy has an even more magnified potential. On Taobao, an online shopping site, sellers can register for the “Treasures for Charity” program, allowing them to donate a portion of sales revenue to non-profit projects. Sellers not only draw more customers but this also boosts their conversion rate. Even though the per-deal donation can be as low as US$ 0.0058, the cumulative effect is significant: in 2017, 1.8 million participating sellers and 350 million buyers donated a total of 245m RMB (US$ 35.7m) to charity projects the world – owing to the enormous transaction volume and user base on the e-commerce platform.

A New Era for Philanthropy in China

China’s private wealth continues to expand, and philanthropy in the country is on an undeniably upward trajectory. New technologies are unlocking more inventive forms of giving, which become more synergized with companies’ mega business ecosystems. Public awareness about philanthropy is rising, while non-profit organizations are regaining their credibility and trustworthiness. I expect a brighter future.

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Founder & CEO of Gao Feng Advisory Company, a global strategy and management consulting firm with roots in China. —learn more
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