Push for private donations 2004-06-25 China Daily
Income redistribution through private donations could be a powerful weapon in
China's battle against poverty.
China has made stunning achievements in its poverty alleviation campaign over
the past two decades, slashing the number of poor rural citizens from 250
million in 1978 to 29 million at the end of 2003.
However, this dazzling accomplishment was measured by China's own poverty
gauge of an annual income of 625 yuan (US$75). Anyone above that line is
considered to be out of poverty.
If measured by the internationally accepted yardstick, which is US$1 dollar
per person per day, China would still have about 100 million rural citizens
living below the poverty line.
This grave situation presents new challenges to China's poverty alleviation
at a time when the nation is also beginning to grapple a new social problem:
urban poverty.
The increasing number of urban poor has given birth to a host of social
problems, threatening the nation's social fabric.
Adding to the problem is the already yawning income gap, which continues to
grow.
China's Gini Co-efficient, a standard international measurement of income
inequality, reached 0.454 in 2002, far above 0.4, which is the threshold
generally considered to be a cause for concern.
Although the market economy is efficient in allocating resources through
competition, it also leads to wealth inequality.
At this time, the government is expected to fix this unwanted problem by
redistributing the wealth through taxation and fiscal policies - the so-called
second income distribution.
The second income distribution alone, however, is no panacea for solving
wealth inequality, a proposition validated by the growing income gap.
Though the government could still strengthen its role in the second income
redistribution by raising the tax rate or bolstering fiscal transfers to check
the income gap, the parameters are rather limited.
Under such circumstances, private donations - thus far a rarely explored
means of income redistribution in China - could play a complementary role in
helping curb the swelling wealth gap and contributing to poverty reduction.
In order for private donation, often referred to as the third income
redistribution, to work effectively in the war against poverty, we need to know
how it works, such as who would be the participants in this endeavour and how to
raise funds.
International expertise shows that the private donation system works better
if the donors are from various sectors.
Business entities are a major source of private donation. By making donations
to charitable causes they elevate their public image and foster loyal customer
pools.
Wealthy people make up another major source of private donation. Some
world-renowned business barons are at the same time prolific philanthropists.
They often donate their wealth by setting up their private foundations, such as
the Ford Foundation and the Gates Foundation in the United States.
Because donations or grants given by the wealthy are usually in large sums,
they greatly reduce fund-raising costs.
However, according to international experiences, the lion's share of
donations comes neither from business entities nor tycoons, but from common
individuals.
In the United States, for example, 70 per cent of the annual US$200 billion
in donations comes from individual in tens or hundreds of dollars.
In developed countries, fundraising activities are not handled by government
agencies but by charity organizations and various community foundations.
The lack of donation culture and its relevant infrastructure, coupled with
private charitable organizations' low profile, has long prevented the private
donation cause from taking root in China.
A new regulation on foundation management, issued on March 18, has
established a system and policy platform for mobilizing social resources for
charitable causes.
The regulation, mandating the separation of foundations into public and
private groups, has in essence created a new channel for enterprises and wealthy
individuals to make donations.
In addition, the regulation has stepped up its oversight over foundations and
demanded their operations be transparent, which will enhance their poor public
credibility.
The promulgation of the new rules is expected to further push forward the
development of China's charitable endeavours.
However, if the private donation scenario is really to be put into full play
and has a substantial impact on China's poverty alleviation campaign, more
measures should be taken.
The government could launch an education or publicity campaign to foster an
donation-friendly environment, thus encouraging enterprise and individuals to be
more willing to make contributions.
The government could also encourage donation-making by reforming its tax
regime, such as introducing an inheritance tax and offering tax reduction or
exemption for donations made by individuals or enterprises.
Finally, the government could beef up its scrutiny of fundrising
organizations and conduct financial audits on those charities to raise their
public credibility, which in turn will make both enterprises and individuals
more willing to make donations. |