17 May, 2016
Non-governmental organisations (NGOs) wishing to operate in China will be required to register with the police and find an official Chinese sponsor before they will be able to do so, according to new laws approved by the Chinese government.
The PRC Law on the Management of Foreign NGOs' Activities Within Mainland China will come into force on 1 January 2017 and apply to "not-for-profit, non-governmental social organisations lawfully established outside mainland China, such as foundations, social groups and think tank institutions", according to an unofficial translation. It will give NGOs "protection of the law", provided that they comply with Chinese laws and do not undertake activities that would "harm China's national interests".
Shanghai-based commercial law expert William Soileau of a Pinsent Masons, the law firm behind Out-Law.com, said that the new law "can only increase the burdens and risks for most foreign NGOs operating in China".
"But for foreign universities in particular, the law is a mixed bag," he said.
"The good news is that the law clearly exempts Sino-foreign cooperative education programmes. The bad news is that it is not clear whether the law could apply to foreign universities carrying out other activities here, like recruiting, liaison and even technology licencing. That doesn't seem to be intended. But unless we get clear official guidance before the effective date, we'll just need to wait and see how things are handled in practice," he said.
The new law contains an explicit carve-out for joint programmes involving "foreign schools, hospitals, natural science and engineering technology research institutions or academic organisations" and their Chinese counterparts. This was introduced to deal with concerns raised by these institutions while the law was in draft form.
Once the new law is in force, affected NGOs will be required to either register to set up a representative office on the Chinese mainland, or to "file and record" an application to carry out temporary activities. Those that do not do so will not be permitted to carry out "or covertly carry out" activities in China, or to entrust or fund any unit or individual in China to carry out activities on their behalf.
Only those NGOs legally established outside of mainland China, capable of bearing independent civil liability and that have "continuously carried out substantive activities" outside of mainland China for two years or more will be able to apply to set up a representative office. The objectives of the NGO must also be "beneficial to the development of social welfare". Those that do not meet the requirements to set up a representative office or do not wish to do so can instead register to carry out temporary activities for no longer than 12 months, in association with a 'Chinese Partner Unit' such as a state, public or social organisation.
Activities carried by a foreign NGO once registered will be supervised first by the Public Security Bureau (PSB), then by a sector-specific professional supervisory unit at local government level and by any other supervisory authorities responsible for national security, finance, foreign affairs, customs or tax. Representative offices will be required to submit an "activity plan" setting out their planned projects and use of funding over the following year before 31 December of each year to their professional supervisory unit, according to the unofficial translation of the law.
The law limits funding for foreign NGOs' activities in China to money legally raised outside of China, interest earned on bank deposits in China and "other funds lawfully obtained within mainland China", according to the unofficial translation.
Neither the NGO nor its Chinese representative office is permitted to fundraise within China itself. A representative office
must use a bank account in mainland China registered with the PSB, while those carrying out temporary activities must use their Chinese Partner Unit's bank account.
Foreign NGOs are permitted to carry out activities "beneficial to the development of … social welfare" in fields such as economics, education, science, culture, health, sports and environmental protection, and projects related to poverty and disaster relief, according to the unofficial translation. They may not engage in or fund for-profit or political activities, or religious activities.
For further information, please contact:
Ian Laing, Partner, Pinsent Masons
ian.laing@pinsentmasons.com
