Opinion

The rich and the spirit of charity

By Grayson Clarke (China Daily)
Updated: 2010-08-20 06:10

Open the newspapers these days and you can hardly avoid reading about the activities of China's super rich - whether it is about the exclusive properties they are buying in London or the activities of their often-spoilt offspring.

One thing you certainly don't read too much about is their giving to good causes. If you do hear about that, it is usually international celebrities such as Jackie Chan or Yao Ming, who are leading the way. Contrast this with the situation in the United States where billionaire financier Warren Buffett has just finished a one-month campaign with 40 American billionaires pledging half of their personal wealth to charity.

I think, and of course, we shouldn't jump to conclusions. The appeals for help following the Wenchuan and Yushu earthquakes were very well supported and I am sure there were plenty of contributions from rich individuals. I also don't think we should make too much of a contrast with the US.

Pledges are pledges after all and even if they do happen, these people (never mind the ones who didn't subscribe) will still be very rich. They have also benefited more than any other group from the financial and tax reform of the past three decades, which have increased the gap between rich and poor across the developed world.

Still the charitable sector is extremely important in doing many of the important things the State simply can't afford to or in some cases cannot do very well. To have a thriving sector means that the basis of donations needs to be wide.

And that means those who can well afford to pay setting an example for the millions of ordinary people whose few yuan will be every bit as important as the millions contributed by rich individuals. So why aren't the Chinese super rich setting more such examples for their fellow citizens?

I don't think inheritance tax or death duties (or the lack of them in China) are a reason. In the world of numerous tax havens and no exchange controls the super rich in all societies are well able to structure their affairs to avoid these taxes. Rather I think the attitude comes down to a combination of reasons.

One of the important issues in the design of Chinese social security, which we in the EU-China Social Security Reform Cooperation Project take into account, is building on the culture of individual savings and the importance of being able to leave those savings to family heirs.

Related readings: Should China's wealthy people pledge half their wealth to charity?  Shanghai residents more willing to donate to charity  China mulls charity law hoped to increase transparency  Charity is every body's business

The European heritage is one of more solidarity - hence the fact that until recently there were no individual savings accounts in the social security system. This is a long tradition. It dates way back to the middle ages when trade guilds were active in helping their members and the wider poor.

Again it would not be right to say there are no similar examples in the Chinese world. I have just got back from Penang in Malaysia where five Chinese clan associations founded in the second half of the 19th century are still going strong supporting their temples and communities, particularly in the area of education.

This however brings us to the absence of a strong tradition of charity law and protection of charitable property. Charity law has one of the longest traditions in British history dating back to when the crusaders used to entrust others with the protection of their children's rights in the event of death in the battle. Trustee law is now one of the most important foundations among Anglo-Saxons, essential to the operation of the whole charity sector as well as occupational pensions.

In fact China enacted a trust law in 2001 under which some company pension schemes were set up. But the law is not part of Chinese tradition and the crux of the law - the fiduciary duty of the trustee to act on behalf of those whom the scheme is meant to benefit - is very poorly respected. To put it simply, why would anybody bother to donate his/her money to a good cause if someone will simply run off with it. And there is never anyone to prosecute malefactors or recover those assets.

The government cannot do much about changing culture, not in the short term at least, but it can do something about the development and implementation of proper law and regulations.

One final thought. There has been much talk in the press recently of the problems of how children of China's first-generation entrepreneurs can be taught skills and encouraged to take over and develop family businesses.

Charitable foundations can play an important role in that process. If you leave all your wealth to an only son or daughter, there is a reasonable chance he/she will blow it on high life. But leave only one-third to your son or daughter and the rest to charitable foundations and your son or daughter will want for nothing and the foundations, which need the revenue to support their good work, may be the ones to develop the business for the next generation. Charity and corporate social responsibility - that is a nice combination.

The author is an international consultant with the EU-China Social Security Reform Cooperation Project.