Editor's Note: We are excited to share this report summary from the Center for Family Philanthropy, the research arm of the China Global Philanthropy Institute. It discusses the rise of family philanthropy in China and the unique way its philanthropists are making their mark.


Background

After 40 years of rapid economic growth in the “Reform and Opening Up” era, China now has the second-highest tally of millionaires in the world. These newly wealthy individuals seek to carry on their legacy and to promote social values through family philanthropy. Meanwhile, the philanthropic sector as a whole is burgeoning. China passed its first Charity Law in 2016, expanding the field of charity from a focus on disaster relief, poverty alleviation, and education to encompass many other areas related to social welfare and sustainable development. The Center for Family Legacy at China Global Philanthropy Institute (CGPI) carried out an exploratory assessment of China’s family foundations, evaluating and ranking foundations based on size of financial contributions, degree of social impact, and governance, and identifying challenges and opportunities for further increasing philanthropic engagement and efficacy.

Key Findings

Growing in numberThe first family foundation in China was established in 1986. In 2010, there were 100 family foundations; four years later there were 200. By the end of 2018, there were a total of 268 family foundations—4% of all charitable foundations in the nation. According to data publicly available from the China Foundation Center, the total net assets of these family foundations equated to $1.6 billion (RMB 11 billion), accounting for 8% of the total assets of charitable foundations in China. In 2017, family foundations received $630 million in donation income, and disbursed $540 million in grants. This represents an astronomical increase from 2005, when family foundations disbursed only $1.3 million in grants—the bulk of this increase came from large grants over $15 million.

Growing in size: When first registered, the majority of family foundations (54%) were established with only the minimum required funds: $290,000 (RMB 2 million), but many have increased in size over time. In 2017, 63% had assets exceeding the minimum requirement. More than half of family foundations (54%) are still small or medium-sized, with assets below $1.5 million (RMB 10 million).

Concentrated in southeast China: The greatest number, 52, are registered in Guangdong province (also called Canton Province, which topped the GDP rankings among all provincial-level divisions). Next comes the capital, Beijing (the only exception to the southeasterly trend), which has 41 registered family foundations. It is followed by four more southeastern provinces: Fujian (34), Zhejiang (28). Jiangsu (16), and Hunan (14). Other provinces in China each have fewer than 10 registered family foundations.

Education is a giving priority: The majority (60%) of philanthropic giving from family foundations is directed toward education, with 43% of family foundation gifts going to elementary education, and 17% going to higher education. The next big giving focus is on poverty alleviation, which is understood to be a multifaceted issue and often inclusive of educational as well as environmental protection programs. Arts & culture, eldercare, and community development come in third, fourth, and fifth, respectively as other major areas of giving.

Family-Foundation ties still developing: Most family foundation executive directors (83%) are professional managers; only 17% are family members. According to regulations, no more than 30% of board members can be family members, so senior corporate executives, retired government officials, and public figures also serve on the boards. Very few foundations publicize their family history or consider the foundation to be an important part of the family’s legacy. Since private wealth, inheritance, and family foundations are all relatively new in China, only 20% of family foundations currently involve the participation of next-generation family members, and of these, the majority only include two generations. Just 4.2% of family foundations in China have engaged a third generation in giving.

Outlook for the future: In recent years, new modes of giving are emerging: charitable trusts are newly regulated since the 2016 China Charity Law; the first Donor-Advised Fund was established in 2018; impact investing and social enterprises are becoming increasingly popular. The ecosystem of family philanthropy is also developing, as private banks, trust companies, family offices, and family lawyers take on advisory roles. Family philanthropy has received increasing attention from HNWIs in China and is coming to be considered an indispensable component of wealth management and family legacy.

In 2017, nearly $22 billion (RMB150 billion) worth of donations were received by entities on the Chinese mainland according to a newly released report by China Charity Alliance. China Top 100 Philanthropic Giving, an annual report by the Center for Family Legacy at CGPI, shows the top 100 private donors gave a total of $3.8 billion (RMB 26 billion) to charities in 2018; this statistic in 2017 was $3.4 billion (RMB 34 billion). Last year, only $1.6 billion went to family foundations, leaving plenty of room for future growth. Family philanthropy in China is currently in a state of expansion, experimentation and evolution, and is poised to unlock the gate of China’s next chapter, ushering in greater social innovation and sustainable development.

To see the 2018 list of the Top Ten Family Foundations in China, and to read the full report, please contact Ying Lu, Deputy Director, The Center for Family Legacy at China Global Philanthropy Institute, luying@cgpi.org.cn.