Private non-enterprise institutions in China in an era of charity law reform

Abstract

Private non-enterprise institutions (PNIs, minban feiqiye danwei 民辦非企業單位 or minfei 民非), one of the three types of nonprofit organizations in China, mainly exist in a wide range of human service fields, e.g. education, health-care, and social welfare. Thus, PNIs are addressed as nonprofit human service organizations in this study. Despite their relatively short history, PNIs have grown dramatically in size and influence since the late 1990s. Today they constitute an integral and increasingly important part of the charitable sector in China. However, to date research into the legal and regulatory framework for PNIs has been limited.

This study examines the legal and regulatory framework for PNIs in the broader context of China’s ongoing charity law reform. In the wake of charity scandals in 2011, the past few years have seen a new wave of charity law reform in China, characterized by an accelerated process of drafting the long-awaited Charity Law. This vital piece of legislation is likely to bring the charitable sector of the country to a new stage of development where a more supportive legal environment can enable further development of this sector on the one hand, and more vigorous and effective oversight can restore public trust and confidence on the other.

For charity law reform in China to succeed, a richer and deeper understanding is needed of the legal and regulatory framework for PNIs. This study presents a theoretical framework for the study of nonprofit human service organizations that is built on an integration of demand-side and supply-side theories, and uses it to examine the development of PNIs in post-1978 China. In particular, relying primarily on data analysis, this study reveals that the supply of nonprofit production of human services in China is still unable to meet the growing demand. Given this, PNIs are unlikely to have a comparative advantage over public agencies and private for-profit producers. This demand-supply mismatch, as this study makes clear, is due largely to the uncertainty surrounding the legal status of PNIs.

In view of the extraordinary challenges facing the development of PNIs, this study explores some suggested directions toward improving the legal and regulatory framework for PNIs against the backdrop of charity law reform in China. First, based on a comparative analysis of civil law and common law approaches to recognizing nonprofit organizations, as well as case studies, this study highlights the need to clarify and recognize the nonprofit and charitable status as well as tax-exempt status of PNIs, and investigates the present state and future development of relevant issues. Second, this study looks closely at the means by which greater accountability and transparency of PNIs can be achieved, aiming to prevent abuse of this legal status. Bearing in mind the regulatory challenges posed by the emergence of multiple-entity groups (or “social enterprise groups”) in the third sector in China, this study analyzes and proposes regulatory oversight mechanisms that should be put in place as charity law reform goes forward.