There is a lot of potential to develop charities in China, but legislation needs to improve if that is to happen.

Charities are not an alien concept to China where helping others is a time-honoured tradition.

But those sorts of charitable activities were mostly carried out among relatives or neighbours or in a community.

Charities, in the sense of a well-organized sector, developed relatively late in China.

Only during the late Qing Dynasty (1644-1911) did charitable groups, in the modern sense, emerge.

But the sector's development in modern day China is slow.

The role that should have been partly played by charities, such as poverty-alleviation and disaster relief efforts, was virtually taken over by the government during the planned-economy period. This meant the development of charities didn't really happen.

When the country began to move towards a market economy in the late 1970s, the dormant charitable undertakings erupted into life again.

A milestone came in the early 1990s. Severe floods that hit vast areas of East China in 1991 resulting in major human and property losses sparked passionate charitable donations both at home and abroad for the disaster victims.

This moving event sent out a strong message a solid social foundation did exist to develop the then still embryonic charities.

This episode also vividly promoted the role charities could play in society, such as disaster relief.

Such roles have now been acknowledged by the government and incorporated into its overall social planning.

For example, charities have been designated as an important part of the social security network, a network the government is currently working hard to establish.

And at a time when the widening income gap is raising serious concerns, charities as a moderate way of redistributing wealth will help bridge it.

However, if China's charity sector is really to shoulder such tasks, it should first become well developed, which regrettably is not the case at present. It is still in its infancy.

According to Ge Daoshun, a research fellow with the Chinese Academy of Social Sciences (CASS), there are only about 100 or so fully-fledged charitable organizations in China, while in the United States there were about 1.2 million in 1998.

In addition, the weak position of charities in China is also revealed by their inability to raise money. For example, the total cash received by Chinese charities was 5 billion yuan (US$602 million) in 2004, just 0.05 per cent of the country's GDP that year.

In the same year, the figures were 2.17 per cent and 0.88 per cent in the United States and Britain respectively.

Although in China a considerable amount of charitable donations go directly from donors to recipients meaning they are not included in the above tally the huge difference between China and the United States and Britain still shows China's charities are not doing enough to get money.

"Charities in China are also plagued by a lack of public enthusiasm," Ge said.

And the everyday man, used to the planned-economy-era idea that social security and social welfare are issues in the government's domain, is often not motivated to do his "bit," Ge said.

"Although the government should play a leading role in social security and social welfare issues, the role played by charitable organizations in this regard should also be greatly encouraged," Li Peilin, a research fellow at CASS, said.

To this end, in Li's opinion, the government should encourage the development of charitable NGOs. Efforts in other aspects should also be made to push ahead the development of China's charities.

"A major hurdle for the growth of China's charities is the lack of a legally friendly environment," said Zheng Gongcheng, a professor at the Beijing-based Renmin University of China.

"The fundamental reason for the backwardness of the sector in China is not the economy and the lack of charitable resources, but the current incomplete legal framework concerning charitable matters," Zheng said.

According to current laws, only seven charitable organizations in the country are allowed to give full tax exemption treatment to donors.

Such an arrangement not only greatly narrows the channels for potential donors, thus turning some of them away, but also increases the costs of doing charity work.

Under existing laws, many charities are treated as if they were businesses. They are required to pay the same tax as business ventures, thus curbing their enthusiasm for charitable undertakings.

So perhaps the government can consider using the tax issue to stimulate the growth of charities, experts say.

But this hinges on a complete and well-functioning legal framework to regulate the sector.

There should be legislation for preferential tax policies for charities, for example.

Speeding up legislation in the sector is an issue of the utmost urgency, Professor Zheng said.

(China Daily June 13, 2005)