China’s decision to subject foreign NGOs to strict government control has triggered international outrage. But the Overseas NGO Law, while further narrowing the space for political engagement in China, is not primarily an attempt to shut China off from Western influences. Rather, it is part of a strategy to develop a domestic – and domesticated – non-profit sector.

Chinese soldier

China has joined the club. With the passage of a law to govern the activities of foreign non-governmental organisations, Beijing has followed in the footsteps of many other authoritarian states. Western media mostly portrayed this move as an outright attack on civil society.

The work of many foreign NGOs and foundations in China is indeed likely to get more difficult, especially in politically sensitive areas like legal consulting or advocacy. The fact that NGOs will be subject to supervision by the Ministry of Public Security is certainly the most worrying signal to this effect. Also, the passage of the law seems consistent with the overall political climate. Restrictions for foreign media organisations, the campaign against Western values at universities and government-sponsored advertising campaigns depicting foreigners as potential spies are all part of a fight against foreign infiltration.

Conflicting interests in China’s leadership

But the case of the Overseas NGO Law is more complex. Rather than pursuing one clearly defined purpose, it seems to reflect a compromise between different factions within the Chinese leadership. Its passage was originally planned for mid-2015 and then delayed again and again. The unusual number of last-minute changes to the draft is a further indicator for internal strife and not simply a reaction to criticism by western NGOs and diplomats.

Conflicting interests must have been at play in Beijing. While one side prioritised national security and absolute party control, others stress the necessity for international cooperation. Domestic actors played a leading role in making sure that cooperation projects in the education and health sectors were excluded from the law’s area of application.

China’s lawmakers even made concessions to foreign organisations when they dropped certain bureaucratic harassments. For instance, the final version of the law no longer includes a requirement to re-register after five years, and it also eases restrictions on hiring Chinese staff. Even the law’s title was changed from governing foreign NGOs per se to regulating only their activities in Mainland China.

Remarkably, reports about the law in China’s party-run media were mostly devoid of nationalistic undertones. And at a news conference following the law’s passage, government representatives stressed the positive role of the large majority of foreign NGOs in China.

Charity Law and NGO Law go hand in hand

Beijing’s true intentions behind the law are best explained before the backdrop of another recently promulgated law. As I argued in a previous post, the Charity Law is supposed to promote the rise of a home-grown Chinese philanthropy sector. For the first time, it creates a sound legal framework for China’s scandal-ridden non-profit sector.

Under the Charity Law, domestic charitable organisations will find it easier to conduct fundraising while foreign organisations will find it harder after the NGO law subjects them to strict new financing and accounting requirements. The laws are two sides of the same coin. They work together to strengthen Chinese organisations at the expense of foreign competitors. In line with China’s industrial policy, the goal is to build “global champions”. In the case of charities, such champions could also help China’s “cultural soft power”.

China still has a long way to go on the way to a non-profit sector “Made in China”. Up until now, the country lags behind in international philanthropy rankings. It is true that China’s multimillionaires are increasingly willing to donate and that new foundations are being set up all over the country. But this also means that the need for foreign expertise in non-profit management will grow rather than diminish, at least in the short term. Foreign actors will be welcome if and as long as they are seen as contributing to Beijing’s developmental goals.

Rather than subscribing to the western concept of a “civil society”, China’s new laws are in line with the leadership’s vision of a “civilised society” which supports public and private efforts to combat poverty, protect the environment or improve education. At the same time, they create a broader legal basis for the Chinese state to control, ban or even pursue organisations and individuals that it sees as engaging in subversive activities. So while the new law may not be the direct attack against foreign values as which it has been portrayed, there can be no doubt that NGOs with political ambitions – domestic or foreign – face even more difficult times in China.