David Wolf on China NGOs, China law, and calculating China risks
David Wolf on China NGO law and calculating China business risks

There are a handful of China people (note that I am not using the term China expert) who just seem to nail China every time they write about it. And by nailing it, I mean that I read what they write and when I am done I think to myself little more than, “Yes.” And then my next thought is “I wish I had written that because that expresses better what I am thinking than anything I have written — or probably could write — on the topic. I had that reaction the other day to a Linkedin post by David Wolf, entitled, NGOs in China: Seeing through a Law, Darkly.

I have known David ever since we both were on an AmCham panel a long long time ago on the topic of writing about China. David has doing business in China since the 1980s and he has lived there for around 20 years. David is managing director of the Global China Practice for Allison+Partners LLC, and he just came out with a book Public Relations in China (published by Macmillan) in October. I have that book on order and I hope to eventually review it on here.

Back to David’s Linkedin post. The post is on NGOs but like so many good “micro” posts, its value goes way beyond that. It as a great post on Chinese law and, more particularly, on how foreign businesses should incorporate Chinese law into their business calculations. The other day a reporter asked me how foreign companies should plan their businesses in light of the TPP. This reporter wanted to know how a foreign business can make plans in light of the “huge uncertainty posed” by whether TPP will or will not pass and what it will mean for international businesses either way. I explained that businesses always operate in a world of risk (even the most local domestic business must deal with multiple risk factors) and that each business must  gather up as much information as it can to analyze TPP and then decide for itself how it might or might not impact its particular business. It then must act accordingly.

When I first saw David’s Linkedin post, I left the following comment: “Great article! I am sure I will at some point quote you on this: “As always with Chinese regulations, it is unwise to panic when word of new laws or policies are announced. Such occasions call for questions rather than statements, study rather than action, and engagement rather than estrangement.”

This is what I am talking about! So without further ado, here is David’s post:

 

Over the past six months, there has been a great deal of consternation about the new law being drafted in Beijing covering the operation of NGOs, both domestic non-profits and foreign organizations. The NGOs I work with have been, each for their own reasons, concerned about what to make of both the law itself, and, perhaps more important, what it signals about the broader policy environment around China’s nascent civil society.

As always with Chinese regulations, it is unwise to panic when word of new laws or policies are announced. Such occasions call for questions rather than statements, study rather than action, and engagement rather than estrangement. For a start, The Economist offers some clarification:

The draft law represents a mixture of limited progress and major party retrenchment in a sensitive area. Under Mao Zedong, China had no space for NGOs. But they have multiplied in the past decade to fill the gaps left by the party’s retreat from people’s daily lives. Officials say the law will help NGOs by giving them legal status, a valid claim. But it will also force strict constraints on foreign or foreign-supported groups. No funding from abroad will be allowed. And all NGOs will have to find an official sponsoring organisation. They will then have to register with China’s feared public security apparatus, which will now oversee the entire foreign-backed sector.

The article goes on to explain that while in practice the government may back off from enforcing some of the more draconian clauses, they will keep those provisos in place to use selectively against groups they seek to censure.

This means that international NGOs in China, from the American Chamber of Commerce to environmental organizations like Greenpeace, will live under a sharper Sword of Damocles than ever. Worse still, the law could be used as a device to quell discussion and debate about China abroad by holding an NGO’s right to operate in China hostage against better behavior overseas.

International NGOs operating in China not only need to understand how the law will regulate their operations in China, but also how the exigencies of their China operation may compel them to alter their behavior abroad. At some point, many NGOs will face a hard choice between sticking to their principles globally on one hand, and continuing to operate in China on the other.

The wiser NGOs will not wait for that choice to come, but will address it now, and preferably before even venturing into China. The sooner all of an NGO’s stakeholders understand the potential scenarios, the sooner the organization can delineate the terms under which it is – and is not – prepared to operate in China. This is also a good time for international NGOs to identify and engage their allies, partners, and supportive voices.

This is not to say that the worst will happen. China’s government is not a monolith, and there are regulators and bureaucrats in Beijing who understand that a healthy civil sector, and even a degree of foreign participation therein, is an essential part of the solution to many of the problems China has encountered in its development and growth.

But that support offers no guarantee against turbulence ahead. For international NGOs in China, the coming year should be spent preparing for the worst while working to make the situation better.

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Photo of Dan Harris Dan Harris

Dan Harris is internationally regarded as a leading authority on legal matters related to doing business in China and in other emerging economies in Asia. Forbes Magazine, Business Week, Fortune Magazine, BBC News, The Wall Street Journal, The Washington Post, The Economist, CNBC, The New York Times, and many other major media players, have looked to him for his perspective on international law issues.

  • Terry Newman

    Excellent post. A lot of these points relate equally to companies operating here.