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China snares NGOs with foreign funding

With little help at home, nonprofits often rely on outside aid. But the government may be using tax, licensing laws to shut them down.

By Correspondent of The Christian Science Monitor / August 4, 2009


It began with a tax notice for $200,000. Three days later, on July 17, officials raided the group's Beijing office and seized its computers. Then, just before dawn on July 29, police detained its founder, Xu Zhiyong at his home

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On the same day, government officials went to the office of Yi Ren Ping, another nongovernmental organization, and confiscated copies of its newsletter on the grounds that it didn't have a publishing license.

Taken together, the raids appear part of a tightening of controls on critical voices in the run-up to Oct. 1, the 60th anniversary of the founding of the People's Republic of China. The two NGOs are among a growing number here using the law to hold authorities to account on issues such as food safety, patient rights, and illegal detention.

But they share another common thread: Both received grants from American and other foreign donors. The tax fine for Open Constitution Initiative, the group headed by Mr. Xu, was assessed largely on a donation from Yale Law School. Xu, a lawyer and elected legislator, is being detained on suspicion of tax evasion, according to an OCI official.

The harassment of these and other foreign-funded NGOs in Beijing has raised fears of a Russian-style squeeze on civil society. Since 2006, Russia has stripped the tax-free status of many foreign foundations and forced NGOs to report their activities in exhaustive detail, while accusing foreign-funded human rights groups of being Trojan horses for Western powers. It recently amended its NGO law, easing some of these controls.

An alternate view in Beijing is that the groups targeted had pushed too aggressively into forbidden political zones, setting off a reaction. NGO workers and experts on civil society say the investigations into taxes and licenses are a smokescreen for a clampdown on legal activism, including the recent disbarring of 20 civil rights lawyers in Beijing.

"It's what you do with the money that matters," says a researcher on Chinese NGOs, who declined to be named. He says investigations into foreign funding provide a "post hoc excuse" for authorities.

Foreign funds become a liability

Because of the difficulty of registering as nonprofits, many Chinese NGOs are listed as businesses. That makes them liable for potentially crippling tax demands, says Wan Yanhai, who runs an HIV/AIDS advocacy group in Beijing.

"This is a big issue. If there is a similar action [as OCI's tax case] against us, we could be fined tens of millions of yuan," he says.