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.
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Mr. Wan and other activists say that soliciting foreign funds is routine for many NGOs in China. Some government officials are supportive as they also benefit from funding for public programs from the same foreign donors. And they tend to overlook the fact that foreign-funded NGOs were registered as businesses, say activists.Skip to next paragraph
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A crackdown on this practice – and the risk of a backdated tax bill – would be chilling, says Sara Davis, executive director of Asia Catalyst, a New York-based nonprofit that provides technical support to civil society groups in China.
"It's a tough situation. For most grass-roots groups working on humanitarian and civil rights issues in China, there's no domestic funding. They're also not allowed to register as NGOs. That leaves very little option except to go to foreign donors," she says.
Another dilemma for activists is that foreign donors often want to fund projects that rub against the grain in China, such as research into last year's riots in Tibet, which inflamed foreign opinion. In a recent report, OCI said the official explanation that the Dalai Lama had fomented the unrest ignored the government's own repressive actions in Tibet.
It also took up the cause of families suing companies that sold contaminated milk powder last year, until the practice was exposed. China's government has tried to draw a line under the scandal by paying compensation to those that agree not to bring lawsuits against manufacturers.
An official at an overseas grant-making organization, who requested anonymity, says informal agreements with tax authorities on giving money to Chinese recipients may now be in doubt. But he and others in the NGO field say it's too soon to say if a broader crackdown is underway and, if so, whether foreign funding would be squeezed.
State projects get outside aid, too
On the day of his arrest, Xu was due to prepare his defense in the tax case. The next day, a municipal tax bureau found against OCI, which had argued that the money from Yale and another private donor had already been declared.
Jeffrey Prescott, deputy director of Yale's China Law Center, says he was disturbed by the detention of Xu, a former visiting scholar at Yale, and its implications for lawyers working with marginalized groups. He says Yale also supported government-run programs in China, including research on legal reform with state universities.
"Obviously these issues can be sensitive in China. But if you look at what [OCI] is doing, it's pretty mainstream public interest law," he says.