If promulgated in its current state, the second draft of the Foreign NGO Management Law, published on 5^th May, 2015, could completely alter the way foreign NGOs operate in China. With the proposed layers of government control and final oversight by China’s Public Security Bureaus (PSBs), NGO work will become extremely difficult. While foreign NGOs will feel the initial pinch, Elizabeth M. Lynch of China Law & Policy says the true victims will be the Chinese people.

Currently in China, Chinese NGOs—grassroots groups that seek to alleviate poverty, eliminate discrimination and conduct other activities that benefit the average citizen—are largely funded by foreign NGOs, particularly those that champion issues considered ‘too political’. Even where foreign NGOs do not offer funding, they provide essential training, informal advice and moral support that helps grow China’s nascent civil society.

Unfortunately, though, the current draft Foreign NGO Management Law will result in fewer foreign NGOs being able to work in China and, as a result, will set the Chinese people back in their ability to vindicate their own rights.

Why would the Chinese Government seek to squash civil society at this juncture? Many of the government’s own social reform agenda items—ending corruption, ending re-education through labour, reforming the hukou system—have come from these civil society groups. So why would they now look to pass a law that could severely limit the growth of civil society?

This is not about greater transparency

Foreign NGOs have largely remained unregulated in China, so there is something to be said about a law that adds greater transparency to the sector. For groups that are lobbying government officials or seeking to change the law, knowing the source of funding—even if the funder does not meddle in the organisations daily affairs—is something we deem important to know. The Chinese Government is no exception, nor should it be. Only months ago, Americans were shocked to learn that foreign governments donate money to many US think tanks, with the implication being that this source of funding impacts the organisation’s research direction.

But transparency is not what this law is about. If it was, foreign NGOs could easily continue to be regulated by the Ministry of Civil Affairs (MOCA). Yet the MOCA is nowhere to be found in the draft law itself. Instead, it has largely been replaced by China’s public security apparatus. It is the PSB that has ultimate say if the foreign NGO can establish a representative office or conduct temporary activities in China (Article 47). The PSB can, of its own volition, conduct on-site inspections of the China office, question individuals involved with the “matter being investigated,” copy or “seal” documents and, when the PSB determines necessary, “seal” the venue related to the “matters being investigated” (Article 49). The law is silent on what would give the PSB cause to disrupt the work of a foreign NGO, allowing for potential harassment.

Will foreign NGOs even have the resources to follow the new law?

The law itself does not seek to shut down foreign NGOs in China or prevent foreign NGOs from hosting events in China. Instead, through an onerous, supervisory structure, it makes getting anything done in China time-consuming and expensive. Survival of the fittest will dictate which NGOs go and which stay.

Under the draft law, foreign NGOs that want to establish a representative office in China must first have the consent of a Professional Supervisory Unit (PSU) (Article 11), presumably a government agency or government-approved organisation in the foreign NGO’s field. A legal-oriented foreign NGO would therefore seek to establish a relationship with the Ministry of Justice as its PSU. Only after it receives this consent can the foreign NGO apply for approval with the PSB (Article 12(6)).

But here is the rub, how many foreign NGOs can one government organisation sponsor? Would the Ministry of Justice establish a relationship with every legal-oriented foreign NGO seeking to establish an office or would it pick one, two, or maybe a handful? It’s not their business to sponsor foreign NGOs and presumably these government agencies have limited capacity to do so. Even if a foreign NGO can partner with a quasi-government organisation, there are still not enough of these to cover the number of foreign NGOs with offices in China. As a result, some will inevitably be forced to leave China because of their failure to establish a relationship with a Chinese PSU.

But the relationship with the PSU does not end with registration. Every year, the foreign NGO will have to submit two documents: (1) an activity plan that delineates the implementation details for the following year’s projects (Article 24); and (2) an annual work report which must include financial accounting and audit reports (Article 37). For smaller foreign NGOs with limited resources, hiring someone to handle this paper work might not be the best use of its funding. Even if a foreign NGO can establish a relationship with a Chinese PSU, at some point it will become debatable if it is even worth it economically.

If that isn’t enough to discourage a foreign NGO from establishing a representative office, the procedures are required to be repeated every five years. (Article 15).

Even academic exchanges aren’t exempt

Foreign NGOs that think working from abroad will be less onerous will have a rude awakening. Under the draft law, they must also establish a relationship with a PSU before applying for a “temporary activity permit” from the PSB. (Article 20(3)).  Again, it will be interesting to see how many eligible PSUs will establish relationships with foreign NGOs.

As the law stands now, foreign universities are not exempt from the draft law. What type of foreign NGO is covered by the law is unclear and the vagueness implies that anything that is a not-for-profit abroad is covered. Even the state-run Global Times highlighted the negative impact the first draft of the law could have on academic exchanges. It appears those issues remain in the second draft as well.

Where will all the funding go?

Any argument that this draft law will lead to necessary transparency is belied by the rigorous regulations that will make it impossible for a lot of foreign NGOs to legally do work in China. For many that will mean a decision to leave. But, as highlighted in the prescient report Closing Space: Democracy and Human Rights Support Under Fire, some organisations committed to staying in a country with increasingly harsh laws against foreign NGO funding, might implement a policy of “distancing”. Distancing is essentially the opposite of transparency – trying to hide the source of funding through various offshore means.

But this avenue, with its greater risks to the foreign NGO, and in particular to its partners in China, will be used by very few. The ultimate result of the draft Foreign NGO Management Law is that a large number of grass-roots Chinese NGOs that are doing essential work in China will close.

Elizabeth M. Lynch, the founder of China Law & Policy, is an attorney who focuses on legal development and reform in China. Elizabeth recently concluded her work as research fellow at NYU Law School’s US-Asia Law Institute where she worked with Professor Jerome Cohen on criminal justice reform in China. Prior to joining the US-Asia Law Institute, Elizabeth was a practicing attorney in New York, working on commercial litigation including anti-trust and securities actions. She also worked on pro bono cases, including a state post-conviction petition for an individual on Tennessee’s death row. She received her JD from Harvard Law School and her BA in Chinese Studies and Political Science from the State University of New York at Albany. In between undergrad and law school, Elizabeth was a Fulbright Scholar researching rule of law issues at Peking University in Beijing.

This article is adapted from the original, which was published on 10^th May, 2015.