In 2001, Chinese legislators introduced public welfare trusts to encourage the public to participate in charitable endeavours, drawing on the experiences of Japan and South Korea. However, despite being in existence for twenty years, the success rate of public welfare trusts in China has been low, with only twenty trusts being established. To address this issue, legislators introduced the charitable trust in 2016 to unlock the potential of trust institutions in promoting charitable causes. This book, the Governance of Chinese Charitable Trust, explores the governance of the newly established charitable trust institution, highlighting the need to consider relevant laws, administrative practices, and private actions taken by trust parties to fully understand the governance framework of Chinese charitable trusts.
The book highlights the creation of a public-private hybrid model for Chinese charitable trusts at the law level. Private law norms grant settlors significant powers, including the ability to change trust management methods and appoint trust supervisors, to encourage public participation in charitable causes. However, the state remains in control of the use of charitable resources, and regulators have been endowed with extensive supervisory powers to ensure this control. This allocation of powers suggests that private law norms are subordinate to public law norms in the legal framework of charitable trusts. While private parties have autonomy in managing trusts, they must adhere to the state’s public welfare policy and may not use charitable resources for personal gain.
The book further examines the regulatory practice of Chinese charitable trusts by conducting interviews with individuals experienced in trust regulation. It concludes that China’s unique economic, social, and political circumstances are crucial in understanding the regulatory practice of charitable trusts. The regulatory framework established by the law is vague and underdetermined in various aspects, creating risks for regulators in fulfilling their supervisory duties. As a result, regulators have adopted risk mitigation strategies. Additionally, political objectives have influenced the development of the charitable sector in China, shaping the function and scope of the regulatory framework for charitable trusts. Due to the vagueness of the law and political objectives, regulators consider three extra-legal factors when performing their duties: the regional development agenda, the tension between regulatory capacity and objectives, and their risk perceptions.
The book finally examines the private actions taken by trust parties in creating and managing charitable trusts by collecting and reviewing contractual clauses used in charitable trust practices. It finds that contracts are widely used in two ways in the charitable trust setting. First, trust parties perceive risks due to problems with legislative and administrative practices, including the vagueness of the law, public scrutiny, and regulatory scrutiny. To mitigate these risks, charitable trust parties use contracts to clarify their powers and duties and how charitable assets are managed. Second, regulators use contracts to entrench their regulatory preferences. Charitable trust practice shows that regulators advise trust parties on which contractual clauses to incorporate and how to modify them, enabling them to align charitable trusts with regulatory expectations.
The examination of charitable trust governance reveals the historical tension between private individuals and state control, as well as the ongoing tension between the social welfare goals of charitable trusts and the autonomy of private actors in deciding how their assets can be used for charitable purposes. This tension is rooted in the political philosophy underlying the regulation of the charitable sector, which has not changed significantly in the new charity law era. In China’s particular institutional context, relevant law, administrative practice, and private action are interrelated and taken together to constitute the unique mode of governance for Chinese charitable trusts.