Granting Money to an Individual under the Foreign NGO Law: A Thought Experiment

By Fu Hualing and Jessica Batke

This article originally appeared on ChinaFile’s The China NGO Project.

Despite the Foreign NGO Law’s taking effect on January 1 of this year, quite a number of questions regarding the law’s contents remain unanswered. Lawyers, scholars, and foreign NGOs themselves all face uncertainty as they try to understand how specific operational situations do or do not fall under the scope of the law.

Beneath these technical concerns, however, lie deeper questions about the global reach of Chinese domestic law. The point can be illustrated with a simple thought experiment related to the Foreign NGO Law:

Imagine there is a small arts-focused NGO based in the United States, legally established there as a non-profit, with no presence, permanent or temporary, elsewhere in the world. The NGO makes grants every year to three individuals of any nationality who apply for funds to carry out an art project of their own design. The NGO neither favors nor disfavors applications from China; in fact, applicants’ citizenship has no bearing on the success of any given application. Because the NGO does not operate in China and has no plans to do so, it has not registered to establish a permanent office in China nor filed to carry out temporary activities.

Under Article 9 of the Foreign NGO Law, “Foreign NGOs that have not registered and established representative offices or filed to carry out temporary activities must not carry out or covertly carry out activities within mainland China, and must not entrust or fund, or covertly entrust or fund, any unit or individual in mainland China to carry out activities within mainland China.” This appears to prohibit the U.S. NGO from awarding its grants to any Chinese citizens (or others based in China) if the project is to be carried out within the mainland’s borders.

Yet, why should this U.S. NGO care about Chinese domestic law? The NGO itself, after all, is not operating in China. Do domestic Chinese laws somehow apply to non-Chinese entities operating outside the People’s Republic of China? Are there gradations in the implementation of the law that differentiate between an organization that is proactively working in China versus awarding money to mainland-based individuals who apply for it? For certain foreign foundations, the question may well be, “why does this law apply to us?”