Charity Law to address crowdfunding issues

When China's first Charity Law was passed more than four years ago, it aimed to regulate foundations and other charitable organizations but did not address the emerging practice of crowdfunding.

That is expected to change, with a senior lawmaker saying planned revisions will address issues related to crowdfunding, which is a way for individuals to raise money online.

In a report to the bimonthly meeting of the National People's Congress Standing Committee in Beijing this month, Zhang Chunxian, a vice-chairman of the top legislature, said it will revise the 2016 law at an "appropriate time" and add a special chapter governing online charitable activities.

It will include efforts to clarify the threshold for initiating crowdfunding projects and related obligations, he said.

Rules will also be drafted to strengthen the duty of internet platforms to verify user data, disclose crucial information, warn donors of risks and help trace wrongdoers, Zhang added.

As crowdfunding's user base has expanded rapidly over the past four years, the downsides of the lack of specific legal provisions have become apparent.

Current rules used to mediate disputes and punish scams are scattered across multiple civil laws, and they were mostly not purposed to deal with online proceedings.

Moreover, the lack of rules on what data a person seeking to raise funds through crowdfunding needs to supply has led some people to withhold crucial financial information－such as the ownership of real estate－to their benefit, leaving platforms scrambling to fact check.

One such crowdfunding effort last year involved Beijing cross-talk performer Wu Shuai. His wife launched a project on crowdfunding platform Shuidichou to help pay Wu's medical bills after he had a cerebral hemorrhage. But donors complained after they discovered Wu owned a car and two apartments in Beijing, a city known for its high housing prices, and was covered by health insurance. The project was later suspended and donors refunded.

In addition to inadequate disclosure of financial data, Jia Xijin, deputy head of Tsinghua University's Institute of Philanthropy, said many crowdfunding controversies have centered on whether the person raising the funds uses the money for the stated purpose, or what happens to donations when the intended beneficiary dies or recovers.

"Those are the issues that have arisen due to the lack of detailed rules," he said.

Jia hailed efforts to include crowdfunding rules in the Charity Law but cautioned against limiting people's legitimate right to seek assistance online, such as banning homeowners from starting such projects. Instead, the revisions should focus on the legal obligations of all parties involved so that wrongdoers can be punished when things go awry.

Huang Ximing, a researcher at the China Philanthropy Research Institute at Beijing Normal University, said revising the Charity Law will be time-consuming, and before that happens efforts are needed to ensure existing rules are enforced.

"Most dishonest behavior can be punished by existing laws," she said. "When the new law comes into being, law enforcement also needs reform to make the rules work."