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Insights

Various unprecedented wealthy families are continuously emerging along with the hills and valleys, ups and downs in the modern business era in contemporary China; at the meantime, some of the families are starting to explore “the way of giving”, which accelerates the spring-up of family foundations in China. Nowadays family foundation turns out to be an effective way for wealthy families to participate in charity activities. In this article, we are trying to outline the status of family foundations in China today.

According to US “Council on Foundations”, a family foundation is solely financed by an individual or a family, with deep involvement of family members in its operation and inheritance of family values, and has no affiliation or share of interest with any family business.

Therefore, we filtered out 59 foundations registered as individuals or corporations from top 100 private foundations listed in the “Top 500 Foundations in China (2013)”. Next, we began to screen these 59 foundations with the criteria stated above:

1. Based on source of fund, 35 out of 59 were set up by individuals or families.
2. Adding connection with business, 26 out of 35 showed no affiliation with family business hence have formed quasi-family foundations.
3. Adding family member engagement, there are 21 family foundations.
4. Adding heritage of legacy, there are only 4 typical family foundations in China.

Apparently, family foundations are still in nascent stage in China. But we are very excited to see the macro environment for family foundations is improving.

• The policy environment is improving: Government encourages the establishment of private foundations, such as decentralized authority, allowing multiple ways of making donation. At the same time, government management style is shifting: 18th Party Congress of China planned to construct a social service system independent of the government.
• Charitable Trust motivates family charity. Charitable Trust allows family foundations to make a big investment without concerning about tax or annual expenditure. Government has set up a pilot trial in Shenzhen.
• The third sector recognizes the power of family foundation. Though in nascent stage, family foundations are highly recommended by the experts. Mr. XU Yongguang said, “What is most reliable about a family foundation is that the later generations will always put family reputation first, and will take their ancestors’ vision as their own.” Moreover, compared with other charitable foundations, family foundations are purely driven by social mission. They can be viewed as “Venture Capitalist” in the social sector as they are willing to take risks and strive for sustainability.
• The demand for inheritance of family fortune and legacy is rising: Since the implementation of economic reform and open-up policy in 1978, the first generation of Chinese entrepreneurs has emerged. About three quarters of family enterprises are facing the issue of how to deal with their wealth in the next 5-10 years. A few high-net-worth individuals have announced to establish family foundations from the start of 2013, and we are expecting to see more in the near future.

Family foundation not only plants the seed of philanthropy spirit in the capital world and let it blossom and bear fruits, but also helps family to remain fresh even after many years. Under the collaboration of Venture Avenue and the Rockefeller Philanthropy Advisors, the strategic planning project for the first family foundation in China is approaching its end. In the future, Venture Avenue is looking forward to providing the best service for more individual/family foundations, renovating them into flagships and stimulating the development of the philanthropy sector in China.

We have learned much along the way. In the later part of the newsletter we will further deep dive into the experience and wisdom of leading international family foundations throughout their long history of development.