China Global Philanthropy Institute’s Fu: “Philanthropy is an important vehicle of family legacy in China”
Fu Changbo, at the Wealth and Society 2018, held in the United Kingdom, paints a picture of the current financial ecosystem in China and the increasing role of philanthropy in family and society building throughout the region.
Here is the transcript:
Changbo: Thank you, Mr. Vayev. And, thank you, Mr. Racine, for your comforts. I will bring my four points in my presentation with three essays: First, the outlook of family philanthropy in China and the new chance since 2016, and we think the … So, it’s – as we all know, after 40 years, …, China has become the second largest economy in the world. Before this, 2018 was the last list. It included four countries and 17 seats Chinese, and it was …
Among them, 25 is worth over $10 billion, and 15 among the top 100 philanthropists in the world. So, according to 2017 report from the Chinese Merchants Bank and the bank consortium company…yes, China private address report. There are nearly 2 million high net worth individuals in China with investment assets over $1 billion.
However, the family philanthropy has not kept the same pace with the economy. Most of the Chinese charity foundations are government-sponsored or government … So, in 2014 – in 2004, Chinese government issued a regulation on charity foundations, and since then, the growth of the foundations is very bad.
According to my – we have a team research for the family foundation who estimates – not very accurate– who estimates by the end of this year, there will be 500 family foundations in China, which comes after seven percent of the Chinese charity foundations are made of other foundations – corporation foundations.
So, according to this list published by the China Foundation Center in 2015, 19.3% of China family foundations has net worth of less than $15 million. From 2011, our institute every year will publish the top 100 Chinese donor list. In the past seven years, 504 high net worth individuals have been on the list, and they have donated more than $25 billion in total. There are 148 donors who have donated more than 1 million RMB, and 19 donors who have donated more than 1 billion RMB.
So, I will give the number ... the founder of a leading company in China is the greatest number of high net worth individuals to philanthropy. In 2016, this new – in 2010, this individual donated all his shares to his family foundation and to trust. The total combined cash and equity of donations equated to about $600 million.
As of 2017, Lao Yu Foundation has dispersed $20 million in grants focusing on the environment protection and other pressing social issues. The management is new. Also, it began to engage in global philanthropy. You can see he was the first Chinese to begin … in joining the … initiative … And, he also is one of the five founders of our initiative. The second generation of new family has already begun to carry on the old philanthropy legacy, and this news – only some looked at it – is four times exactly of his foundation …
At the same time, wealthy Chinese have started to donate to the international community. In 2016, Mr. Chen Kinshao donated $115 million to fund research in brain science at California Institute of Technology, and Dr. Fek Shinshin donated $70 million to Yale Law School, and Mr. Chen Yidan used an independent trust of $320 million to launch Yidan Prize, which recognizes innovators and others who have made significant contributions to education around the world. He is also the co-founder of Tencent Company.
So, secondly, I’m going to lead some discussion about Li Chen since 2016. Since 2016, China partnership casted the first Chinese law. The Chinese law extended the field of the philanthropy team beyond disaster relief, poverty innovation, and education to include digging directly toward social welfare and sustainable communities. Chinese philanthropists now can donate to and fund science and technology and culture for arts, sports, and environmental protection, et cetera.
And, just this past month, the Minister of Civil Affairs of China released regulation on the asset investment for Chinese. So, it’s the newly announced release that by the end of 2014, 90% of China’s charity foundation kept their funds in the bank and returned – the average returns is terribly low. So, this new regulation provides a special reference for Chinese organizations to increase their asset spending, and I think it’s a crucial opportunity to make Chinese corporations into family charitable foundations and wealth institutions.
So, in addition, most Chinese first generation of wealthy people are over 60 years old, and they are ready to cast the winnings of their company and wealth to the second generation. So, currently, more than 80% of private enterprise in China are still family-run and are still under control of the first-generation founder. According to a survey launched by National Federation of Industry and Commerce, in the next three years, 70% of private enterprise in China will face succession issues, and only 40 of the second-generation heirs are willing to take over the family business.
What’s more, due to the Chinese strategic family planning policy spanning nearly 30 years, many wealthy Chinese families have a shortage of human capital, and many family members are either reluctant to take over or not qualified to take over. So, nowadays, many wealthy families in China have forgotten that philanthropy is an important vehicle of family legacy.
More and more families have begun to recognize the importance of philanthropy as well as the cultivation of family members, the construction of family culture, and the development of family social influence. This way, they later can choose, and you can see the demand for family – for instance, in 2015, it’s only five percent, and in 2017, it increased to 40%.
So, managers of the country’s charitable trusts – the family trust can come to – can be a new way for Chinese wealthy families to engage in philanthropy. In 2017, China published the management of Chinese charitable trusts. As for now, China has 107 charitable trusts with total assets of $279 billion USD. Moreover, the trustee of the charitable trust is most often a member of the wealthy family. Of over 107, 95 have trust assets less than $1.45 billion. Here, I would mention Mr. Hessian Chen, the founder of Magyu Group. It’s an international charity group.
In escrow from this year, I delivered this … of the 2017 top donor of China to list, and in 2017, Mr. Hesian Chen crafted a total of $1.18 billion, and he convened three generations of family members to hold a brunch ceremony. His donation included 100 million stock shares of Magyu, which was $8.850 million at the time, and another $3.3 million in cash. It established a foundation and a series of community foundation – charitable foundations separate. And, in other ways, the social impact investment is also a high-profile area for Chinese wealthy families.
In 2016, our institute CGPI established China’s first social finance and social innovation center. As for now, we have held two global social finance forums and social impact investment summits in Shenzhen and issued global social investment concepts, also known as the Shenzhen Xiangmi Group – a local lake’s name in Shenzhen – Xiangmi Group Concepts.
And, the full game has changed. We are always interested in innovation. The local Shenzhen government has issued a support policy for social impact investment highlights and other movements in social enterprise because some wealthy people have also become very involved in social enterprise.
This is a student of our mentor of the Institute of Finance … He created … policy center for workers here. The workers that get our data come …, and they have mentored this. But, … defined the process of publishing two separate parts, and the issue is one part. In addition, Cheng accompanied the workers three months so they can finish their work. So, this kind of company, such as the social community support, agriculture, and investment service company – this kind of social enterprise is successful in China.
In addition, we cooperated with two other partners, and actually, the other partners are sitting there. We created China’s first donor-advised fund, the Shenzhen … Foundation, and this September, we announced this brand-new foundation. We hope this foundation can enable more families in the middle and above to set up their family foundations or family funds.
Finally, I’ll talk a few words to introduce our institute. Our institute is very unique. It’s an independent institute sponsored by Mr. Bill Gates and Mr. Ray Dalio, the biggest hedge fund creator – Bridgewater. And, … mention that … group founder. This guy is very humble. … And, our chair of board, Ma Weihua, is a famous banker in China, and our president, Wang Zhenyao, is the former official in charge of charity affairs in the Civil Affairs Ministry.
So, you can see this photo is last May. Our … with Bill Gates in Seattle and two members … this last May here. And, several of these guys gave a speech at a seminar on the institute. We have two campuses. One is in Beijing and is 2,000 square meters. Another is in Shenzhen with 3,000 square meters. You can see it’s a very big investment … professor salary. This is the … Japanese very famous banker.
So, we have actually four categories of change. The top level is the finance leaders. The second is active management of research and Chinese professional advice among plenty of organizations. And, we also have certification programs. This is a portal for free public investment education online. And extra – my world is focused on the bottom of these parts. I focus on the young generation of the wealthy family or the young people who create their own business. This is my cause.
These others bring 15 members to a village in San Francisco and … foundation. This January, we plan to meet in New York. This is …, and several leading philanthropists in New York, and this a very competitive foundation. And then, we also organized some conferences and events with wealth management companies such as private banks, insurance, trust companies, and insurance companies. So, our vision is social organization and philanthropy at … Thank you.
Keywords: High-net Work Individuals, Social Responsibility
Institution: China Global Philanthropy Institute
People: Changbo Fu