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Why Are Chinese Millionaires So Stingy?

On Wednesday, Bill Gates and Warren Buffett hosted a dinner for China’s billionaires. The pair, fresh off successful efforts to persuade Americans to leave their fortunes to charity, hoped to start a wave of philanthropy in China, which now has the second largest number of billionaires. Gates and Buffett described the event as “a private gathering to discuss philanthropy development.”

Xinhua, Beijing’s official news agency, earlier this month reported that only two of the approximately 50 invitees had accepted. The New York Times, however, noted last week that Gates’s foundation issued a denial, stating that only “a small number of people” declined. In the end, Buffett called the event “a tremendous success.” According to a press release, 50 people showed up.

Who wouldn’t want to go to dinner with Gates and Buffett? Zong Qinghou, China’s richest individual according to Forbes, said he couldn’t attend due to a scheduling conflict. The busy Mr. Zong said he thinks philanthropy is a bad idea. He can do much more for society by running a productive business, the beverage billionaire noted.

Not every Chinese tycoon is so cold-hearted, however. Chen Guangbiao, a mere multimillionaire, publicly pledged to leave his entire fortune to charity and claims a hundred fellow entrepreneurs have told him they will do the same. A recycler of construction material, Chen is worth $440 million according to some estimates and $735 million by others. He made his much-discussed promise after hearing that China's rich were snubbing Gates and Buffett, fearing they would be forced to donate to charity. “I don’t want to become a slave to my wealth,” he told CNN.

Why doesn't China have more Chens? First, China's wealthy are relatively young, still in the acquisitive stages of their lives. The average age of China's millionaires is 39. Second, it is virtually impossible to become wealthy in today’s China without being corrupt and ruthless, and corrupt and ruthless folk are usually not inclined to dispose of their ill-gotten gains. China’s rich, according to one estimate, are sitting on $1.4 trillion in dirty money. Third, many aspects of Chinese culture discourage giving to help others. “You sweep the snow only in front of your own porch,” goes a well-known saying.

But there is one overriding reason why charity is largely absent from contemporary China: The Communist Party makes it difficult. Why? The party does not want competitors, especially organized ones. Charities, therefore, have to find government sponsors before they can register with the Ministry of Civil Affairs, and this requirement severely limits the number of them. Even Hollywood action star Jet Li, a favorite of Beijing because he makes “patriotic” films, cannot register his One Foundation, which may have to suspend operations soon.

Don't be surprised that as of last year there were, in all of China, only 643 foundations not run by the government. There were an estimated 300,000 so-called grass-roots organizations that were operating without registering or had registered as business enterprises. Such organizations, functioning in a highly unorthodox manner, invariably find it hard to raise funding. For one thing, donors cannot obtain tax deductions for contributions to them.

But forget about the lack of tax deductions: Some reports indicate that China’s wealthy are afraid of government reprisals if they make donations. In any event, severe government restrictions have had an effect. Last year, donations in China totaled about $8 billion, less than 3 percent of philanthropic giving in the United States.

The public is outraged by the country’s wealthiest ducking out on the Gates-buffet event, as they were when the skinflint rich were labeled “Iron Roosters”—birds that would not share even a feather—because they failed to support relief efforts for the Sichuan earthquake in May 2008. That reaction, fortunately, is a sign of eventual acceptance of private charitable giving.

So we all can hope that Gates and Buffett, through giving their banquet, can encourage the Chinese to become world-class philanthropists, but, with the state’s continuing war against charities and foundations, who will China’s rich give their money to?

Gordon G. Chang is a columnist and the author of The Coming Collapse of China.

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