Chinese universities see surge in philanthropic capital
Philanthropic capital is playing a more important role in funding Chinese universities as donations continue to rise, a recent report showed.
Meanwhile, experts say more professionally run endowments help both with fundraising and operations. An increasing number of Chinese universities are building designated teams to work with philanthropists and philanthropy organisations.
According to a recent report on major gifts received by university foundations released by Corporate Citizenship in Action (CCiA), a philanthropy consulting company in China, Chinese universities saw robust growth in donations in 2021, including 254 large donations - a new record since 2015 - totalling Rmb8.6 billion ($1.2 billion). The figures represent an increase of 41% compared with 2020.
In the report, large-scale donation refers to that with a total amount equal to or above Rmb10 million.
The report found that companies and entrepreneurs remain the main source of major gifts to Chinese universities, accounting for 80%. Private enterprises and their foundations comprise over half of the gifts from this group, while individual entrepreneurs or their foundations contribute another 25%.
Real estate, information technology services, and finance continue to be the top three industries producing major donors.
“It's a result of accumulated wealth,” said Anthony Gao, head of Asia philanthropy services at Pictet Wealth Management. Pictet Group was a partner of the CCiA report.
“It's also about a changing social norm in which people support and understand the need to share their wealth with others under the common prosperity goals,” Gao told AsianInvestor.
There is a significant increase in the proportion of donations from alumni, accounting for 39% of total donations in 2021, higher than the 28% share recorded in 2020.
With strong support from alumni, universities in the East China region have experienced a significant increase in large donations, surpassing the North region for the first time and becoming the hottest destination for large donations in 2021.
About 95% of major gifts in 2021 were made in cash, while there was an increase in equity donations.
However, the donations accounted for less than 5% of these universities’ total revenue, and in 70% of these universities, this proportion is less than 1%. For the most part, the institutions still rely heavily on government funding.
In China, the portion of philanthropic gifts in relation to overall income of universities was significantly lower than in Europe and the US, where gifts make up 5% and up to 16% of their total income respectively.
“Government funding will continue to play a very important role [for public universities in China],” said Gao. Leading universities in China are all public universities.
“But universities recognise that government funding is not going to increase significantly to keep up with the pace of the vision they have to continue to move to the next level.”
Hence, more Chinese universities are building designated teams to work with philanthropists and philanthropy organisations, who can potentially provide the resources they need, Gao noted.
ENDOWMENTS MATTER
University endowments are top recipients of large donations. A total of 68 universities received large donations through their endowments in 2021.
Among them, Tsinghua University had the highest number of large donations received through its endowment, with a total of 44 donations.
Gao noted that some leading Chinese universities, such as Tsinghua University and Peking University, have set up a team to manage their endowments to maintain their long-term operations.
In this way, they can show donors that their gifts have a multiplier effect and help the university conduct more long-term activities, rather than as one-off contributions that will be spent immediately.
If a university can invest effectively through its endowment and use some of the investment returns to cover operational costs, donors – especially small donors – can see that every penny they give is flowing directly to the projects or the beneficiaries rather than covering the universities’ operational cost, Gao said.
Kristoffer Jonsson, senior investment manager at Pictet Investment Office, said both universities and the government have roles to play.
“To ensure the assets are well managed in the first place and the overall mission and goals are clearly understood by all stakeholders, it’s advisable to start to formulate the governance for the foundation or endowment, following a structured and strategic approach,” Jonsson said.
Jonsson stressed the crucial role of the regulatory environment in university-endowment and foundation investment activities, especially how much money can be invested in risky assets or overseas.
In 2019, China’s Ministry of Civil Affairs introduced guidelines on how philanthropic foundations can manage their investments.
“China's philanthropic sector is still at the early stage of its development,” said Gao. “One of the priorities for Chinese regulators is to build and strengthen the trust over the philanthropic sector and [for donors to have oversight on] how well the philanthropic capital is being managed.”