China - A Brief Commentary On The Directory Of Activity Sectors, The Project Catalog, And The List Of Industrial Supervisory Authorities For Foreign Non-governmental Organizations (2019)

Legal News & Analysis - Asia Pacific - China - Regulatory & Compliance

12 June, 2019

 

On April 29, 2019, the Ministry of Public Security of the People’s Republic of China (the “Ministry of Public Security”) published its Directory of Activity Sectors, Project Catalog, and List of Industrial Supervisory Authorities for Foreign Nongovernmental Organizations (2019) (together the “2019 Directory”) on its Service and Management Platform for Foreign NGOs1, the first time it has amended its Directory of Activity Sectors, Project Catalog, and List of Industrial Supervisory Authorities for Foreign Nongovernmental Organizations (2017) (together the “2017 Directory”) since the 2017 Directory was released on December 20, 2016.

 

Pursuant to the Law of the People’s Republic of China on the Administration of Activities of Foreign Nongovernmental Organizations in the People’s Republic of China (the “Foreign NGO Law”) effective since January 1, 2017, any foreign non-governmental organization (NGO) planning to set up a representative office in China shall identify a competent supervisory authority according to the NGO’s scope of activity, the geographical area in which it operates and the necessity of the work it undertakes. Having acquired the approval from such competent industrial supervisory authority, the NGO shall then file an application to register a China office at a provincial public security bureau. 

 

As perhaps the most significant implementing rule to the Foreign NGO Law, the 2019 Directory aims to further clarify the scope of operations and the categories of activity for foreign NGOs and the corresponding industrial supervisory authorities as specified in the 2017 Directory, in order to provide NGOs with more detailed guidance for their operations in China. 

 

We hereby summarize our high-level comments on the key changes and highlights, as well as drawing our attention to some of the remaining uncertainties of the 2019 Directory.

 

Part I. New developments in the 2019 Directory

 

The 2019 Directory elaborates on and expands the categories of activity and scope of operations of foreign NGOs, and provides specific and detailed guidance for NGO operations in China. 

 

It is indicative of the Chinese Government’s intention to welcome and encourage foreign NGOs.  

 

The 2017 Directory and 2019 Directory specify the same nine sectors in which foreign NGOs are permitted to operate -  Economics, Education, Science and Technology, Culture, Health, Sports, Environmental Protection, as well as the sector of “Poverty Alleviation, Disaster Relief and Similar Items” and an “Other” sector. However, while the 2017 Directory listed 54 categories and 195 major projects, the 2019 Directory extends the scope to 65 categories and 237 major projects. The 2019 Directory also makes some changes in terms of the relevant industrial supervisory authorities.

 

1. Changes in Categories

 

The changes in categories introduced by the 2019 Directory include the following:

 

(1) Within Economics, the category “information and telecommunication” is changed to “industrialization and informatization”; 

(2) Within Culture, “culture and arts” becomes “culture, arts and tourism”; “broadcasting, film and television”  becomes “broadcasting, television, audiovisual network”; and “press publication and copyright” divides into the separate categories of “press and publication” and “copyright”; 

(3) Within Health, “food and drug” is separated into “drug management” and “food”;

(4) Within Environmental Protection, “wildlife conservation” becomes “wildlife and its habitat conservation”, the “construction of protected categories, national parks, scenic spots and forest parks” is extended to become “construction of protected fields, national parks, scenic spots, forest parks and geological parks”;

(5) Within “Others”, the category “legal service” becomes “legal work exchange”; “fellowship exchange in the area of foreign Chinese affairs” is amended to “exchange in the area of foreign Chinese affairs”; “natural person movement” becomes “natural person movement research, exchange and cooperation” under the category “human resources and social security”, and the 2017 category “introduction of foreign talents research, exchange and cooperation” is deleted.

 

There are 11 additional categories included in the 2019 Directory:

 

(1) Economy now includes “civil aviation”, “natural resources” and “market supervision”;

(2) The Science and Technology sector includes the new category “quality basis”;

(3) Culture now includes “films”;

(4) Environmental protection includes five new categories: “ecological restoration”, “forestry reform”, “forestry industry development”, “grassland ecological protection”, and “watershed ecological environment protection”;

(5) The sector of Others now includes “friendly exchanges with foreign countries”.

 

Most of the newly added or expanded categories are in environmental protection, which in our view reflects China’s increasing focus on this sector.

 

2. Changes in Major Projects

 

Along with the changes and additions to categories, there have been numerous associated changes in the major projects listed in the 2019 Directory. For example, within the new category “natural resources”, there are three types of main project listed, namely: “coastal zone planning, and theoretical marine planning, cooperation and exchange”; “cooperation and exchange in geographic information” and “mapping policy, technical exchange and cooperation”. Given the large number of changes, it is beyond the scope of this summary to provide details of all the new projects listed in the latest Directory. For further details, it is recommended to refer to the 2019 Directory.2

 

3. Changes in Industrial Supervisory Authorities

 

The overall number of competent supervisory authorities has increased. In response to the increase in the scope of operations, the 2019 Directory adds new industrial supervisory authorities, including the Chinese Council for the Promotion of International Trade and its provincial counterparts, the Ministry of Natural Resources, the External Relations Department of the Central Committee of the Communist Party of China, the Civil Aviation Administration of China, the Chinese People's Association for Friendship with Foreign Countries, the National Ethnic Affairs Committee, the National Food and Materials Reserve Bureau, the Foreign Chinese Federation and the Provincial Foreign Chinese Federation. Following the 2018 institutional reform of the State Council3 and the subsequent institutional restructuring, the 2019 Directory shows some newly established national and provincial government departments taking over the responsibilities of their predecessors. Those categories that previously fell under the State Administration for Industry and Commerce have been transferred to the State Administration for Market Supervision and Management, and those that were under the Ministry of Environmental Protection are now the responsibility of the Ministry of Ecological Environment.

 

However, the 2019 Directory maintains a key rule established in the 2017 Directory, namely that if a foreign NGO sets up a representative office that falls within more than one category of activity, the NGO shall have only one, single industrial supervisory authority, and it shall be based on its primary category of activity and scope of operation. For any activities beyond the scope of the supervisory authority, opinions shall be solicited from other competent authorities, and shall be coordinated to enable joint supervision and administration.

 

Part II. Ambiguities in the 2019 Directory

 

1. Pending Provincial Directory 

 

As was the case in the 2017 Directory, the 2019 Directory authorizes provincial public security bureaus to formulate and publish their own Provincial Directory of the List of Activity Sectors, Project Catalog, and List of Industrial Supervisory Authorities for Foreign Non-Governmental Organizations, which shall be in line with local practices and in developed conjunction with local supervisory authorities, and which shall further provide guidance to foreign NGOs about how to lawfully undertake their activities in China. 

 

Shanghai, Guangdong and some other provinces had already, on the basis of the 2017 Directory, previously published their own provincial Directory. It remains to be seen whether these provincial directories will be updated to reflect the changes within the 2019 Directory.

 

Generally speaking, it would appear that the Ministry of Public Security is continuing to allow the provincial public security bureaus with flexibility in terms of their provincial Directory. 

 

Those provincial authorities that had already released their own Directory did not generally introduce many changes when compared to the national level Directory. Those provinces that have not developed their provincial Directory have tended to base their daily administration on the national Directory. In summary, there does not appear to be significant material risk in the establishment of China offices by foreign NGOs due to uncertainty over the release of any pending provincial Directory.

 

2. Uncertainty in Supervisory Authorities

 

There are three main areas of uncertainty relating to the practical implementation of the Directory by supervisory authorities, namely:

 

(1)The activities of a foreign NGO may cover more than one category of activity or multiple major projects within the same activity category. The various categories of activity or major projects may fall within the responsibility of different supervisory authorities. While the Guide on Registration and Filing for Temporary Activities of Representative Offices of Foreign Non-government Organizations (the “Guide”) states that a foreign NGO shall turn to only one supervisory authority based upon its primary activity, the term “primary activity” used by the Guide is, itself, ambiguous.

 

(2)According to the 2017 and the 2019 Directories, national and provincial supervisory authorities are both authorized to supervise similar activities of NGOs. As an example, the major project area of “international statistical theory research, communication and cooperation” could be supervised by the National Bureau of Statistics or by its provincial counterparts. This may lead to some uncertainty about whether the correct supervisory authority is at the national or provincial level. As already indicated, the 2019 Directory does not provide any guiding rules in this regard. Our previous discussions with supervisory authorities suggest that views and positions in this matter may vary among different kinds of supervisory authorities, and at the different levels. 

 

(3)According to the 2017 and 2019 Directories, certain major projects may be supervised by multiple kinds of supervisory authorities. For example, NGO activities in respect of “international energy efficiency planning, policies, technology, standards, regulatory research, exchanges and cooperation” could be covered by the National Development and Reform Commission, the National Energy Administration or their provincial counterparts.

 

It is currently difficult to assess whether these uncertainties will have an overall positive or negative impact on the establishment NGO’s China offices. On one hand, uncertainty over which is the appropriate supervisory authority may in fact prolong the application process of a foreign NGO, with the NGO unable to determine from the Directory which authority should receive its application; in such instance, the NGO may be required to communicate with each potential industrial supervisory authority, which will likely require additional resources and expenditure. On the other hand, such uncertainties may provide NGOs with some flexibility to select a supervisory authority from several possible options. The Directory lists both national and provincial industrial supervisory authorities for all projects, and for certain projects, lists a number of different kinds of supervisory authorities, which in effect broadens the range of choices. In practice, this means that even if a foreign NGO was declined by one industrial supervisory authority, that NGO could potentially turn to another supervisory authority. 

 

Therefore, while there is some benefit – for example requiring fewer resources - in having one-to-one correspondence between a major project and just one industrial supervisory authority, this approach may also narrow the options available to foreign NGOs in choosing an industrial supervisory authority. 

 

Ultimately, a more effective approach for central government would be to promulgate further institutional regulations, guidance, standards, and thereby improve the effectiveness of communication and coordination between the different kinds and levels of supervisory authorities, and also lower the resources required by and application costs for NGOs.

 

3. Uncertainties in Multiple Offices in China and One Supervisory Authority

 

In terms of the category of activity as described, according to the 2019 Directory, if a foreign NGO establishes a representative office covering more than one activity category, the NGO shall identify only one industrial supervisory authority which will be determined by its primary activity category and its major operation scope. 

 

In terms of the geographic area of its activities, according to the Guide, the China office of a foreign NGO may carry out activities in more than one province as long as the registered geographic area of the China office is consistent with its actual scope; also according to the Guide, a foreign NGO may establish two or more representative offices, but the categories of activity of each representative office shall not overlap each other.

 

The above rules allowing for multiple offices but only one supervisory authority may lead to complications if a foreign NGO establishes two or more representative offices in different provinces. Specifically, the issue arises whether or not such representative offices are required to be supervised by the same kind of supervisory authorities. 

 

For example, if the Shanghai office of a foreign NGO is supervised by Shanghai Health Commission as its industrial supervisory authority, would its Beijing office be supervised by the Beijing Health Commission or another supervisory authority as listed in the 2019 Directory, for example the civil administrative department? 

 

As of the date of this legal update, we have not yet seen any ruling in response to this issue, and there is uncertainty about its practice among the Ministry of Public Security and its provincial counterparts.

 

Part III. Conclusion

 

As of May 2019, according to the Service and Management Platform for Overseas NGOs under Ministry of Public Security, a total of 478 overseas NGO China offices had been established, with most of the major projects in the sectors of economics, health and education. Correspondingly, the most commonly used supervisory authorities were provincial commerce, health and education authorities.4 

 

Our review of the 2019 Directory indicates that most of the newly added or expanded categories are in environmental protection, which in our view is in keeping with China’s increasing focus on this sector. 

 

More generally, as described earlier, the 2017 Directory has helped play a positive, practical role, providing supporting documents for the Overseas NGO Law. We believe that the 2019 Directory will further promote such positive influence and provide more detailed guidance to overseas NGOs in their requirement to have an appropriate supervisory authority. 

 

While there remain some uncertainties in relation to various issues of practical implementation, we believe these will gradually be clarified, resolved and communicated through the joint efforts of the Ministry of Public Security and its provincial counterparts and the relevant industrial supervisory authorities.

 

Jun He 4  

 

For further information, please contact:
 

Jiangang SUN (Roy), Partner, Jun He

sunjg@junhe.com

 

1.http://ngo.mps.gov.cn/ngo/portal/index.do (last accessed: May 30, 2019).

2.http://ngo.mps.gov.cn/ngo/portal/view.do?p_articleId=192153&p_topmenu=2&p_leftmenu=5 (last accessed: May 30, 2019).

3.Institutional Reform Plan of the State Council (2018) (released by the National Peoples’ Congress of the People’s Republic of China on March 18, 2018 and coming into effect on March 18, 2018).

4.http://ngo.mps.gov.cn/ngo/portal/toInfogs.do (last accessed: May 30, 2019).