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China’s New NGO Law and
its Impact on FDI into the
Higher Education Industry
By Dezan Shira & Associates
Editors: Samuel Wrest and Mia Yiqiao Jing
China’s long-anticipated Non-governmental
Organization (NGO) Lawwas released in April 2016.
Widely reported in mainstream Western media
and commented on by foreign governments,
the law, set to come into effect in January 2017,
is widely seen as part of President Xi Jinping’s
efforts to restrict and control organizations whose
interests aren’t in line with those of the Chinese
Communist Party.The lawplaces various constraints
on foreign NGOs in the name of protecting China’s
national security, but the ripples resulting from its
implementationwill not be limited toNGOactivities
as traditionally defined in the West. Indeed, the
broad and at times vague language contained in
the law mean that its provisions can quite easily
be applied to China’s private education industry.
This is most starkly exemplified in the law’s blanket
ban on all “for-profit” foreign schools, the makeup
and activities of which are not clearly defined. Due
to its loose definition of “non-governmental” and
“non-profit”, there is also a risk that the marketing
and funding activities of education providers that
aren’t for-profit will also be affected.
One of the other defining characteristics of the
NGO law is its requirement that foreign NGOs
be reviewed by the Public Security Bureau rather
than the Ministry of Civil Affairs, illustrating how
the Chinese government might view NGOs as
potentially hostile. This will extend to foreign
education providers, with activities such as
registration, licensing, recruitment, operations,
and education programs needing to be disclosed.
Complying with the NGO Law
Asmentioned in the second article of thismagazine,
theNGO law is one of several contradictory pieces of
Chinese legislation concerning for-profit education
activities. Because the law doesn’t clearly indicate
which practices are considered“for profit”, it is likely
that it will be used as ameans for local governments
to shut down foreign education institutions that
they do not approve of. It is therefore essential
that foreign investors regularly communicate with
local governments in order to understand their
area-specific development strategies, targets, and
howeducation programs can boost local economic
development.
Traditionally, foreign universities have targeted
China’s more affluent coastal cities. However,
the Chinese government is now putting more
emphasis on providing high-quality education
services to children in Central and Western China.
With China targeting 20 percent of its energy mix
to be clean before 2030, the government is also
working to promote expertise in atmospheric
science, disaster management, ecology and
environmental engineering.
While the NGO Law stands to further impede FDI
into China’s higher education market, the Sino-
foreign education industry is still expected to
expand overall. In order to ensure that investment
is worthwhile, foreign education providers will have
to look closely at a number of influencing factors,
including the location of their institution or
program and the subjects that it teaches.