An Introduction to the Third Sector in Hong Kong: Historical Developments and Current Outlook

A brief history of Hong Kong’s nonprofit sector, examining the parallel development of Chinese and Western charities as well as local philanthropy.

 

This text originally published: 8 August 2006

 

Hong Kong, the former British Crown Colony and current Special Administrative Region (SAR) of China, is one of the economically dynamic Four Little Dragons¹ and a hub for shipping and transport, financial and business services, corporate headquarters, educational institutes, and other cultural entities. As a cosmopolitan city, Hong Kong also has a diverse population with many of its roughly 7 million residents capable of speaking multiple languages, and the city routinely hosting businesspeople, tourists, and other travelers drawn by the city’s economy, cultural mix, security, and generally open immigration policies. Hong Kong’s stability is frequently attributed in large part to its strong foundations in the rule of law and its independent judiciary, holdovers from the British colonial administration that have not been significantly altered by the Beijing authorities since the colony’s 1997 handover to China.

Among its other assets, Hong Kong also boasts a vibrant third sector.² Various charitable activities have been a mainstay in Hong Kong since its earliest days as a colony, and today the SAR is home to an impressive array of both local and international non-governmental organizations (NGOs) and nonprofits working in a wide variety of fields. This essay provides an introduction to the history and growth of Hong Kong’s nonprofit sector, focusing particularly on the parallel development of Chinese and Western charities while also exploring the philanthropic culture of Hong Kong. It is hoped that the essay can serve as useful context and background for further research on the current challenges and opportunities of Hong Kong’s nonprofit sector.

Early developments in Hong Kong's third sector

The British Empire took possession of Hong Kong Island and its strategic harbor from China following the First Anglo-Chinese (or Opium) War in the 1830s and early 1840s. The island outpost was converted to a full Crown Colony in 1843.³ The British interest in Hong Kong was primarily in securing open access to China for its merchants and in maintaining a diplomatic presence near Imperial China⁴, and the Hong Kong colony generally lacked the Christianization component and the focus on “civilizing the natives” common in other British colonial endeavors.⁵ Indeed, the British colonial administration was remarkably thin, and has generally been characterized (to borrow a modern term) as “positively non-interventionist” as opposed to simply laissez-faire. That is, the government was “explicitly restrained and selectively involved”⁶ in the colony’s affairs, providing a legal framework, infrastructure, and targeted funding for certain societal projects, but generally taking a hands-off approach to the economic and social spheres. As a result, Hong Kong witnessed the rapid establishment of self-help groups, mutual aid societies, and other organizations that would today be categorized as belonging to the third sector.⁷

While early Hong Kong was not subjected to massive Christian missionary campaigns, the first significant charities in Hong Kong were of a religious nature. Early examples include the Morrison Education Society School (founded 1842) and the Ying- Wa Anglo-Chinese College (founded 1842), both of which provided schooling on religious and secular topics to the local community.⁸ In addition to their religious missions, Catholic, Protestant, and other Christian groups also set up hospitals; an early example was the Missionary Hospital of Hong Kong, opened in Wan Chai in 1843.⁹ Organizations focused on providing welfare services to sick, elderly, orphaned, and disabled people were all launched by Christian missionaries within several decades of Hong Kong’s establishment.¹⁰

The local Chinese community, which far outnumbered the colonial expatriate community and continued to grow with constant immigration from the mainland, also created a number of organizations to provide social services. Many of these organizations were structured along the lines of traditional Chinese welfare societies, known as kaifong associations.¹¹ The Man Mo Temple was the first major kaifong group to emerge among the Chinese population of Hong Kong. Launched by a few affluent locals in 1847, the Man Mo Temple quickly became a center not only for worship, but also for community affairs. The committee in charge of Man Mo Temple became an intermediary between the local Chinese community and the somewhat detached colonial government.¹²

Another notable early Chinese charity was the Tung Wah Hospital (now much expanded and known as the Tung Wah Group). Tung Wah’s origins lie in the Kwong Fook I-Tze, a temple built in 1851 to house traditional Chinese burial tablets, which also began offering shelter to the ill and the poor.¹³ The Tung Wah Hospital was set up in 1869-72 to provide traditional medical care to the local Chinese community, and the new organization’s board members quickly eclipsed the Man Mo committee as the chief, colony-wide liaison between the Hong Kong Chinese community and the government.¹⁴ Tung Wah rapidly diversified to offer a full range of social services—everything from nonprofit funeral parlors to schools, elderly homes, daycare centers, and even soothsayers and temples.¹⁵

The liaison role, as seen in the examples of Man Mo and Tung Wah, was—and remains—an important function of Hong Kong’s third sector organizations. Since British colonial rule was not democratic, the government relied on its discussions and interactions with many civil society groups in order to know the pulse of the local community and to attempt to form policies that would meet with popular consent. As Lam and Perry have noted, “Voluntary associations are part of a larger network of advisory boards, ad hoc committees, rural committees, and citizens that government officials consult routinely as part of the policy-making process in Hong Kong.”¹⁶ They also emphasize that these procedures “outlived the colonial regime” and continue to inform the SAR government’s policy formation.

With the government committed to its non-interventionist policy, organizations in the aforementioned veins proliferated to serve Hong Kong’s growing population right up until the Japanese Occupation of Hong Kong during the Second World War.

Hong Kong's third sector from the post-war period to the handover

After the disruption of the Japanese Occupation, British colonial rule was restored in Hong Kong. As Hong Kong began to re-stabilize itself, the tumultuous civil war in neighboring China exploded, sending a dramatic influx of refugees from the mainland into the tiny colony. With the recently restored government struggling to revive its rule, third sector organizations played a major role in serving the needs of both established and recently arrived residents of Hong Kong. Kaifong associations sprung up in great numbers beginning in the late 1940s, providing free or low-cost healthcare and education to the local Chinese communities.¹⁷ The Hong Kong Council of Social Services (HKCSS), a nonprofit consortia of welfare and service NGOs that today has more than 300 member organizations, was founded in 1947 to help coordinate the varied relief activities in the immediate post-war period; today the HKCSS remains a major force in Hong Kong’s nonprofit sector.¹⁸

The post-war refugee crisis, coupled with devastation from a series of typhoons, was severe enough to attract a number of international nonprofit relief agencies to Hong Kong, where the groups took up humanitarian operations alongside local Chinese and Christian groups.¹⁹ But as Hong Kong society stabilized in the 1960s, the bulk of these international agencies closed down their Hong Kong operations, leaving the local charitable sector to confront the challenges connected to continued immigration and a growing population. In order to provide sustained funding streams to Hong Kong charities (and particularly the social service agencies) after Hong Kong was no longer receiving significant international relief support, new strategies were devised.

One source of funding to Hong Kong’s third sector has been and remains the government, particularly for social service and education provision. However, given the Hong Kong government’s preference for a streamlined, positive non-interventionist approach, governmental support of third sector organizations should be viewed less as bureaucratic largesse and more as an example of co-dependent partnership between the state and the third sector. With the government focused on maintaining an environment amenable to business and sustained economic growth, it required dedicated partners capable of meeting the varied social challenges of a rapidly changing society. As Lam and Perry note:

The Hong Kong government does not directly provide many of the social services it underwrites... The government is therefore dependent on hundreds of voluntary education, health, social welfare, and other types of organizations to deliver social services. This creates a mutual dependence between the government and voluntary agencies to assure that services are delivered efficiently and effectively.²⁰

Through a range of charitable trust funds and statutory grants administered by various government agencies, the Hong Kong government has thus been a major player in the social welfare and education sectors—albeit in partnership with the many third sector organizations that actually carry out the various projects.²¹ Government subventions (block grants) have historically been a major part of the budgetary resources for specific types of Hong Kong nonprofits. For instance, in 1996 Moser noted that the HKCSS reported “that NGOs are responsible for meeting about 80% of the community’s needs; in turn, about 80% of their funding comes from the Government.”²² This interdependence has been a cause of concern to some observers, who fear that over- reliance on government funding has negative consequences on the programming autonomy of nonprofits.²³ In recent times (discussed below), government subventions have been reduced, and Hong Kong nonprofits have been forced to seek new funding streams to sustain their programs.

The government is far from the only source of funds for third sector organizations. Hong Kong’s fascination with horseracing dates back to the colony’s founding, and the sport has long been the only legal form of gambling in Hong Kong. Founded in 1884, the Hong Kong Jockey Club organized racing activities and also oversaw the lucrative betting operations. In 1955, amid the refugee crisis, the Jockey Club formalized its longstanding philanthropic activities by declaring that it would donate its annual surpluses to local Hong Kong charities and community projects.²⁴ Since then, the Hong Kong Jockey Club Charities Trust has become a major philanthropic body in Hong Kong, donating about HK$1 billion (US$128.6 million) per year for the decade preceding 2005.²⁵

Another crucial philanthropic agency is the Community Chest of Hong Kong. Originally affiliated with the HKCSS, this nonprofit organization was set up in 1968 to serve as a centralized fundraising agency for Hong Kong’s many small social service agencies. The Community Chest is similar to the United Way in the United States, and concentrates on large-scale public fundraising campaigns such as its “Walks for Millions” walkathon.²⁶ The Community Chest’s administrative costs are underwritten by the Hong Kong Jockey Club and the Chest’s own investments, and the organization allocates 100 percent of the funds it raises to 137 social welfare agencies in Hong Kong.²⁷

Spurred on by new industrialization and a thaw in Cold War relations that allowed the colony to resume its entrepôt status with China, Hong Kong entered a period of sustained economic growth in the 1960s and 1970s that carried through relatively unabated until the end of British rule. With Hong Kong’s sudden shift from a challenging post-war reconstruction ethos to a situation of rising living standards and growing affluence, international nonprofit organizations were quick to return to the city—but this time they came to raise funds rather than distribute them. Oxfam, having wound down its relief programs in Hong Kong in 1966, opened a fundraising office in the colony a decade later; World Vision similarly transitioned from relief work to fundraising in Hong Kong by 1982.²⁸ The Hong Kong Committee for UNICEF was set up to begin fundraising and advocacy work in the territory in 1986.²⁹

In this era, many of the Hong Kongers themselves shifted from being recipients of charity to donors to charitable causes, putting their new wealth toward projects both at home and abroad. Supporting humanitarian aid and development work in mainland China has been a particular focus of much Hong Kong philanthropy.³⁰ Studies place Hong Kong among the most generous donors per capita in the world.³¹ Hong Kong’s status as a stable environment with low corruption, clear-cut laws, low taxes, and a bilingual population also helped to attract international NGOs looking for a base of operations in the Asia- Pacific region. As Ren has noted, “Its economic growth helped Hong Kong to establish more ties with the international community and, as part of this transition, the number of international non-governmental organizations mushroomed.”³²

As the 1980s arrived and the status of Hong Kong’s future became a more pressing issue, the British administration hastened reforms to make the Hong Kong government somewhat more accountable to the public. This contributed to a growth in civil society organizations of a political nature, with political parties and trade unions stepping up activities both in favor of and against further democratization in Hong Kong—particularly after the 1989 Tienanmen Square Massacre.³³ In this period, human rights NGOs like Amnesty International (with its Hong Kong Section initiated in 1976 and formalized as a charity in 1982³⁴) began operations in Hong Kong, soon to be complemented by a number of homegrown human rights organizations including the Hong Kong Human Rights Commission (a coalition of 11 NGOs established in 1988³⁵) and the Hong Kong Human Rights Monitor (founded 1995³⁶).

NGOs focused on environmental issues also took root in Hong Kong during the 1980s, including Friends of the Earth Hong Kong (founded as a local chapter in 1983³⁷), the World Wildlife Fund Hong Kong (1981³⁸), and Greenpeace China (first based at Hong Kong, in 1997³⁹). The last years of British rule in Hong Kong also saw a blossoming of local NGOs focused on areas such as immigrant rights (particularly among Filipino migrant workers), women’s equality issues, consumer protection,⁴⁰ and animal welfare.

A snapshot of Hong Kong's third sector today

The handover of Hong Kong from Britain to China occurred on 1 July 1997. While the lead-up to the date was filled with unease and ambiguity for Hong Kongers, in many ways Hong Kong society continued as before when the handover actually occurred. Regulations concerning the establishment and conduct of nonprofit organizations in Hong Kong—highly influenced by the British colonial legacy—have not been significantly affected by the return of the colony to Chinese sovereignty or the adoption of the Beijing- drafted Basic Law.⁴¹ In a variety of respects, the SAR continues to function in an autonomous manner from the giant neighbor to the north.

In fact, Hong Kong’s third sector has gone from strength to strength since the handover. Fears that Beijing might clamp down on NGO activities in Hong Kong have not borne out, and the SAR’s nonprofit sector continues to grow. Hard data on the sector is difficult to come by⁴², but anecdotal evidence suggests the sector is robust and growing. In a 1996 commentary on Hong Kong’s philanthropic landscape, Moser pointed out that, “The latest [1995] Government List of Approved Charitable Institutions and Trusts of a Public Character runs to over 370 pages, listing the names (but only the names) of organizations with Section 88 [tax-exempt] status authorized by the Inland Revenue Department.”⁴³ In an indication of the third sector’s growth in the last decade, the latest List, published in May 2006 and still containing only the names of Section 88 charities, now extends to 569 pages.⁴⁴ The landmark Study on the Third Sector Landscape in Hong Kong, conducted by Civic Exchange and the government’s Central Policy Unit and released in 2004, identified a total of 16,662 third sector organizations, but also took pains to stress that it was a non-exhaustive count.⁴⁵ Whatever the precise figure, it is safe to conclude that Hong Kong’s third sector is large, especially in light of the relatively small population of the SAR (6.9 million people in 2005⁴⁶). Indeed, based on the aforementioned figures, Hong Kong has approximately one nonprofit organization for every 414 residents.

One of most significant shifts in the Hong Kong nonprofit sector since the handover to China has been a reduction in government subventions to many of the social service and education agencies. This shift began when Hong Kong was struck by the 1997 Asian Financial Crisis, but continued as the government sought to marketize social service provision to a certain extent in the hopes of improving efficiency and increasing accountability.⁴⁷ Based on interviews conducted by the author with 20 Hong Kong NGO leaders in the summer of 2006, the reduction in government subventions has compelled social service nonprofits to pursue other funding schemes and pushed them into more direct fundraising competition with other Hong Kong nonprofits that never relied on government subventions to operate.⁴⁸ Nonetheless, given the interdependence of Hong Kong’s government and third sector, the government cannot cut subventions too much or it will provoke a crisis in social service and education delivery. In other words, the government relies on the third sector for many essential services that a stable society cannot go without. As the 2004 Study on the Third Sector Landscape noted:

Non-governmental educational organizations operate and manage 64% of kindergartens, 83% of primary schools, 68% of secondary schools and 100% of special schools in Hong Kong. The NGOs also operate about 70% of all social welfare services and over 100 hospital and health care units in Hong Kong. While the Government provides most of the funding for these operations, the NGOs running these services offer their reputation, experience, expertise, leadership and management resources.⁴⁹

For his part, the Hong Kong SAR’s top government official, Chief Executive Tung Chee- hwa, indicated his desire for “a vibrant third sector” in Hong Kong in his Policy Address of 11 October 2000:

I hope that apart from having a highly efficient and modernised market economy and a small and effective government, Hong Kong can also boast a dynamic and growing sector of voluntary services. We will continue to enhance our working partnership with these organisations. Together we will build a better future for Hong Kong.⁵⁰

An increasingly important alternative source of funding for third sector organizations in Hong Kong is the private sector. There is nothing new about philanthropy from the business sector; Moser notes that “Hong Kong’s [philanthropic] tradition, brief as it is, is inextricably connected with Guangdong’s merchant class and its ‘new’ money” and points out that 19th Century Guangdong business leaders received varied privileges in exchange for their support of good causes.⁵¹ Later, notes Yip, “all major trading firms or rather ‘Hongs’ and corporations in Hong Kong... set up foundations or trust funds for the benefit of the local community as one of their public relation exercises.”⁵² But, as Moser astutely observes, “In Hong Kong, because corporate wealth is relatively new, because corporations and families are intimately connected, and because the tax laws provide little incentive for corporations to make purely philanthropic gifts, most donations come out of the corporations’ public relations, communications or advertising budgets.”⁵³ Though they do give a great deal of money away, Hong Kong’s wealthy families and businesses have tended to keep the decision-making in their philanthropic activities shielded from public scrutiny. Hong Kong private philanthropy has thus been characterized by a local preference to “keep private things private,” as one foundation representative put it.⁵⁴

However, Hong Kong’s tradition of instrumentally oriented corporate philanthropy (sometimes dubbed “guanxi giving”⁵⁵) is increasingly being altered by the influx of notions of Corporate Social Responsibility (CSR). This shift has partially been driven by the influence of multinational corporations in Hong Kong. As a 2001 study by Golin/Harris Forrest explains, “Multinational companies in Hong Kong are distinct as far as philanthropy is concerned. Giving policy is normally dictated from the global headquarters, and is often driven by a corporate foundation.”⁵⁶ The study then elaborates on current limitations on corporate philanthropy: “The extent to which companies are willing to give philanthropically will remain inhibited until more charities in Hong Kong provide clear and detailed information about who they help, and how effectively they use the resources they receive—what in the west [sic] is called ‘gift stewardship.’”⁵⁷ This sentiment was echoed in several interviews the author conducted with NGO leaders, particularly those focusing on CSR promotion and philanthropic initiatives.⁵⁸

One final funding source that Hong Kong’s third sector organizations continue to explore is the general public. With a per capita GDP in 2005 of $23,627⁵⁹, Hong Kongers at large “can be tapped more effectively by third-sector organizations.”⁶⁰ In addition to developing new membership schemes and exploring other innovative fundraising tactics⁶¹, traditional Hong Kong fundraising techniques include a variety of -thons (walkathons, hikeathons, etc), gala balls, and flag days. On flag days, charities are granted the exclusive right to fundraise on Hong Kong’s streets (flag day rights are allocated by the government’s Social Welfare Department through a bidding process⁶²). Hong Kongers rarely refuse to donate to flag day volunteers, and the takings in just one day can be substantial: One animal welfare organization the author interviewed explained that they had been able to build and outfit their entire animal care clinic (including an x- ray machine, operating tables, surgical equipment, and medical storage cabinets) on the earnings from one year’s flag day.⁶³

Conclusion

Hong Kong is home to a growing and diverse third sector. Nonprofit organizations in Hong Kong run the gamut from small, all-volunteer mutual aid groups up to sophisticated local and international NGOs with significant reach and influence. The nonprofit community has benefited from Hong Kong’s affluence, stability, and cosmopolitan nature, as well as the traditions of both Western (often Christian) and Chinese charity that have been part of the territory’s fabric since its earliest days. These factors have undoubtedly all contributed to the strong philanthropic culture in Hong Kong. Well positioned as a hub for NGO activities in the greater Asia-Pacific region, Hong Kong’s nonprofit sector has proven to be vibrant and, as it expands, increasingly innovative. Core challenges facing Hong Kong’s third sector include a need for greater transparency and outcome measurement, a need to enhance the development of human resources talent, and a general need to increase creativity in programming, fundraising, and interactions with the state and private sectors; these observations, based on preliminary findings from the author’s interviews with nonprofit leaders in Hong Kong, will form the basis of future research. Overall, however, Hong Kong is endowed of an impressive nonprofit sector that can rival the dynamism of its business sector, and one which plays a vital role in the everyday lives of people both in Hong Kong and beyond its borders.

 

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Notes