In fact China enacted a trust law in 2001 under which some company pension schemes were set up. But the law is not part of Chinese tradition and the crux of the law - the fiduciary duty of the trustee to act on behalf of those whom the scheme is meant to benefit - is very poorly respected. To put it simply, why would anybody bother to donate his/her money to a good cause if someone will simply run off with it. And there is never anyone to prosecute malefactors or recover those assets.
The government cannot do much about changing culture, not in the short term at least, but it can do something about the development and implementation of proper law and regulations.
One final thought. There has been much talk in the press recently of the problems of how children of China's first-generation entrepreneurs can be taught skills and encouraged to take over and develop family businesses.
Charitable foundations can play an important role in that process. If you leave all your wealth to an only son or daughter, there is a reasonable chance he/she will blow it on high life. But leave only one-third to your son or daughter and the rest to charitable foundations and your son or daughter will want for nothing and the foundations, which need the revenue to support their good work, may be the ones to develop the business for the next generation. Charity and corporate social responsibility - that is a nice combination.
The author is an international consultant with the EU-China Social Security Reform Cooperation Project.
(Source: China Daily)
