Charity Law intensifies scrutiny on crowdfunding

Platforms obliged to verify claims made by people appealing for money online

The latest revision of the Charity Law will subject crowdfunded projects to greater scrutiny on a par with those governing the fundraising activities of charities.

Websites must first seek approval from the Ministry of Civil Affairs before they can host crowdfunding projects that are launched by financially strapped users in order to pay hefty medical bills, according to a decision on Friday by the Standing Committee of the National People's Congress, China's top legislature.

The websites — which used to only warn potential donors that the user's claims are unverified — now are obliged by law to authenticate claims in crowdfunding posts, such as the stated financial status and health conditions.

People turning to such websites for help must not fabricate stories or conceal facts, the decision said, suggesting legal liabilities for doing otherwise.

The changes will come into effect on Sept 5, and more detailed rules will be rolled out by the civil affairs ministry, the Cyberspace Administration of China and the Ministry of Industry and Information Technology, said the NPC Standing Committee.

Websites such as Shuidichou and Qingsongchou have played "positive roles" in helping financially strapped families pay their medical bills, but the operations have been mired by accused misuse of such tools, which has hampered the development of charitable causes.

"With the rise of internet technology, the number of crowdfunding projects has soared, and the scope of such projects is no longer restricted to a certain community or at a person's workplace," said Shi Hong, a senior legislator at the NPC Standing Committee.

He said such projects have helped some people raise much-needed money for costly medical bills, but the misuse of such platforms has raised public concerns, which hurts the credibility of the charitable industry.

"It is widely acknowledged that legal changes are needed to administer such activities," he said.

Passed by the top legislature in 2016, the Charity Law was the first of its kind in China, where charitable donations have been growing rapidly in recent decades. Charitable donations, made convenient by online payment methods in recent years, have surged past 200 billion yuan ($28 billion), according to the Ministry of Civil Affairs.

Charities and expanding crowdfunding platforms are viewed by authorities as a crucial vehicle to redistribute social wealth and advance the national common prosperity agenda.