The China National People's Congress passed a second reading of the Foreign NGOs Management Law last month and released the complete text  of the draft legislation on May 5.
The latest draft has been described by major state-directed media as lessening control over foreign NGOs, since it allows them to open offices in the country with permission from the government. These changes were explained by way of “the Chinese government's positive attitude towards some international NGOs” in a government commentary on the draft.
Yet Chinese NGO circles remain skeptical about the new law.
The first draft of the law, written jointly by the Ministry of Public Security and the Ministry of Civil Affairs, was submitted  to the bimonthly session of the National People’s Congress Standing Committee (NPC) in December 2014, but the details were not disclosed until March 2015 when it was amended. In the same month Chinese officials revealed  some fresh restrictions imposed on foreign NGOs.
As Maya Wang, China researcher for Human Rights Watch, pointed out to Global Voices:
The second draft has made no significant improvement upon the first from a human rights point of view. There are some changes, but they are technical changes and do not alter the fundamental purpose of the law, which is to significantly tighten the Government's control over civil society if adopted.
Research carried out by the Chinese Academy of Social Sciences estimates  that there are about 1,000 foreign NGOs operating in China and an average of between 4,000 and 6,000 NGO projects on issues including poverty, environment, health and education carried out annually. These projects — worth hundreds of millions of U.S. dollars combined — often involve partnerships with local NGOs and social groups.
The new law forbids foreign NGOs that have not registered in China or obtained a permit for their temporary projects to commission local organizations or individuals to carry out activities inside the country (Article 6).
Prominent activist Zeng Jinyan says that provision in particular will increase risks for domestic NGO workers:
根据这个草案，国内NGO的风险巨增，国际国内Ngo若想在中国开展活动，几乎全都丧失独立性。境外非政府组织管理法（草案二次审议稿）全文（标注版） | http://t.co/LmR5WW5YOU 
— zengjinyan (@zengjinyan) May 6, 2015 
According to the draft, the risk of running domestic NGOs will increase tremendously and both international and domestic NGOs will lose their independence in their China projects. See Foreign NGOs Management Law (Second Draft) whole text (with notes): http://t.co/LmR5WW5YOU
Notably, the State Council Public Security Department will have an outsize role under the new legislation, obtaining the power to approve the registration of foreign NGOs and manage their activities.
That “management” entails a “coordination mechanism” that involves “researching, coordinating and resolving major problems in the management of foreign NGOs” (Article 7).
Maya Wang elaborated  further on the role of the Department:
[…]'supervision’ can entail entering the premises of the foreign NGO at any point, questioning its staff, and copying or seizing any document, all tactics more commonly reserved for a criminal investigation. Foreign NGOs will have to submit for approval annual work plans and funding allocations, and will be prohibited from engaging in a range of peaceful activities, from raising funds or accepting donations in-country to recruiting volunteers or trying to recruit members ‘directly or indirectly.’
Violations mean that an NGO's representative in China (the draft law now requires foreign NGO to establish a representative office) would be liable to punishments, including a 15-day detention.
The release of the draft law prompted a broad public discussion.
A detailed explanation of how the law might curb the development of the NGO sector in China soon circulated widely among Chinese NGO workers via social media.
The author of the explainer lists a number of adverse impacts on the civic sector in mainland China:
1. Workload and recruitment:
According to the new law, foreign NGOs have to fill in applications for their temporary projects once a year. As for the setting up of sub-branches, they have to re-file an application once every five years. The [NGO] offices in China will be under a “dual-supervision-system”, which means their projects have to be approved by related authorities and the public security department. Any change would have to get the approval again. Activities plans and reports have to be submitted to both sets of authorities. If the organization is active, the administrative workload would be tremendous.
So, they can recruit more people to deal with the extra workload, right? Naive! The new law requires that any local recruitment of regular staff or volunteers must be handled through the foreign affairs service units or other Chinese government-designated units. (Article 32)
The proportion of foreign personnel at foreign NGOs’ offices must not exceed 50% of the total staff numbers (Article 35).
2. No more funding for advocacy groups:
The new law specifies that any legal entities in China must not accept commissions or financial support, or represent foreign NGOs that have not registered a representative office in carrying out activities. (Article 38)
Currently, Chinese government and domestic funding organizations seldom support advocacy groups. The sector will die out because of funding shortage. Moreover, the law also forbids foreign NGOs from sponsoring political activities or it would be shut down or penalized. Yet the definition of “political activities” is so blurred. God help activists.
3. Development of social enterprise faces a dead end:
Foreign NGOs cannot engage in or sponsor profitable activities (Article 5). What about the development of social enterprises?
4. Definition of foreign NGOs and their activities:
As the law defines foreign NGOs as overseas non-profitable, non-governmental organisations, such a definition can be extended to non-profitable enterprises such as hospitals, and educational organizations. As the law forbids foreign NGOs, which are not registered in China to carry out activities in China or commission local legal entities for carrying out activities, the impact will affect commercial activities springing from the private sector.
For example, a hospital from the U.K wants to buy some medical facilities in Shanghai, the Shanghai company has to make sure that the hospital is not a non-profitable entity before it signs the contract?
每年都有一些国外基金会面向全球提供访问、游学、奖助学金的项目，自然也覆盖中国大陆，新法出台后，要在中国发奖学金，他们首先得：1.（取得五年资格）去业务主管申请开设代表机构资格，再去公安部门登记 2.年度计划、财务、税务等细节一个都不能少 3.派一个首席代表 4.境外工作人员不得超过50%，得再委托当地外事服务单位或者中国政府指定的其他单位找一个员工……
Many foreign foundations provide worldwide funding for visiting scholars, exchange or scholarship, such funding opportunities naturally extend to China. Once the new law is implemented, if they want to extend their fundings to China, they have to 1) apply for a representative office and register to the public security department; 2) submit their plan, budget, tax form; 3) send a chief representative to China; 4) ensure that their foreign representatives will not exceed 50% total staff, and they moreover have to ask the foreign affairs service units or other units designated by the China government to hire a local employee…
Since Chinese President Xi Jinping came to power two years ago, the crackdown on dissent and civic groups has been unprecedentedly broard and fierce.
The pretext for these crackdowns are thus far related to tax evasion, such as the arrest of Ai Weiwei in 2013 and the shutdown of Gongmeng in 2009. The government has also showed it will detain people for “picking quarrels and provoking troubles “, a catch-all criminal offence that has been invoked to prosecute dissent and activism in the past few years, as seen with the arrest of five prominent feminists  two months ago.
This new set of laws would provide still further legal grounds for future crackdowns and political prosecution, since any overseas connection to organizations that are not registered in China could mark an organisation or person as out as a criminal.