This article is part of our special issue on New Trends in Philanthropy and Civil Society in China (Summer, 2011). It highlights the government’s heavy hand in the philanthropy sector through a case study of the China Charity Federation (CCF), one of the major players in Chinese philanthropy.
Like other major national-level “social organizations” in China, the CCF was established from the top down through the support and intervention of organs of the party-state. At the local level, the CCF is essentially part and parcel of the Civil Affairs bureaucracy. To make matters worse, the CCF enjoys greater fundraising privileges than public foundations, and yet the CCF is, legally speaking, not even a public foundation. Legally, the CCF is registered as a social organization (shehui tuanti), a type of nonprofit that is not allowed to engage in public fundraising. The result is a highly inequitable distribution of resources favoring GONGOs like the CCF, then public foundations, and last but not least, private foundations and NGOs.
The controversy over the privileges held by GONGOs, like the CCF, came to light after the 2008 Sichuan earthquake when scholars, like Tsinghua University professor Deng Guosheng, pointed out that the lion’s share of public donations for the earthquake relief went to the government and a handful of GONGOs. In 2008, total public donations broke the 100 billion RMB mark, an astonishing 300 percent increase from the previous year, as a result of 65 billion RMB in donations for the earthquake relief alone. To put that number into perspective, 65 billion was more than twice as much as all public donations for 2007. Of that 65 billion, about 56 percent went to party and government offices, mainly Civil Affairs, 21 percent went to the Chinese Red Cross, and 15 percent went to the CCF. In other words, nearly 90 percent of the public donations for the earthquake relief went to the government and two GONGOs. The remainder went to public foundations. NGOs were not allowed to publicly solicit donations for the earthquake relief ((China Charity Information Center, “Donation for 5.12 Earthquake Disaster Relief Sets Record”, China Philanthropy Times (中国公益时报), December 12, 2008.)).
This article discusses the need for reforms in the CCF, but recognizes that any reforms would also require the support of government agencies like Civil Affairs. As the article makes clear, there are sharp differences in opinion between scholars who believe that reforms are necessary to further separate government from the philanthropy sector, and government officials who believe the government needs to strengthen its management of philanthropy.
Deng Guosheng, associate professor at Tsinghua University’s NGO Research Center, was sharply critical of the philanthropy sector in remarks he made at an October 2009 salon hosted by the NGO Interactive Forum. [Editor’s Note: The NGO Interactive Forum, www.ingo.org.cn, was established by a major GONGO, the China Foundation for Poverty Alleviation (CFPA), to promote and support the NGO sector. On the CFPA, see the article in this special issue, “The China Foundation for Poverty Alleviation Internationalizes.”]
At the salon, Professor Deng argued that “the China Charity Federation (中华慈善总会,hereafter CCF) undermines the growth of the philanthropy sector in China.” He believes “the CCF’s autonomy and independence [from the government] is limited, particularly at the local levels. Many provincial-level CCFs are nothing more than a division of the Civil Affairs department. If this trend continues, the future does not look bright for Chinese philanthropy ((Editor’s Note: The CCF is a GONGO and one of the biggest and most influential philanthropic organizations in China. It and the Chinese Red Cross are the only “social organizations” authorized to raise public funds in the event of a disaster. While GONGOs vary widely in terms of their ties with the government, Professor Deng’s remarks reveal that the CCF enjoys very close ties the government, so much so that local-level CCFs are even considered divisions of the local Civil Affairs departments.)).”
Professor Deng’s remarks, later published in the Report on Chinese Society (中国社会报),ignited intense debate among scholars, government officials, and those engaged in philanthropy work in China. The CCF has sought to keep a low profile and has yet to issue a formal public response. Although the CCF disclosed plans earlier this year to meet with the media, a press conference still had not happened by Chinese New Year, and several requests from this writer for an interview were ignored.
In raising the question, “Who has hindered the development of China’s charities?” the Report on Chinese Society provoked greater reflection on philanthropy in China.
The CCF was originally established in 1994. Since 1994, 270 organizations have joined the CCF to form a network of charitable organizations that spans the entire country. Although the CCF has promoted philanthropy in China for the last 15 years, it has also come under fire for the privileges and exclusive resources it has gained from its close ties with the government. The recent controversy surrounding the CCF reflects growing expectations for philanthropy [in China] and the fallout that results when those expectations are not met.
Historical Origins of Philanthropy in China
The CCF was established in a top-down fashion in the early 1990s, and set up a charity system that enjoyed some operational autonomy. Yet, this network of CCFs had also built up a relationship with the government, and so they were designated as “government-organized” rather than “popular” or “grassroots” organizations. The government’s influence was pronounced among local CCFs, even though the CCF was established under the condition of “not getting a penny from the government budget, not having an administrative staff, and not employing government officials ((Editor’s Note: Throughout this issue, we use the term GONGO to refer to “government-organized” NGOs, and NGOs or grassroots NGOs to refer to NGOs set up voluntarily and independently of the government. There is no clear-cut division between GONGOs and NGOs; rather, think of it more like a continuum in which some organizations are closer to the GONGO end of the spectrum, while others are closer to the NGO end.)).”
In ancient times, philanthropy was traditionally associated with civil society. But China made a break with that tradition after 1949, when charity came to be associated with religion and superstition and was declared to be in conflict with socialist ideology and even labeled hypocritical. When this new perception took hold in China, charitable activities previously run by “the people” fell under government control.
It was not until the reform and opening period of the early 1980s that public opinion gradually began to shift and became more accepting of the modern notion of philanthropy and charitable giving. The government also began to realize the importance of philanthropy and to actively promote charitable work. It introduced relevant policies, laws and regulations governing the philanthropic sector, and established some of the earliest government-run charitable organizations. The CCF came into being against this backdrop. Not long after, Civil Affairs offices at the local level began to establish local CCFs.
The majority of local CCFs were thus established by local Civil Affairs departments, and many even ended up as administrative offices within Civil Affairs. These local CCFs were officially authorized to solicit charitable donations, leading some to argue that their monopoly on resources will restrict the space for NGOs. Fundraising through government channels also does not foster a modern notion of charity or independence among the citizenry, and it has a detrimental effect on the culture of charitable giving.
Society’s Push for Change
Professor Deng recognized that the CCF has up to now made a historic contribution to the development of China’s philanthropy. But he went on to say that when the CCF first came into being, it was said that “the government would be involved initially in order to withdraw later.” In reality, the CCF’s actions are not consistent with that original intention. “The CCF has already had a period of 15 years to develop with the government’s backing,” Professor Deng observed. “If it does not evolve, there is a danger that it will become an entrenched interest in Chinese philanthropy.”
Yang Tuan, deputy director of the Social Policy Research Center at the Chinese Academy of Social Sciences (CASS), shares Deng’s view of the CCF. “It should bear in mind and recall its 15-year history; compared to those organizations that have been around for only three or even five years, the CCF should be more mature and engage in some soul searching,” she says.
Yang served as Executive Deputy Secretary-General of the CCF for five years when the organization was first established. Since then, she says, bureaucratization has become a more serious problem in the organization. “These last few years, the CCF has moved closer to the government, and further from civil society.”
In the Report on Chinese Society, some local CCF offices and government officials disagreed with Professor Deng’s point that “the CCF is hindering the development of philanthropy in China”. In defense of the CCF’s role in promoting philanthropy in China, Mao Shanghui, Secretary-General of the Jiangsu province CCF, compared the CCF to the Red Cross Society of China (hereafter, Red Cross). The government’s presence in the Red Cross Society is greater than in the CCF, Mao said, since the Red Cross is managed in line with the status and benefits given to national civil servants.
Local-level CCF’s naturally feel misunderstood and even offended by the criticism they encounter from the outside, but Yang Tuan says “while she understands why the CCF might feel offended at being compared to the Red Cross and at being viewed as ‘better than some, but worse than others,’ at the same time, the CCF should understand that the criticism is not unjustified and reflect on the choices it has made over the past 15 years.”
Professor Deng also remarked, “the Red Cross is not without administrative powers, but relatively speaking, it holds slightly less government authority [than the CCF]. This does not mean that Red Cross is without problems, but compared to the CCF, the Red Cross has less influence on the culture of philanthropy.”
Local-level CCFs have compared themselves to the Red Cross in an attempt to deflect criticism, but important legal differences exist between the two. Professor Deng explained that the CCF is mainly governed by laws and regulations adopted by the State Council, in particular the Regulations on the Registration and Administration of Social Organizations, while the Red Cross is governed by the Law of the People’s Republic of China on the Red Cross Society passed by the National People’s Congress in 1993.
Furthermore, industry insiders point out that when the CCF joined United Way International in 1998, it flouted international fundraising guidelines, which required it to use the funds it raised to support civil society organizations, and instead channeled those funds into the CCF or government system.
In addition, other public foundations have expressed resentment at the CCF’s exclusive right, along with the Red Cross, to fundraise during a major disaster. Professor Deng has challenged the legality of the practice and pointed out that it is granted in accordance with guidelines issued by the Ministry of Civil Affairs (MCA), which are in conflict with the higher-level Regulations on the Management of Foundations promulgated by the State Council ((Editor’s Note: MCA is under the State Council in the government hierarchy, and thus regulations issued by the State Council should in theory supersede MCA regulations.)).
Zheng Yuanzhang, director of MCA’s Department of Charity and Social Donations, confirmed that in previous years, authority for the CCF’s “exclusive fundraising privilege” could be found in a MCA document, noting that “the CCF behaves like a public foundation because it believes the MCA renders it one.” Thus, the crux of the problem, in Zheng’s opinion, is that there exists “a certain legal and operational contradiction between the CCF’s “social organization” [shehui tuanti] governance structure and its responsibilities as a public foundation, and further research and appropriate adjustments should be made ((Editor’s Note: In other words, the CCF is legally a social organization (shehui tuanti), which has a different status than a public foundation [gongmu jijinhui], and yet, operationally speaking, the CCF often behaves like a public foundation. Yet the CCF also enjoys privileges that no public foundation, let alone a social organization, enjoys and that is the authority to solicit public donations in the event of a major disaster. After the 2008 Sichuan earthquake, that privilege was extended to select public foundations, but the Red Cross, CCF and Civil Affairs departments were still the major beneficiaries of the public donations made to the earthquake relief.)).”
The CCF and the Government Should Undertake Reforms
The CCF’s exclusive privilege to fundraise is not just a technical issue, but has systemic implications. Once the CCF is able to free-ride on administrative power, it has exclusive access to substantial charitable resources, preventing other civil society organizations from having a chance to participate. At one point in time, there was an outcry in some cities along the southeast coast where the government had become involved in charity work, but today government interference in charitable affairs no longer makes the news.
In a recent investigation, Professor Deng discovered that several local MCA departments that were concerned about resource diversion had prohibited enterprises or individuals from establishing private foundations. Enterprises or individuals could only participate in the philanthropy system under the separate “special fund” category, or else donations would have to be made directly to the CCF ((Editor’s Note: The issue about resource diversion was MCA’s concern that enterprises or individuals might engage in fraud by diverting donations into their own pockets. The “special funds” mechanism is described in more detail in other articles in this issue. See “The One Foundation and SEE as “shell” Foundations” “Grass-roots NGOs Go through Special Funds to Raise Resources”)).
On defining the boundary between governmental power and philanthropy, Professor Deng explained: “The government should help, not be an agent. Often, local governments aren’t successful at managing the degree of involvement and will cross the line. Once the government initiates an activity, businesses must make contributions. This actually ends up being an exchange of interests, rather than a donation made wholly out of the goodness of one’s heart. This has a detrimental effect on fostering a culture of charity. The culture of charity should be based more on the voluntary participation of citizens; passive or compulsory acts of charity are counterproductive and can lead to a vicious cycle.”
However, Director Zheng, of MCA’s Department of Social Welfare and Charity Promotion, suggested that charities around the country face different situations and are in different stages of development. “Under these circumstances, phenomena with different degrees of acceptability exist. We should be thinking of how best to provide guidance, and gradually improve the areas that are not acceptable. Entirely discarding the current philanthropy development model is not conducive to examining other possibilities; we need to allow some areas to experiment,” Mr. Zheng said, adding, “Just like in the reform and opening process, we are all feeling the stones when we cross the river ((Editor’s Note: Zheng here invokes a popular saying to describe the experimental, ad hoc nature of the reform process started by Deng Xiaoping in the late 1970s: “cross the river by feeling for stones” (mo shitou guohe).)).”
As a scholar, Professor Deng thinks the critical issue is the relationship between the government and the CCF; ideally, “the government should be distinct from society, and government activity should be clearly demarcated.” Yet, the CCF’s overall transformation process has not been very smooth. The main obstacles arise from within the system. On one hand, there is no external pressure to change, since society, including the academic community, does not sufficiently monitor the system. Secondly, there are no incentives from within for reforms. A large part of the revenue that pays the salaries of CCF staff comes from local governments, so there is little desire on the part of the CCF to withdraw from the government. Third, there is no ability to bring about change. Over time the CCF has grown reliant on the government system and developed a set of administrative and bureaucratic practices mirroring those of the government bureaucracy, stifling the ability to promote institutional reforms from within.
In this regard, Professor Deng explained that he is playing the role of a scholar by making appeals to and exerting some pressure on the CCF. He wants to “promote a more scientific, rational working relationship between the CCF and MCA, and hopes the CCF will, in the future, play a more positive role.” Professor Deng’s comments elicited agreement and recognition from Director Zheng.
Too Involved or Not Enough?
Yang Tuan of CASS candidly pointed out that the transformation of the CCF is a secondary issue: one cannot count on changes to the CCF if the Ministry of Civil Affairs does not change its current relationship with CCF.
Yang Tuan believes that a pattern can be discerned in the disparities of China’s social organizations, depending on their proximity to the government. The closer social organizations are to the government, the more privileges, resources, and power they accrue, and the better their development conditions are. The national-level and local level CCFs are a part of this pattern.
In addition, more importantly, MCA not only coordinates the registration of social organizations, it is also at the same time responsible for the development of the philanthropic sector. It is precisely because of a preexisting relationship with MCA that the CCF has become the most favored channel for the Ministry of Civil Affairs to carry out philanthropy nationwide.
In 2004, the Fourth Plenum of the 16th CPC Central Committee announced that it would work to “improve social insurance, social relief, social welfare and philanthropy, which together comprise the social security system,” and that the development of philanthropy would be treated as an important component of the social security system. This implies that the government sees philanthropy not just as a sector to regulate by creating policies and laws, but also as a political achievement to be attained ((Editor’s Note: This goes back to Professor Deng’s remarks about the need to separate government from society and place clear limits on government activity. By conceiving of philanthropy as a political activity, the party-state is encouraging more government involvement in philanthropy and further blurring the line between government and voluntary charitable activity on the part of the public.)).
Yang Tuan explained, “The local governments’ misunderstanding of this policy” has culminated in their eagerness to encourage philanthropy as a means for improving their work performance and reputation.” Around 2006, when a wave of philanthropy swept coastal cities in Shandong and Zhejiang provinces, and small and medium-sized enterprises made donations in funds bearing their names, there were suspicions of government involvement in the fundraising.
Meanwhile, Director Zheng is supportive of efforts by different regions to experiment with development models. For instance, with regard to Henan’s Yingyang local government’s approach, which created quite a stir in the media when the government announced that it had “established 1000 charitable organizations and elected 5000 Goodwill Ambassadors,” Director Zheng believes in actively supporting this and other development paths during this current stage of “letting a hundred flowers bloom.” He believes a way forward for philanthropy will emerge that is appropriate for the current phase of China’s development.
On the issue of the government’s relationship to philanthropy, scholars more often believe that the government has exceeded its role in developing philanthropy. Some scholars even believe that it was not appropriate for the government to establish a government bureau for the philanthropy sector, specifically MCA’s Department of Philanthropy and Social Contributions established in 2008. Scholars are concerned that this move will give the government more power over philanthropy work and influence its relationship with non-governmental charities.
In contrast, regarding the current development of philanthropy, Director Zheng believes inadequate effort is made by the government with respect to oversight, the monitoring of charitable organizations and the implementation of laws, regulations and policies. There is also insufficient guidance for the philanthropy sector to establish urgently needed rules, procedures, and standards. The government does not do enough to build the capacity of charitable organizations. It is precisely such government inadequacies in these areas that have created a bottleneck in the philanthropy sector’s development. “Inadequate efforts are the principle problem at this stage, not excessive efforts,” said Zheng. But he expressed concerns over excessive government involvement in fundraising and hoped that government bureaus would not be directly involved in fundraising or soliciting donations, but rather directs their attention to providing guidance on key philanthropic areas.
Changes to the CCF
“The CCF must first be separated from the MCA,” argued Professor Deng. He provided three solutions for the CCF: the first option is to evolve into an institution supported by government revenues in accordance with law, operating autonomously. The second is to become an independent public foundation that not only can raise funds but can also carry out projects. The third is to become an independent public foundation, with the main difference from the second option being that the foundation would be required to be a United Way organization in a real sense, and use donations to fund community groups in carrying out charitable activities. Professor Deng favors the first and third option, but believes different options can be adopted in accordance with different, local conditions.
Professor Deng noted that, in the transition process, the government must be separated from the CCF and, at the same time, there must be a push for the CCF to establish a new partnership with the government.
Since the CCF is already “viewed as a public foundation”, Director Zheng believes that the CCF can explore this development path, but in the process of transition it should adjust its governance structure. Furthermore, the CCF can improve its working style and methods to enhance the mobilization and development of resources for the public. Additionally, he stressed that society’s discussion of the CCF’s transformation needs to consider its historic role and cannot focus solely on the present controversy, while ignoring its contributions.
Currently, the CCF and local CCFs have not given their response. However, some local charitable organizations have undertaken reforms that offer signs of change in the philanthropy sector.
In 2004 when the Regulations on the Management of Foundations were first issued, the Shanghai Charity Foundation (上海慈善基金会) made a substantive change from a social organization into a public foundation specializing in financing and fundraising. In an interview Ma Zhongqi, Executive Deputy Secretary-General of the Shanghai Charity Foundation (hereafter, SCF), said that it had changed its governance structure and reduced the number of people on the board without affecting its normal operations.
The SCF’s biggest change, however, is that it no longer raises funds for its own projects, but has begun to collaborate with other nonprofit organizations, including grassroots organizations. Other than continuing to operate some of its flagship projects, SCF also “raises money and allocates funds to nonprofit organizations.” In his introduction of the SCF, Deputy Secretary-General Ma said that starting in May 2008, the SCF began implementing Management Measures for Shanghai Charitable Foundations Regarding the Funding of Charitable Public Welfare Projects and started accepting applications from Shanghai social organizations, whereas in the past, it had mainly partnered with government-run agencies to carry out its projects.
Deputy Secretary-General Ma explained that any independent legal entity registered with the Ministry of Civil Affairs can now apply for a Shanghai Charity Foundation project. In addition, the SCF does not accept applications for grants from government-run institutions.
With regard to the controversial debate surrounding the CCF and the development of philanthropy featured in the Report on Chinese Society, Ma said that such discussions are unnecessary. What’s important is to monitor the development; however, legislation is necessary. “The development of modern philanthropy first and foremost requires legislation. Because once the legislation is in place, many things do not need to be debated. Everyone just needs to act in accordance with the law,” explained Ma.
Those who were interviewed by the China Development Brief expressed their approval of the SCF’s transformation. However, it remains to be seen whether the CCF can learn from the SCF’s experience. Regardless, whether the CCF will carry out reforms and rise to the challenge certainly deserves the attention of all those in the philanthropy sector.