New Problems for the Chinese Public Interest Sector

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This is a revised version of a paper presented by the author at a workshop on effective networking organized by CANGO (the China Association for NGO Co-operation, 中国国际民间组织合作促进会) in early 2013

Since 2008, China’s civil society organizations have been developing rapidly. This growth is not only the result of nation-wide mobilization efforts after the Wenchuan earthquake, but also of a changing international context: China’s global rise after the 2008 financial crisis coupled with changes in support from the international community to Chinese nonprofits. Direct assistance to nonprofit projects, once common, has been replaced by a more multifaceted kind of support, such as assistance for networking and capacity development, as well as a wider promotion of China’s integration with the international society.

Both domestically and abroad, an obvious tendency has recently emerged: the rise of the public massively participating in public interest activities through the Internet. In China, the rise of Weibo has lowered entry barriers and enabled Chinese citizens to spontaneously participate in civil society. For the first time in China, civil society development is being favored by individuals acting out of formal organizations. On Weibo, citizens can express opinions on their own initiative. They can choose to approve, oppose, advocate for, appeal, or ridicule any given view. This space for individual expression is unprecedented and encourages a pluralism of views: Chinese citizens have at last been given a channel to freely voice their opinions and that channel is Weibo. The inventors of Weibo must have been aware of this technology’s potential. For our purposes, Weibo is also a channel through which users can both gain an understanding of the public interest sector and donate to it. Weibo can even be seen as a sort of ballot box – netizens can choose the projects they think best and “vote” for them by making donations.

These trends that shape China’s public interest sector present new challenges that call for increased awareness and caution.

Lack of understanding and caution about this new “Great Leap Forward”

In the last two years, many local governments have eased registration requirements for grassroots organizations as well as the procedures to obtain the right to call for public donations for part of them. A huge number of organizations that had, until recently, operated under a business registration are submitting their applications to be registered as social organizations. Furthermore, several national organizations, such as the Red Cross Society of China (Red Cross) or the China Charity Federation, want to develop affiliated, grassroots organizations with roots extending to the township and village levels. At the same time, more than 200 non-profit incubators have sprung up across China, based on the Shanghai model of NPI and are now replicated by local governments at various levels. Despite these efforts, the actual number of officially registered nonprofits has not increased significantly over the last two years. This poses a question: what measures are needed for the healthy growth of the public interest sector?

Blind pursuit of public interest sector efficiency— what I call the “public sector’s great leap forward”—is also causing serious problems. The decimal point incident at the China Charity Aid Foundation for Children (CCAFC) is a good case in point ((At the end of 2012, after only two years and ten months of operation, a logarithmic discrepancy was discovered between the billions of RMB that the CCAFC had declared present in its bank account and the millions of RMB it declared to have received in donations. After the discrepancy had been discovered and widely discussed, the CCAFC explained that the inconsistency had been due to an accounting error, for details on the “decimal point incident” see At that time, the CCAFC had only ten people on its staff, consisting mainly of retired government officials. Most of the employees handled their job with an amateur, volunteer mentality and salaries were kept significantly lower than the market rate. The team was not professional and the lack of a clear division of roles and responsibilities resulted in a situation where a zero was added in financial numbers without anyone noticing. Furthermore, nobody on the board of such a rich foundation was able to identify and react to mistakes and management malpractices, as there were no professionals on the board either.

Contrary to the opinion of some critics who have blamed the decimal point incident on the fact that the CCAFC is government organized, the organization actually has a grassroots background and was highly regarded by other nonprofits. The real reason behind the incident was a combination of the “great leap forward approach” – the blind and rapid pursuit of efficiency—and a nonprofessional approach to managing a nonprofit. Despite exponential growth, a disregard for professional rules had resulted in less effective social services, a phenomenon all too common among other NGOs. Too often, such organizations dismiss criticism based on the excuse that their work contributes to public good.

Government interference in charitable activities is on the rise

While some observers point to the 2008 Wenchuan earthquake as the beginning of government meddling in charitable activities, the origins of these activities can be traced to 2006. That year, in order to incorporate charitable activities as a component of social security, some local governments started to pass official documents requesting that donations be allocated to local branches of the China Charity Federation. In reality, this meant using charitable organizations as a government purse. In some places, local governments have even required charitable donations to first pass through the fiscal authorities, to be released for charitable projects only after an application has been submitted and approved. Another, more recent, example of government control over charitable fundraising involves concerns over faith-based organizations. In February 2012, the State Administration for Religious Affairs, together with other government departments, issued an “Opinion on encouraging and regulating faith-based charitable activities”. In September that same year, a “Faith Based Charity Week” was held, which raised over 250 million RMB in public donations. However, the funds were promptly deposited with the financial department of the State Administration for Religious Affairs and still wait there for another official document specifying, in detail, how the money can be used. In another case of government-led charity activities, the Ningxia provincial government established a “Yellow River Charity Valley,” a special economic development zone in which business enterprises were given tax breaks on the condition of making charitable donations in return. In this case the local government added a fiscal regime based on “charity (collecting funds from the public for “charitable” causes) to a land-centered fiscal regime in order to promote economic growth.

Another dubious practice, mandated by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC), is the adoption of poverty stricken villages by State Owned Enterprises (SOEs). On the surface, this is done in support of the government-sponsored “building new rural areas” program. SASAC made China Resources, a state-owned holding company, spend 5-6 hundred million RMB on six “Hope Townships”. The population of each township is about 200 households, totaling roughly 1000 people. This begs the question: how can a hundred million be effectively spent on such a small population? Wouldn’t it be more effective to just distribute the money directly to the households? And now China Resources has been made a model for other large SOEs, required to study from and replicate that model. Therefore, in the last two years, collaborations between SOEs and local governments to construct model villages have sprung across the country and have become a model for Chinese SOEs engaging in philanthropy because the government is convinced that driving SOEs to engage in charity is its responsibility. The examples above demonstrate that philanthropy in China is on a wrong course. The civic and autonomous character of the charitable sector are increasingly substituted by the mandatory, administrative nature of government-led charity activities. Gradually, charity is becoming another government instrument of economic and social management.

The resources of Grassroots NGOs are stretched thin

While numerous grassroots NGOs have emerged in China, sources of funding are extremely limited. Foreign funding is increasingly scarce and funding coming from government procurement of services is very difficult to obtain and so is funding from Chinese foundations. While the government has been purchasing services from social organizations at an increasing rate in China (for example, the Ministry of Finance invested an addition 100 million yuan in social services from 2012 to 2013, totaling 300 million), these purchases are plagued with problems. Rules for fair access to these programs are non-existent, resulting in projects being granted to government-backed organizations and not genuine grassroots NGOs. Even more worrying is the fact that government funding does not include the payment of NGO staff’s wages therefore “making the horse gallop without letting him eat grass”. As a result, as more and more organizations receive social funding from the government, the salary gaps and economic constraints faced by the charitable sector grow. Until now, neither the problems associated with this policy nor the issue of evaluating it have been addressed. Should the current situation persist, these problems will only escalate as this policy is expanded.

New issues in overseas aid

The Chinese government has already started to engage social organizations in delivering foreign aid. For example, the government has requested the Red Cross Society of China to work with the Ministry of Finance and the Ministry of Foreign Affairs to engage in “grassroots diplomacy” with countries in Africa. Other examples can be found in the China Youth Development Foundation implementing its “Project Hope” in Africa and the China Poverty Alleviation Foundation constructing hospitals in Sudan. However, questions remain about the methods of aid delivery in this grassroots diplomacy. Currently the model is administrative: aid focuses simply on delivering goods or infrastructure. No consideration is given to the sustainability of the assistance provided. Local communities, such as poverty stricken farmers or herdsmen, are not empowered to set up their own social organizations nor stand up and organize. The successful experiences, practices, and methods of Chinese nonprofits are not brought to these regions through our foreign aid programs. As China’s global status rises, so will its grassroots diplomacy. If our foreign aid continues to deliver assistance in this old government-led, bureaucratic way, its effectiveness will undoubtedly suffer greatly.

The issues described above are the result of tremendous economic and social changes in China and abroad in the last two years, and have favored the emergence of new problems in the growth of civil society in China. They must be taken seriously.

In Brief

Yang Tuan, Deputy Director of the Center for Policy Studies at CASS, discusses problems emerging from the recent, rapid evolution of China’s public interest sector and calls for a new, more sustainable development.
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