Abstract: On June 20th, 2011, a Weibo microblog account operated by a user claiming to be the general manager of the Chamber of Commerce of the Red Cross Society of China (RCSC中国红十字会) caused an uproar on the internet due to the lavish lifestyle flaunted on the user’s microblog. The incident led to public outrage and skepticism about the RCSC. Responding to these challenges, the RCSC has begun a major overhaul of its organization.
This was the most sensational charity incident of 2011. A veteran charitable organization with 107 years of history had its reputation unexpectedly marred due to public outrage triggered by a microblog post that has yet to be verified.
The lessons from this incident are manifold. Charitable organizations must become less bureaucratic, step down from their pedestal and engage with the public, and regain the public’s support by displaying a commitment to reform. In addition, the philanthropy sector needs to rethink its place in this new era of civil society, and grapple with the challenges of public sentiment being expressed via the internet.
New leaders have taken over leadership of the RCSC, determined to bring about reform. This is a positive effect brought about by the internet incident. The RCSC’s reform will have an important impact on China’s charity sector.
The Sequence of Events
Chapter 1: A Microblog Post Causes a Great Uproar
On June 20, 2011, a woman using her Weibo [microblog] account confirmed her status as the general manager of the Red Cross Chamber of Commerce on her microblog account “Guo Meimei-baby”. She began flaunting her wealth, triggering strong public skepticism: how did this 20 year old come by these branded bags and luxury cars, and did her wealth have any connection with the Red Cross? Soon a number of theories regarding Guo Meimei and the Red Cross began circulating on the internet, making it hard to tell fact from fiction.
At the same time, Guo was using her microblog account to respond to netizens’ suspicions. One such post claimed that the company where Guo works has a partnership with the Red Cross in which advertisements are installed on the medical vehicles that the Red Cross uses to provide free services to citizens. This partnership raised public suspicions about whether someone was using charity for personal gain.
Dozens of hours later, on June 22, the Red Cross Society of China issued an official statement. The statement stated: (1) The RCSC does not have a “Red Cross Chamber of Commerce” (红十字商会), and certainly no one by the name of “Guo Meimei”; (2) The RCSC retains its rights to pursue the matter with responsible parties; (3) The RCSC hopes that all sectors of the community will approach these issues with a calm attitude, and be wary of exploitation. Afterwards, Sina, which owns Weibo, openly stated that there had been an error in Guo’s microblog status verification, and apologized to the public. The Beijing Public Security Bureau (北京公安局) posted a series of three microblog posts saying that investigations have revealed that Guo Meimei and her mother had no direct ties with the RCSC.
However, these public reports, which read like official documents, were over-simplistic, and not only failed to calm the storm and appease the public, but aroused greater suspicions. By late June, the RCSC was being derided as the “Black Cross Society” and “Three Big Frauds” [Editor’s Note: the “Three Big Frauds” was coined by the popular economist Lang Xianping（郎咸平） who claimed that the RCSC took advantage of its monopoly of brand, blood and marrow donation, and public real estate.] The RCSC was mocked by thousands, and accused of “not being open and transparent in receiving donations”, “lacking credibility” and “turning donations into other people’s luxury cars and bags”, among others, as the complaints and accusations escalated.
Chapter 2: Suspending Activities of the Red Cross Society Commercial System
Even though there was no agency called “Red Cross Chamber of Commerce”, netizens discovered an organization called the “Red Cross Society Commercial System” (hereafter the RCSC Commercial System, 商业系统红十字会), could this have been the “Red Cross Chamber of Commerce” that Guo was speaking of?
On June 27th, the RCSC responded to questions regarding the RCSC Commercial System (hereafter the Commercial RSCS), stating that it was set up by the China General Chamber of Commerce (中国商业联合会) under the Law of the Red Cross Society of the People’s Republic of China, and is the RCSC’s industry association. The RCSC further explained that in accordance with articles of association, the RCSC established an organization like the Commercial Red Cross not to raise funds, but for purposes of organizational development. The RCSC’s main goal behind developing basic-level organizations, members and volunteers is to spread the Red Cross spirit and launch humanitarian relief work. In the event of a major disaster, it can also mobilize corporate and membership donations from within the industry.
Still, people continued to ask, what is the actual relationship between the organizations in the RCSC’s system and and the commercial organizations? Is this relationship harmful to the healthy development of public charities?
Ongoing investigations by netizens brought attention to three companies: Wang Ding Company (王鼎公司), China Red Cross Bo’ai Asset Management Ltd (中红博爱公司), and Zhong Mo Zhi Guo Advertising Company (中谋智国). According to available commercial information, the three companies are all interrelated. Wang Ding Company, which was registered in the same year as Commercial Red Cross, is involved in almost all activities of the Commercial Red Cross; Zhong Mo Zhi Guo Advertising Company share the same boss as Wang Ding Company; and Wang Ding Company is one of the shareholders of the China Red Cross Bo’ai Asset Management Ltd. The general manager of Wang Ding Company is also the daughter of the vice president of Commercial Red Cross. And the boyfriend of Guo Meimei happens to be one of China Red Cross Bo’ai Asset Management’s shareholders. After the “flaunting wealth” incident of Guo, he has resigned from directorship…
The revelation of these intricate personal relationships increased public speculation and suspicion, and public opinion on the internet turned one-sided.
On July 1, the RCSC released an official statement on its website regarding the “suspension of all activities by the Commercial Red Cross”, indicating the start of substantive measures.
In order to reduce public skepticism, the “RCSC Donation Information Disclosure Platform” went online on July 31 on a trial basis. First to be released was information regarding the use of donations received for the 2010 Yushu earthquake. However, the information disclosed by the platform was incomplete, vague about the usage of donations, and lacked third-party evaluation. The problems exposed by RCSC’s hasty response thus sparked off another wave of public dissent.
In their speculations, people continued to look for evidence, attempting to search for the truth through their own research. The media, in search of attention, exploited the public demand for truth by continuing to magnify the “Guo Meimei Incident.” As a result, an internet incident caused by a microblog post turned into a public crisis for China’s philanthropic sector. The credibility of the philanthropic sector became the focal point for 2011.
Chapter 3: The Donation Situation
China’s philanthropic sector was affected by this internet incident. The RCSC, caught in the vortex of this charity storm, saw its donations significantly affected. The Beijing Red Cross Society, for example, received 28 donations from the public totaling 154,400 yuan in July 2011. Of these, only eight contributions totaling 7,495 yuan were from individuals, a significant reduction from previous years when the monthly donation to the Beijing Red Cross Society was 1.24 million yuan in 2008, and 2.20 million yuan in 2009.
The donation situation, though, was relatively better when viewed over the entire year. According to incomplete statistics, the total revenue for the national RCSC in 2011 was 4.198 billion yuan, of which public donations amounted to 2.867 billion yuan, a significant decline compared to 2010. However, given that there were no major disasters in 2011, public donations in that year are not comparable with 2008 and 2010 [Editor’s Note: There were major earthquakes in Wenchuan in 2008 and Yushu in 2010]. Comparing 2011 instead with 2009, when there were no major disasters, gross public donations in 2011 actually showed a slight increase. Furthermore, according to the Chinese Red Cross Foundation’s 2011 Annual Report, individual donations made up 12.62% of total donations, with no significant change compared to normal years. These statistics suggest that in overall terms for the whole year, the Guo Meimei incident did not significantly impact annual public donations to the RCSC in 2011.
Chapter 4: A Period of Reflection
Chinese Academy of Social Sciences (中国社会科学院) researcher Ge Daoshun has been studying the RCSC since 2010. His research found that in the current institutional environment, the RCSC has to deal with a disorganized organizational structure, inadequate internal management and weak capacity, to name a few. “Local branches of the Red Cross depend on which local leaders are in charge of the Red Cross, on whose authority is greater – the leader in charge of the Red Cross or the leader in charge of the Charity Federation. The ability of the Red Cross to play a leading role locally depends not on the institution itself, but on the leaders in charge of it.
On August 11th, the China University of Political Science and Law (中国政法大学) held a “Jimen Decision (蓟门决策)” forum, in order to reflect upon the “Guo Meimei Incident”. Experts pointed out that the RCSC and the government have long had an awkward relation with regards to defining their relationship and division of responsibilities. Clarifying and improving this relationship will be crucial if the RCSC and other government-run public foundations want to extricate themselves from their predicament. It is now the burden of the RCSC’s policymakers to determine what kind of oversight and leadership mechanism to establish. With regards to how to understand and face the challenges brought about by the “Guo Meimei Incident”, the China Charity One Hundred Forum (中华慈善百人论坛) expressed the need for a collective voice to shape social opinion. [Editor’s Note: the China Charity 100 Forum is a group of well-known Chinese from around the world who gather to discuss China’s social development challenges.] On September 26th, “China Charity One Hundred” and the Tsinghua University NGO Research Center jointly organized the “Roadmap for Philanthropy Reform” seminar. At the seminar, Tsinghua University Center for Innovation and Social Responsibility (清华大学创新与社会责任研究中心) Director, Professor Deng Guosheng proposed that 2011 should not be defined as the year of chaos in the philanthropic sector, as there have been similar incidents in the past as well. Instead this should be the year to push for the transformation of government-run charities precisely because charities suffered a public crisis of confidence, and the charitable organizations that came under attack all shared one characteristic: they had close ties with the government.
Chapter 5: The Start of Reforms in the RCSC
In the eye of the storm, deputy party secretary of the National Population and Family Planning Commission (国家人口计生委) Zhao Baige was elected Executive Vice President of the RCSC on October 10, 2011. On taking over, she immediately presented a resolute attitude towards advancing structural reforms in the RCSC to increase its transparence and credibility, and reshape its image.
According to Vice President Zhao, Chinese society is currently undergoing a transition period. A government with too much power coupled with weak civil society organizations has resulted in the imbalance within China’s social structure. Many social problems are undergoing frequent outbreaks, but the public’s channels for participation have been blocked. The blow-up of a Weibo-triggered internet incident that brought the RCSC under public scrutiny is in reality the expression of grievances that have been accumulated over a long period of time, especially grievances regarding the government. Zhao does not deny that the RCSC has a wide range of management issues and deficiencies. She suggested that the RCSC’s poor communication with the media and its inability to grasp the importance of public relations was also an important reason the incident festered for so long.
She also noted that the RCSC must not shirk from the need to face the challenges brought by the incident. Information disclosure must be proactive and fast, allowing the public to know the truth. The RCSC needs to understand the public’s needs and expectations, accept the public’s criticisms and establish unimpeded channels of communication with the public. At the same time, it needs to improve its public relations and strengthen its cooperation with social media.
Since taking up office, Zhao has held several roundtable discussions with the media and met with a number of media players, discussing the challenges and solutions facing the RCSC with an open and frank attitude.
On October 22, at the “China Social Policy Series Forum – Exploring Reforms in the RCSC”, the Chinese Academy of Social Sciences (CASS) Social Policy Research Committee (中国社会学会社会政策研究专业委员会) brought together over 20 experts and scholars to provide advice to the RCSC on carrying out reforms. Vice President Zhao returned overnight to the city to attend the forum and participate in discussions, expressing before the forum’s end her desire for the CASS Social Policy Research Committee to organize a team of experts as soon as possible, inviting leading scholars from the CASS, the Development Research Center of the State Council (国务院发展研究中心), Peking University (北京大学), Tsinghua University (清华大学) and Beijing Normal University (北京师范大学) to join forces in providing research support to the RCSC’s reform plans. After the forum, the CASS Social Policy Research Committee promptly organized a team of experts, submitting their study “RCSC Reform and Development Strategies” to the RCSC.
On November 2, after discussions and approval by the RCSC, the CASS Social Policy Research Committee “RCSC Reform and Development Strategies Research Group” was formally established.
On December 30, the research group submitted a report comprising a main report and a series of six sub-reports. The report positioned itself on a strategic level, putting forward a series of innovative recommendations related to fundraising, financial management, project management, information management, advocacy and communication, external exchanges, and international cooperation.
This study prompted government agencies to pay more attention to the reform of the RCSC. On December 30, 2011, the RCSC held a “RCSC Reform and Development Strategy Research Group” conference, with Vice President Zhao and other RCSC leadership in attendance. Division Head Zhang Lina of the National Development and Reform Commission (NDRC) System Reform Division (国家发改委体制改革司) and other officials also attended the conference. Division Head Zhang stated that the NDRC has been looking for organizations to become part of the Social Organization Pilot Program which is part of the 2012 National Comprehensive Reform Pilot Program (国家综合配套改革试点中社会组织试点). If the RCSC showed the will to reform, it could be included as a national-level organization in the Social Organization Pilot Program. At the start of 2012, the authorities began drafting the document “Guiding Opinions on Promoting the Development of the Red Cross System”.
During this period, the RCSC began accelerating the recruitment of new talent and institution building. Starting in October, it began reforming the internal personnel cadre system, using various methods to recruit capable personnel. By the end of 2011, it had hired a large number of young, energetic adults through a system of open recruitment to take on mid-level leadership positions. The RCSC also focused its attention on reforming its financial system, separating the management of fiscal funds from that of social donations, in order to establish a sustainable mechanism of fundraising. Meanwhile, through information construction, the RCSC improved and perfected the method of disclosing donation information, building a sound system of disclosing and disseminating information on the management and deployment of donations.
On December 31, 2011, the RCSC publicly released the “Briefing on the RCSC’s Investigation of the Commercial Red Cross“ and “Report by the Investigations Group on the Issues Surrounding the Commercial Red Cross”. The Briefing put forward the need to carry out five reform measures: (1) Speed up the institutional reforms of RCSC; (2) Establish clear work procedures and standards for information disclosure; (3) Improve management of the Red Cross brand; (4) Strengthen anti-corruption efforts and focus on key risk areas like donations and procurement bidding, in order to promote greater transparency in donations and financial management; (5) Achieve greater transparency in procurement bidding and resource allocation.
The release of this Briefing at the end of 2011 once more drew attention from Weibo microbloggers. Compared to the one-sided voices of skepticism of before, there were more positive remarks this time. Some netizens affirmed the RCSC’s sincere attitude towards the investigations of the RCSC reform.
On February 15, 2012, the State Council’s Executive Meeting approved the National Comprehensive Reform Pilot Program submitted by the NDRC. The RCSC was included as a pilot in the National Comprehensive Reform for the Promoting of the Social Sector.
Thus marked the official start of the RCSC reformation.
Guo Meimei’s microblog showing off her wealth was forwarded more than one million times within a week, triggering widespread public attention. It marks the first time that Chinese society has encountered such an incident.
This internet incident sparked by a single microblog that then developed into a credibility crisis for the entire Chinese philanthropic sector stands as a defining event of 2011. One thing that has become generally accepted is that Chinese society has indeed changed. As China’s information society has developed rapidly, its awareness of public participation in social affairs has grown.
In this regard, the assessments of many scholars and policymakers are as follows:
Firstly, this incident did not happen by chance; it came about due to a confluence of social discontents. The first was dissatisfaction with the government’s lack of credibility, which was directed at the government-backed RCSC; The second was disapproval of how the nouveau-riche have flaunted their wealth, and suspicions about how they have used their capital as a springboard to appropriate public donations for their own benefit; The third was strong resentment against government-backed charities that work up a great fanfare around donations but were not open and transparent about how money was used.
Secondly, the occurrence of such an incident is an inevitable outcome under the current system. China’s philanthropy system still remains government-led instead of society-led. It is worth pondering that the idea of government-led economics has already been opposed by a Resolution at the Third Plenum of the 11th Central Committee [in 1978], which puts forth instead that the socialist market economy should rest on five pillars of the market economy: market actors, the market system, market regulation, market allocation and social security. [Editor’s Note: The Resolution of the Third Plenum of the 11th Central Committee marked the decisive point when China, under the leadership of Deng Xiaoping, embarked on a “reform and opening” strategy.] Meanwhile, the main role of the government is to leverage economic and social policies in order to foster an environment of fair market competition, while correcting for “market failure” in the areas of public services and social security through the efficient allocation of resources. Today, thirty years after the 11th Central Committee’s Resolution, should the government still maintain dominance in the philanthropy sector, even though it no longer has a leading position in the economy? In today’s market-led society, regardless of whether we are speaking of business or charitable enterprises, self-organization is an important feature. Is philanthropy ultimately an undertaking of the government, or of society and the public? What exactly is the relationship between the government, business, non-profit organizations, donors and beneficiaries? If these questions are not resolved, and a new philanthropic sector compatible with the market is not set up, then we will continue to see incidents like Guo Meimei.
Thirdly, viewed against the larger backdrop, this incident has a kind of butterfly effect in promoting social development. The fluttering of one butterfly creates a ripple effect that draws the Chinese philanthropic sector from the periphery of social and public life to its center. The immense pressure that it has created leads people to wonder whether the philanthropic sector must change, or otherwise arrive at a dead end.
Relaxing the constraints on society in order to let it grow: this is the important message that the public has handed to the government in 2011, through the Weibo microblog incident.
We are pleased to see that the Red Cross Society of China has been keen in receiving this information, and is ready to start on the road to reform.