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21st Century China: Does Civil Society Play a Role in
Promoting Reform in China?
Jenna Nicholas
Center for Democracy, Development and the Rule of Law Thesis
Spring 2012
Advisors:
Frances Fukuyama and Thomas Fingar
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Contents Page
Chapter 1: Introduction p. 3 Chapter 2: The Case for Reform in Social Sector
Organizations p. 9
Chapter 3: The Case for Transparency and Accountability in Social Sector Organizations p.29
Chapter 4: The Business Environment p. 47
Chapter 5: Government and Civil Society p. 57
Chapter 6: Conclusion p. 73 Appendix: p. 79 Bibliography: p. 91
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Chapter 1: Introduction
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Chapter 1: Introduction
Hypothesis
My hypothesis is that civil society has played an increasingly important role in
China over the past ten years in putting pressure on social sector organizations, business
and government to become more transparent and accountable. Modernization and
capitalism with Chinese characteristics have highlighted the need for reform in all sectors
of society. This, in turn, is producing a profound shift within China, leading to an
increasing demand for social justice and accountability, especially at the local level. It is
likely to be fraught with obstacles but in the end, I contend, China will have no choice
but to respond to the circumstances of the times.
Background
Chinas economic miracle and meteoric rise in GDP over the past ten years, under
the leadership of Hu Jintao and Wen Jiabao, is well documented. This period will go
down in Chinese history as an age of great industrialization and urbanization. It has lifted
hundreds of millions of people from poverty, improving living standards of a vast new
urban middle class, creating more billionaires than anywhere in the world except the U.S.
and turned China into the largest manufacturing center in the world. A top down
authoritarian regime has managed this great transition and, although China suffered
during the economic recession affecting the whole world in 2009, and growth has slowed
down, its economy is still strong. The Chinese Government is acutely aware, however, of
the need to boost its domestic economy and develop the poorer inland areas. Vast sums of
money have been allocated to this, but in many ways the results are so far uncertain and
there is much call for reform.
China may be number one in foreign exchange reserves but, in per-capita income
terms, it is still a developing country lagging behind the majority of the world. Whilst the
Chinese Communist Party (CCP) can perhaps no longer be described as a Party of
utopian ideology, but more a Party of material interests with a pragmatic agenda, it is
acutely aware of the increasing demands of civil society for justice and accountability as
well as for higher levels prosperity for all. It holds on tenaciously to its power and does
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not accept disobedience, but it is also resilient and resourceful. Furthermore, through the
new elite class, travel, trade and the Internet, China is now deeply and irreversibly
connected to the rest of the world. The need for transparency and anti-corruption
measures are playing increasingly important roles in Chinas civil society as it relates to
business, social sector organizations and governance.
Gold describes Chinas plight: China is vibrant, undisciplined, and rollicking,
yet simultaneously arbitrary, polluted, and oppressiveits leaders and citizens are
grappling with a relentless onslaught of unprecedented challenges, while also trying to
construct and consolidate institutions to manage the new order.1
For the purpose of this paper I define the scope of the sectors dealt with and
definitions used below:
Definition of Civil Society as it Applies to China Today
There are many different interpretations of what civil society means in the
Chinese context. Before the reform period began in the late 1970s, civil society,
translated as shimin shehui, was understood to mean capitalist society and therefore
carried a derogatory connotation. Since the reforms, a new translation, gongmin shehui,
has been adopted to emphasize the political meaning of civic engagement in public
affairs. It is now understood to refer to the realm or sector that belongs neither to the state
nor the market.2 The definition of the United Nations Development Program seems to be
the most appropriate for the purposes of this paper: civil society is the space between
family, the market, and the state; it consists of non-profit organizations and special
interest groups, either formal or informal, working to improve the lives of their
constituents.3
1 Gold, Thomas, China, Countries at the Crossroads, (New York, Freedom House, 2007)
2 Yu Keping, Civil Society in China: Concepts, Classifications, and Institutional Environment, China Academic Journal Electronic Publishing House, 2006, issue 1
3 UNDP, 2002
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Accountability and Transparency
The definition of accountability that will be used in this paper is the obligation of
an individual or organization to account for its activities, accept responsibility for them,
and to disclose the results in a transparent manner. The definition of transparency that
will be used is action, method or procedures that lack hidden agendas and conditions,
accompanied by the availability of full information required for collaboration,
cooperation and collective decision making.
Scope of the Social Sector
Social sector organizations are those that are delivering social services. This could
be through non-profit organizations, GONGOs (government operated NGOs), non-
governmental organizations (those registered NGOs with government supervision),
private foundations or public foundations. Also included are grassroots civil-society
informal and unregistered groups, or organizations registered as a business but
undertaking social work. There is also a brief consideration of the emerging sector of
social entrepreneurship and impact investing4. The role of transparency within this sector
is covered in a dedicated chapter to this topic together with information gleaned from
organizations and people visited in Beijing between April and August 2011.
Scope of Businesses
Chinas positioning as the workshop of the world and as a major economic
power has placed it under intense scrutiny, both in its dealing with business norms and
procedures on the international stage as well its corporate social responsibility in
enterprises within China. Calls for accountability and transparency, justice and fair
working conditions are becoming louder both from Chinas civil society as well as
international human rights and legal advocates. The chapter on business discusses the
ramification of these changes.
4 See Appendix 9 for a brief overview of impact investing and social entrepreneurship in China.
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Scope of Government
For the purpose of this paper I do not go into the intricacies of Chinese
government structure, but refer to the CCP (Chinese Communist Party) and their top
down approach to governance from the center to the provinces, to the townships and to
the villages. I contend that all measures taken by the government are intended to maintain
control from the top. However, as China is opening up to the world, the CCP is having to
remain alert to changing conditions and public opinion despite the fact that there are not
clear bottom-up channels for reform. The Internet is proving to be a major factor in
generating citizen concerns, which cannot be ignored by the CCP, despite attempts to
monitor and in many instances ban its use. So, far from being static and rigid, as is often
assumed from a Western perspective, the CCP is constantly experimenting and using the
best minds from China and the world to suggest innovative ideas to advance the declared
aim of creating a harmonious society. The CCP knows that failure to demonstrate the
will to be more sensitive to the changing times could lead to civil unrest and instability.
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Chapter 2: The Case for Reform in
Social Sector Organizations
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Chapter 2: The Case for Reform in Social Sector Organizations - A Historical
Perspective
Overview of Chapter
In this chapter, I hope to outline from a historical perspective how civil society in
China has coped with development and reform over the last thirty years, during which
time the focus of the Chinese government has been primarily on increasing GDP (gross
domestic product), sometimes at the expense of civil society. I will explore attempts
made by official government sponsored organizations as well as a growing number of
grassroots organizations that attempt to address pressing societal problems. Finally I
suggest that in response to civil unrest and the wide gap between the rich and poor in
China, that the government is becoming more responsive to civil society demands
for domestic reform aimed at facilitating, improving and funding social sector services as
well as loosening restrictions and supporting grassroots initiatives.
Civic Values in Chinese Society
Chinas unique historical experience of thousands of years of rule by emperors;
the role of communism and the rule of Mao Zedong; the Cultural Revolution and the
opening up that has taken place over the past thirty years, are all important factors to
consider when looking at the development of the social sector in China. Some argue that
Confucian ideology has played a really important role in shaping civic values in Chinese
history. Qiusha Ma suggests that, Before the Communist Party came to power, China
had many, many private associations and institutions, such as private schools and
hospitals5. Jessie Jiang suggests that, studies have referred to a millennia-long tradition
of philanthropy in China, rooted in Confucius ethical concepts of benevolence (ren) and
kindness (shan), which forms the basis of Chinese perception on volunteerism6. Li
Xiaoxiao argues that the concept of volunteerism has historically been defined as
5 http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_house_hearings&docid=f:86861.pdf
6 Han, 2009
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helping each other (huzhu) building up from the grassroots. 7 In addition to the
Confucian values of benevolence (ren), righteousness (yi), kindness (shan) and
truthfulness (xin), the current concept of volunteerism in China is also influenced by
civic values and growing understanding of the role of an emerging civil society,
especially in the context of globalisation and democratisation8. However, others suggest
that traditional China had a distinctly un-civic culture and that charity in China was
completely family-based with no basis for social trust between non-kin. It is for this
reason that Chinese society was characterized as a "loose tray of sand," where each grain
represented a family or lineage. Although influenced by Western concepts of civil
society, Chinese scholars have adapted and redefined the understanding of civil society to
include Chinese characteristics.
Under Maos Rule
Totalitarianism in the Communist state of China, under Mao, led to the breaking
down of all vertical links between individuals, including the family. Therefore by the end
of the Cultural Revolution any sense of individual liberty or community had been
shattered. The Brookings Institute suggests that, From 1948-78, when China functioned
under a planned economy system, social welfare was the responsibility of the
government, leaving no role for NGOs.9 Qiusha Ma further suggests that, After 1949,
first, the majority of civil associations were suppressed; and second; all the private
service providers were nationalized, following the Soviet Unions model. Therefore,
during that period in China there were no true private or non-governmental organizations
of any type. However, social organizations continue to exist and some old social
organizations, such as the Red Cross and other professional associations, remain.
Although eventually they were nationalized, on paper they were still called social
7 Li Xiaoxiao in Ding et al., 2007; 8-17 8 Appendix 4 looks at other motivations that people have for participating in philanthropic causes.
9 Zhang Ye, Brookings Institute, China's Emerging Civil Society, http://www.brookings.edu/papers/2003/08china_ye.aspx
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organizations.10 During this time, the focus was on participation in mass organizations,
rural collectives and the Communist Youth League. Any sense of civic responsibility
outside of state patronage mechanisms was not permitted. Carol Hamrin argues that this
history had a strong impact in shaping peoples conception of civic engagement. She
suggests, There is a deficit of humanitarian values throughout society stemming from
decades of class struggle mentality coupled with the current un-tempered pursuit of short-
term material gain.11
The Increase in Civic Consciousness
The state has traditionally played an extremely important role in China in terms of
the protection of citizens. Before Deng Xiaopings reforms in 1978, the danwei/work unit
system meant that people felt that they were supported by the state in such essential
services as healthcare and education. However, after the era of reform, this support
loosened up, and the vast majority of the population found themselves in dire need and
without support. It was clear that the distribution mechanisms for social services had to
be reformed and developed.
In the aftermath of the 2008 Wenchuan Earthquake in Sichuan Province, China,
many organizations gathered to try to determine what should be done. This earthquake
measuring 8 on the Richter scale struck Sichuan Province, killing around 90,000 people
and injuring 363,000, destroying more than 15 million homes and leaving 10 million
homeless and 1.5 million displaced. The estimated damage was $20 billion. The media,
in particular social media, was very quick to respond but the government was seen as
slow in their response12. The response was challenging because each of the NGOs
involved had their own mission and mandate and this was one of the first attempts to
form a coordinated response to a huge societal problem in China. Many people therefore 10 Congressional-Executive Commission on China, To serve the people: NGOs and the development of civil society in China. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_house_hearings&docid=f:86861.pdf
11 Carol Lee Hamrin, Chinas Social Capital Deficit, http://www.globalchinacenter.org/analysis/chinese-society-politics/chinas-social-capital-deficit.php 12 Appendix 7 shows the increase in media coverage of philanthropic causes.
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see the aftermath of the 2008 Wenchuan Earthquake as the beginning of a surge in
philanthropic engagement and strong civic responsibility in China. There was certainly a
great increase in philanthropic activity and donations from 2008 to 2010.13
The Hauser Center for Non-Profit Organizations argues that, The growth of
philanthropy in China is dramatic. Spurred by the 2008 Beijing Olympics and the
Szechuan earthquake in May of that year, 2008 became the first year of philanthropic
China.14 Despite the philanthropic activity that existed before 2008, the earthquake had
an important impact in terms of galvanizing the laobaoxing, or ordinary citizens, around
social causes.15 John Giszczak, Programme Division Coordinator of Save the Children,
China, argues that the Sichuan Earthquake of 2008 brought to peoples attention that the
government did not have much experience in dealing with any organization outside its
own direct rule. In the case of the immediate and overwhelming aid that was required
during and after the earthquake, NGOs, both foreign and local stepped in to fill the
breach. This underscored a grave deficiency in the Chinese Governments ability to
handle such disasters and coordinate between aid initiatives. The response to the Yushu
earthquake of 2010 was even more poorly managed.
The relative success of some NGOs in handling crises without posing a threat to
the government has led to a tentative trust and cooperation between the two, affording
more opportunities for civic engagement, for both registered and unregistered
organizations. Thomas Gold suggests that currently more and more Chinese are
participating in civic life on their own, such as in NGOs or via Internet chat rooms and
blogs. Chambers of Commerce, with local and foreign members, have also begun to 13The earthquake inspired an increase in donations from RMB13.3 billion in 2007 to RMB76.4 billion in 2008 and highlighted philanthropy as an important approach to addressing these issues. Business for Social Responsibility, Catalyzing Social Investment in China, http://www.bsr.org/reports/Catalyzing_Social_Investment_in_China_BSR_CiYuan_November_2011.pdf Business for Social Responsibility (BSR) works with its global network of more than 250 member companies to develop sustainable business strategies and solutions through consulting, research, and cross-sector collaboration.
14 P.152, Alex MacGillivray, Gefei Yin (China WTO Tribune), Kate Ives (Accountability), Joshua Wickerham and Yi Shi (Accountability), The state of responsible competitiveness, 2009 15 Business for Social Responsibility, Catalyzing Social Investment in China http://ciyuan.bsr.org/data/resources/Catalyzing_Social_Investment_in_China_BSR_CiYuan_November_2011.pdf
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assume an important role in Chinese life.16 Foreign NGOs, however, are under more
stringent restraints and surveillance as the government is ever watchful for subversion or
anti-government rhetoric.
Structure of Social Sector Organizations in China17
According to Xu Wang, There are three types of civil society organizations
within the Chinese context, all of which are called civilian non-state organizations18
The first group comprises social organizations, which are membership-based entities.
Included in this group are GONGOs (Government Operated NGOs) focused
predominantly on associations such as sports, business, academic and other such areas of
civil affairs, such as the Red Cross Society. The second group comprises of foundations,
which are fund and asset based. These are split up into private and public foundations.
The third group incorporate what are referred to elsewhere as non-governmental
organizations (NGOs) and civilian non-enterprise units such as private schools, non-
profit hospitals, and social service agencies which have a public-interest objective.
Those organizations that are not able to comply with the registration process for an NGO
register with the Bureau of Industry and Commerce and are considered as businesses with
a social cause. Technically, those not registered at all are considered illegal.19
GONGOs (Government Operated NGOs)
One of the largest contingents of social sector organizations in China are the
government operated non-governmental organizations (GONGOs).20 According to the
Hauser Center, many of these GONGOs are able to gain an edge over other non- 16 P.18, Thomas Gold, China, Countries at the Crossroads 17 See Appendix 2 and 3 for statistics on social sector organizations
18 Anthony J. Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs http://www.jstor.org/stable/10.1086/660741#rid_rf1 19 Ye Zhang, Chinas Emerging Civil Society, http://www.oycf.org/Perspectives2/22_093003/2b.pdf
20 Zi Zhongyun, Crossing the New Threshold.
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governmental organizations through a de facto unfair competition.21 Chen Jie suggests
that, One major category of GONGO is born of traditional Leninist mass organizations
(renmin tuanti). There are eight of them, including the All China Youth League, All
China Womens Federation, and the All China Federation of Trade Unions. The
government is trying to gradually restructure the function of these mass organizations
away from their original role as Communist Party overseers of particular constituencies,
towards one more of service facilitation and provision. As a result, satellite agencies
(associations and foundations) have been created.22 According to Chen Jie, The fear of
bottom-up social mobilization as well as practical needs have led the government to
create a semi-official NGO sector, a policy practiced with increasing enthusiasm from the
1990s. Government and Communist Party departments at various levels have been setting
up foundations and other organizations to advance charitable, research, information and
policy objectives.23 Spires suggests that the GONGOs are much more likely to attract
foreign funding than grassroots NGOs. This is because many of the grassroots NGOs,
due to difficulties with registration, often find it difficult to achieve legal status and are
sometimes working on radical issues. Therefore foreign funders often prefer to work with
professional and hierarchical grantees within existing institutional structures. As is seen
from the table below, the majority of US foundation giving has bypassed grassroots
NGOs. From 2002 to 2009, academic, government and GONGO grants together counted
for 86% of total grants. Whereas grassroots NGOs received only 5.61% of the total
grants.
21Hauser Center, Shenzhen Government Delegates Some of Its Functions to Social Organizations, http://hausercenter.org/chinanpo/2009/11/shenzhen-government-delegates-some-of-its-functions-to-social-organizations/
22 Chen Jie, The NGO Community in China 23 Chen Jie, The NGO Community in China
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NGOs (Non Governmental Organizations)
There is a difficulty in the conception of NGOs in China because of the fear that
they could be seen as anti-government. Therefore the term minjian zuzhi or the
peoples sphere organization is often preferred to the term fei zhengfu zuzhi as the
prefix fei implies anti government.25 Any group that wants to establish a social
organization has to register through The Ministry of Civil Affairs and they are overseen
by the relevant affiliated supervisory branch. However, this can be an extremely difficult
process in terms of application to the institution and being monitored by it. They are also
closed down very quickly if they are seen as a threat. Anthony Spires suggests that the 24 http://yaleglobal.yale.edu/content/us-foundations-boost-chinese-government-not-ngos
For more information on US donor giving, see Appendix 9
25 Anthony J. Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs http://www.jstor.org/stable/10.1086/660741#rid_rf1
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requirement to have a supervisory agency can be viewed as an enervating control
mechanism. However, the former head of the Ford Foundations Beijing office and
political scientist, Tony Saich suggests that registered NGOs can operate within the
constraints of the regulations in a fairly efficacious, albeit not completely independent,
manner. Saich, as others, argues that such organizations benefit from the legitimacy and
protection extended by their sponsoring agency and may also be granted greater access to
decision makers as new policies relevant to the field of their activities are formulated.26
Around 2002 was the time, according to Shue, when shehuihua, societalization, of
bringing society back into public service delivery, was trumpeted by the Chinese
government as an important reformist initiative that would help to relieve the heavy
welfare burdens on the state and mobilize otherwise dormant social forces and resources
for good causes. The government also wants to ensure that they can monitor civil society
and therefore does not enable civil society to develop as an autonomous unit. Xiaomin
Yu, a professor from Beijing Normal Universitys School of Development and Public
Policy, suggested in an interview that the Chinese government want to develop a strong
third sector as service providers rather than as a social movement. The Hauser Center
suggests that currently the government sees itself as the sponsor of all social
organizations. Instead, it seems as though it would be more advantageous for the
government to see social sector organizations as partners and establish mutual respect
with them. Ma Qiusha suggests that despite the large role of government in NGOs, NGOs
are still the mechanism through which people participate in public affairs, develop their
personal interests and get their voices heard.27
Gold suggests that, The governments policies toward NGOs pass through
alternating periods of restriction and loosening, and the shifts are often
unpredictableThe restrictions on NGOs are clearly motivated by the CCP (Chinese
Communist Partys) concerns that groups in China, including foreign ones, might play 26 Anthony J. Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs http://www.jstor.org/stable/10.1086/660741#rid_rf1 27 Congressional-Executive Commission on China, To serve the people: NGOs and the development of civil society in China. http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_house_hearings&docid=f:86861.pdf
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the same sort of role as those in Georgia, Ukraine, and Kyrgyzstan in fomenting Color
Revolutions.28 The chart below gives some indication of how the government views
certain sectors:
Government generally supportive/mutually beneficial
Government generally not supportive/controversial
Running orphanages HIV/AIDS
Delivering care to the elderly or disabled
Tibet and other minority groups rights issues
Providing education and other forms of welfare to the rural poor, especially girls
Migrant education
Nonetheless, numerous NGOs, especially in the environmental field, operate very
actively in China. Although there are no established channels by which civic
organizations can participate in the policy process, they comment quite forcefully on
affairs of the day through their websites and blogs. They have had some successes, such
as delaying (but apparently not canceling) dam building on the Nu River in the southwest
and on a sacred Tibetan lake.29
Foundations
There is a significant distinction in China between private and public foundations.
Foundations, in particular public foundations, traditionally act as operating entities rather
than grant-making foundations supporting NGOs. However, recently some public
foundations have taken on the role of grant making. Private foundations are independent
but are often associated with a company e.g. Vantone, Narada and Soho. Li Jing,
Secretary General and Executive Director of the Vantone Foundation, suggests that there
are an increasing number of public foundations which are beginning to follow the models
set by private foundations in innovation and grant-making with the encouragement and 28 Thomas Gold, China, Countries at the Crossroads 29P.7, Thomas Gold, China, Countries at the Crossroads
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support of the government. Examples of this are the China Youth Development
Foundation and the China Poverty Alleviation Fund, which have recently been given
greater autonomy. According to statistics from the China Foundation Center, in 2011,
China had 1,284 non-public foundations and 1,181 public foundations as is shown in the
graph below.30 Even foundations that are trying to follow a grant-making model, find it
difficult to develop their capacity to fundraise. Currently, the non-public foundations do
not have the legal right to fundraise from the general public; instead they can only
fundraise from specific individuals. When private foundations give grants, they want to
see tangible results showing how their money has been used. When the NGOs do not
produce tangible results, distrust arises which raises the whole issue of transparency and
accountability. The lack of this leads to distrust, which in turn leads to less assistance.
A model of contingent symbiosis
It is important to consider ways in which the state and civil society can work
together to pursue mutually beneficial goals. Spires suggests that in the case of China, it
is important not to consider state and society as being inevitably in opposition and
30 Cheng Yingqi, Scandals put a big dent in donations http://www.chinadaily.com.cn/china/2011-10/19/content_13928884.htm
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unalterably in competition with each other for influence and authoritythe relationship
between the two need not be imagined as zero-sum.31 According to Spires, there seems
to be a shift from a corporatist model to a model of contingent symbiosis between state
and social sector organizations in China. Corporatism is a system of economic, political,
or social organization that involves association of the people of society into corporate
groups such as agricultural, business, ethnic, etc. on the basis of common interests.
Corporatism is theoretically based upon the interpretation of a community as an organic
body. Often a corporatist model is used to describe how authoritarian states ensure tight
control over interest groups and prevent democracy from arising. Contingent symbiosis,
Spires suggests, acknowledges the real-life micro level negotiations that take place
between the state and bottom-up associations. It is in these details that we can start to
understand both the possibilities and the limits of political life in an authoritarian
regime.32 Spires further suggests that: While this may reflect the relationship between
government and official NGOsGONGOs, to be more accuratecorporatism cannot be
suitably applied to understand the existence and survival of ostensibly illegal grassroots
organizations.33 The protagonists of this model of contingent symbiosis suggest that
despite the fragility of the NGO-government relationship, such a relationship is
beneficial. Vivienne Shue agrees with Spires that there is an intriguing relationship that
exists and extols the mutual benefit achieved, between the emergence of a robust sphere
of civil associational life, on the one hand, and the consolidation of social power in
relatively strong or resilient state organizations, on the other. Putting it in simple terms,
we might propose thatunder certain conditions at least, strong and robust civil
associations can go together with powerful and resilient states.34
31 P.2, Vivienne Shue, The political economy of compassion
32 Anthony J. Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs http://www.jstor.org/stable/10.1086/660741#rid_rf1 33 Anthony J. Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs http://www.jstor.org/stable/10.1086/660741#rid_rf1 34 Shue, 1994:66
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The Growth of Civil Society - Grassroots
The last decade has seen the emergence of a large number of grassroots
organizations. These groups are formed by Chinese citizens, some registered as
businesses and some not registered at all. Professor Wang Ming of the Tshinghua
University NGO Research Centre suggests that despite the fact that the official statistics
from the Ministry of Civil Affairs in 2010 suggest that there are 400,000 social sector
organizations; it seems as though the unofficial figure of 3-4 million is much closer to
reality. This research is based on rigorously going through old periodicals to find groups
that act as NGOs but have not officially registered.35 The advantages of them registering
is that they have the legal protection of the state and they are not acting illegally.
However the disadvantages of trying to register are that often the registration
requirements are too onerous and many groups prefer to avoid contact with the
authorities.
They perform an important function in society, engaged often in providing
essential social services to local communities. However, the government is often fearful
of fully empowering organizations to take responsibility for social causes for fear they
will not be able to control them. In an interview with Jianyu, a Tshinghua Professor, he
said, The Chinese government is cautious about supporting civil society because there is
fear that civil society organizations might play an anti-government role. Mutual trust
develops over time through social capital and organizations sharing resources amongst
themselves. 36 Therefore, unless the social sector organizations cause a social
disturbance or incite violence, by and large the government leaves them alone. Spires
quotes one grassroots activist as saying: In China, if the government doesnt say no,
you can experiment and understand their failure to say no to mean yes, or you can say
I thought since you didnt say no, I could do this. Thats the way things work here. So
35 Statistics from Chinese Ministry of Civil Affairs, Bureau of Management of Nongovernmental organizations, http://www.chinanpo.gov.cn/web/listTitle.do?dictionid=2201
36 This interview took place between April and August, 2011
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we do take some risks here in our work.37 One supportive government official explains
the suspicion from the governments perspective as follows, Not enough government
officials know anything about civil society. Some of them are very afraid of it, wondering
what it is and what political motives people haveBut I think that the government needs
to understand that civil society in China today is not political. These NGOs, the
grassroots NGOs who are mostly registered as businesses, theyre outside of the civil
affairs system, but theyre not looking to do anything political. Theyre trying to help
alleviate poverty or provide educational assistance or help people with diseases. This
is something the government needs to understand.38
There is additionally an incentive system for local government officials in
supporting grassroots initiatives. The officials are largely judged based on GDP so
decisions they make are often based on short-term economic growth rather than long-
term social benefit. Officials are also judged based on the lack of social unrest, disruption
and protests that take place in their area of jurisdiction. Therefore, the existence of both
official and unregistered social organizations that are addressing important social
challenges can be seen as useful to local officials. The officials are able to take credit for
positive social activities but attempt to hide unfavorable or unsuccessful ones. In like
manner, government-NGO conflicts do not necessarily represent central government
directives but rather clashes of interest between local NGO activities and local political
and economic interests.
Some social sector organizations, however, make their protests louder. Spires
comments that in more candid moments, many civil society spokespeople present
themselves as critical thinkers, patriotic progressives who dare to pursue the promises of
socialism that the government has seemingly abandoned in the name of economic reform.
With the Internet penetration into more households and daily lives, the information flow
has increased exponentially in recent years. It has become harder for social tensions to be 37 Anthony Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs
38 Anthony Spires, Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of Chinas Grassroots NGOs
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ignored or suppressed by powerful interests or some local governments. Civil society
groups allow the disadvantaged to be heard. Some take it to the next step.
Mounting Unrest
In an environment where civil society has very limited ability to apply pressure on
the government to rectify ills of social justice; where there is little rule of law, and
grievances are dealt with in an ad-hoc manner, it is not surprising that the only recourse
open to citizens is to resort to demonstrations, protests and occasionally to riots. Civil
unrest is officially known as mass incidents in China. It would seem that as China
surges ahead in becoming a world economic power and the Chinese elite are enjoying all
the excesses, which money can provide, the poor are becoming understandably aggrieved
and mass incidents are increasing exponentially. According to a report in Open
Democracy Shenzhen alone, one of the more advanced industrial centers in China has
officially registered about six hundred unexpected mass incidents each year from 1990
onwards. Whilst there is no way of confirming the accuracy of the data, statistics have
been taken from various sources to indicate that grievances range from issues of
unemployment, pensions, wages, corruption, tax collection problems, misuse of funds,
widespread informal bankruptcy, neighborhood and housing issues, land acquisitions,
forced relocations, environmental damage and mismanagement. A graph representing the
rise in protests is shown below.
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39
The strategy mostly used by the government is mainly to adopt measures between
concession and repression and to keep the protests localized. What the party seems to
fear the most is coordination between groups or across provinces, which would render the
situation untenable for the CCP. Wen Jiabao called for urgent political reform in his
final news conference on March 14th 2012, cited in the China Post. He said: New
problems that have cropped up in Chinas society will not be fundamentally resolved, and
such historical tragedy as the Cultural Revolution may happen again.40 This would 39 1993-94 data from Murray Scott Tanner (2004) China Rethinks Unrest, The Washington Quarterly, Vol. 27, No.3, Summer 2004, pp 138-39; 1995- 2002 data from Albert Keidel (2005) The Economic Basis for Social Unrest in China, Carnegie Endowment for International Peace- for The Third European- American Dialogue on China; 2003-2004 data from South China Morning Post, July 7, 2005; 2005 data from Thomas Lum (2006) Social Unrest in China, CRS Report for Congress, Congressional Research Service; 2006-07 data from Ben Blanchard (2011) Riot in South China After Fruit Vendor Allegedly Beaten to Death by Officials, July 27, 2011; 2008 data from Goh Sui Nui, (2010)Political Reform, China Style, Asia New Network, November 4, 2010; 2009 data for from Gordon C. Chang (2011), Repression in China Losing Its Effectiveness and Its People are Becoming Defiant, Fox News, April 25, 2011. Elizabeth J. Perry and Merle Goldman (2007) Grassroots Political Reform in Contemporary China, Harvard University Press, Cambridge.Ching Kwan Lee (2007) Against the Law: Labour Protests in Chinas Rustbelt and Sunbelt, University of California Press, London. Susan L. Shirk (2007) China: Fragile Superpower, Oxford University Press, New York. Jenifer Huang McBeath and Jerry McBeath (2010) Environmental Change and Food Security in China, Springer Dordrecht Heidelberg, London.
40 Tania Branigan, China needs political reform to avert 'historical tragedy', says Wen Jiabao http://www.guardian.co.uk/world/2012/mar/14/china-political-reform-wen-jiabao
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explain also why China is so adamant about controlling the civil society organizations
and the Internet.
Meeting Social Demand
It is assumed that the Chinese government is able to act uniformly to ensure
control over the various provinces and social service organizations within them, with a
top-down directive. However in todays China the central government in Beijing enjoys
much less control over these provinces and receives far less feedback. It relies heavily
on the social sector to meet social needs and, as incentives are given to local and
provincial level authorities based on the economic performance in their areas of control,
societal development often takes second place. Much of the community-based social
service is government driven but relies on civil society participation, as the government
cannot take all of the financial responsibility.
For a number of years the government has referred to building a harmonious
society. In the National Peoples Congress in 2005 and in the recent 12th 5-year plan, it
refers to inclusiveness and improving peoples livelihoods by way of the promotion of
happiness, sustainability and addressing economic disparity. As much as this may be
rhetoric, it acknowledges the fact that there are problems with the provision of social
services. Carol Hamrin suggests that, To NGOs on the receiving end of policy, the
(focus on building a harmonious society) appears to be a cover for cutbacks in state
funding, without adequate tax incentives for donors or protection for genuine autonomy
in decision-making. This problem is aggravated by the fact that there is little
communication and coordination amongst the NGOs. Furthermore, there is often a
disconnect between the NGOs and other sectors of society.41 The UNDP has been
working with the government on public-private partnerships. These partnerships are often
useful because they help to keep each organization accountable.42 Linxiu Zhang of the
Rural Education Action Project further reiterated in an interview the importance of
participatory governance whereby there was teamwork between local organizations and 41 Carol Lee Hamrin, Chinas social capital deficit http://www.globalchinacenter.org/analysis/chinese-society-politics/chinas-social-capital-deficit.php 42UNDP, Public Private Partnerships, http://www.undp.org.cn/modules.php?op=modload&name=News&sid=12&file=article&pageid=3
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policymakers. In this way, each is able to bring their expertise to the table and each is
able to benefit from the other.
In a report in Caixin newspaper on April 6th 2012, East China Normal University
Professor Xu Jilin says it is no longer a question of whether social organizations will
reform, but when the next step will be made. He is further quoted as commenting: If
there are no grassroots-level reforms, top-down reforms will be rendered ineffectual43.
Xu Jilin further argues that, in the absence of vibrant social organizations, harmful
activities fill a vacuum of services catering to social needs.44 For example, the
emergence of criminal gangs.
This raises the whole issue of building trust. Bonds of trust and cooperation help
to promote the strength of the social sector and depend heavily on transparency. Putnam
argues, "In all societies dilemmas of collective action hamper attempts to cooperate for
mutual benefit, whether in politics or in economics. Third-party enforcement is an
inadequate solution to this problem. Voluntary cooperation (like rotating credit
associations) depends on social capital. Norms of generalized reciprocity [for favors
received] and networks of civic engagement encourage social trust and cooperation
because they reduce incentives to defect, reduce uncertainty, and provide models for
future cooperation. Trust itself is an emergent property of the social system, as much as a
personal attribute. Individuals are able to be trusting (and not merely gullible) because the
social norms and networks within which their actions are embedded.45"
Premier Wen Jiabao, in a report released on March 19th, 2012, pushed for further
social innovation and for redefining the relationships among the government, citizens,
and social organizations46. The Chinese Ministry of Civil Affairs has recognized the 43 Wang Su, In the Field of Social Organizations, a Constant Need for Reforms http://english.caixin.com/2012-04-06/100376927.html 44 Wang Su, In the Field of Social Organizations, a Constant Need for Reforms http://english.caixin.com/2012-04-06/100376927.html 45 p.177 Robert Putnam, Making Democracy Work: Civic Traditions in Modern Italy
46 Social media give voice to the disadvantaged http://www.herald.co.zw/index.php?option=com_content&view=article&id=37075:social-media-give-voice-to-the-disadvantaged&catid=45:international-news&Itemid=137
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need for a supportive legislative framework for social sector organizations. On July 4,
2011, Li Liguo, the head of the Ministry of Civil Affairs, announced that charity, social
welfare, and social service organizations would be permitted to register directly at local
civil affairs agencies. This initiative was spearheaded by Guangdong provinces recent
reforms relaxing the registration requirements for social organizations. These reforms
were followed up with The Standing Committee of the Guangzhou Municipality Peoples
Congress passing a law entitled, Guangzhou Municipalitys Fundraising Regulations.
This enabled more social organizations and public institutions to expand their fundraising
activities.47 It is hoped that this will set the pace for reforms across the country. The
greatest hope and aspiration of Chinese civil society organizations is that they can bridge
the ever-widening gap between the rich and poor. Lifting people out of poverty could
also have marked advantages for Chinas domestic markets, especially now that China
can no longer depend on sustained growth in exports.
The jury is still out on whether the new administration will implement the reform
measures outlined by Premier Wen Jiabao in his last public speech, but few doubt the
need for such measures. It is worth speculating that if the government put as much effort
into creating a harmonious society as it has done in achieving the miraculous economic
growth China has witnessed, then the world may in many ways look to China as the new
paradigm of world order.
47 China Development Brief, Guangzhou frees fundraisers http://www.chinadevelopmentbrief.cn/?p=603
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Chapter 3: The Case for
Transparency and Accountability in
Social Sector Organizations
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Chapter 3: The Case for Transparency and Accountability in Social Sector
Organizations
During my five month stay in Beijing in 2011, I visited more than seventy
organizations offering some form of social benefit to the Chinese society, from
Registered Government NGOs (GONGOS) to NGOs, to Public and Private Foundations,
to philanthropists, to grassroots organizations (civil society). My aim was to interview
each to get a sense of how the social sector has developed in China over the past ten
years, what role various organizations play and what relevance transparency and
accountability have played in their development. My particular interest was in looking at
the benefits and challenges for each sector providing a social service, the role of the
government, and trends over the past ten years in relationship to the broader questions of
modernization in 21st century China.
One of the greatest challenges in the development of Chinas social sector is the
legitimacy for providers of services, for donors, for recipients of non-profit organizations
(NPOs) and for the general public. It is also important to make sure that money is being
used effectively. The absence of transparency in social sector organizations has been
important in a number of recent famous cases. Various non-profit organizations in China
have been discredited due to claims of corruption and this has had negative repercussions
on the sector in general. Transparency is important from the perspective of donors,
recipients and the government. If there is no transparency, then the organizations become
de-legitimized and cannot be trusted by either donors or the government. Transparency is
therefore considered as a means to an end where the end is effective delivery of social
services. Unless there are more transparent organizations, there is no way that the sector
will gain legitimacy and that these organizations will be able to receive funds and thrive.
Transparency in social sector organizations: a comparative perspective
Transparency is incredibly difficult to encourage, irrespective of the country or
organization concerned. Whether it is foundation leaders reporting the provenance of
their donations or the philanthropic organizations accountability on distributing funds,
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transparency is a murky area. It may not be a question of dishonest dealings, it might be
just a reluctance in the philanthropic sector to openly report failures for fear that this will
have negative repercussions on the branding of the organization and hence peoples
willingness to donate. It has been widely observed that there is not an open discussion of
failure within the philanthropic sector. Organizations want to present a positive image of
themselves and often do not want all of their work to be evaluated. This is particularly the
case with respect to US foundations that have a huge repository of data and information
but often do not reveal this information to the public. The supposition is that if there are
any negative issues revealed, or failures reported, this may disincline the American public
from donating. There are various initiatives based in the US that are focused on
promoting transparency. For example, Guidestars mission is to revolutionize
philanthropy and nonprofit practice by providing information that advances transparency,
enables users to make better decisions, and encourages charitable giving.48
The National Committee for Responsive Philanthropy (NCRP) in the United
States works on promoting transparency and conducting action research. They analyze
and advocate for the support of institutional philanthropy operating with integrity and
openness.49 In Hong Kong, the National Council of Social Service50 plays an important
role in promoting transparency and impact measurement. Stoner Weiss describes the
difficulty for civil society organizations in Russia, civil society and non-governmental
organizations (NGOs) have been stifled through legislation that imposes onerous re-
registration requirements. A few of these organizations have been unceremoniously
raided and closed by the authorities, while human rights and democracy groups have been
accused of pushing an agenda that benefits foreign states. More generally, civil society
finds itself increasingly unable to serve as an effective check on abusive state practices at
a time when the hollowing out of political opposition has increased the importance of
48 GuideStar, http://guidestar.org/
49 National Committee for Responsive Philanthropy, http://www.ncrp.org/campaigns-research-policy/accountability
50 National Council of Social Service, http://www.ncss.gov.sg/home/index.asp
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external monitoring.51 Russia, like China, is fearful of negative feedback from civil
society organizations.
Why is transparency in social sector organizations in China important?
Lack of transparency and accountability in social sector organizations is one of
the biggest hindrances to charitable giving and the development of the social sector in
China.52 The various cases of corruption reported over the past couple of years have had a
very negative affect on the perceptions of Chinese civil society.
The US has taken steps to encourage accountability in social sector organizations.
The US government requires non-profit organizations, or 501C3s, to complete annual tax
forms (entitled 990 forms), which provides an accountability mechanism; the absence of
completely stringent requirements in China impedes accountability. Donors often have no
idea how their money is spent. Deng Guosheng, an associate professor at Tsinghua
Universitys School of Public Policy and Management, suggests that, Charitable
organizations seldom respond to donors requests for information about financial reports
so few donors have a clear understanding of what their money is used for and what
effects it brings about.53 Over recent years, there has been an increase in annual
philanthropic giving. However, in a recent survey of people who donated to the Sichuan
relief efforts, Deng found that of the 1,684 who responded, more than 60 percent had
little or no idea how the money was being spent.
Tsinghua's Deng argues that although there is officially a national tax deduction
policy for charity donations, these are often extremely difficult to actually claim. Jessie
Jiang argues that, Today, even for China's nouveau riche who are willing to give, 51 P.2, Stoner-Weiss, Kathryn, Russia, Countries at the Crossroads
52 According to Business for Social Responsibility (BSR), Beijing, While the growing dollar amount of donations is encouraging, the donations impact also deeply matters. Frustrated by the lack of information about how their donations have been used, individuals and corporate donors are demanding increased transparency from organizations. Catalyzing Social Investment in China: http://ciyuan.bsr.org/data/resources/Catalyzing_Social_Investment_in_China_BSR_CiYuan_November_2011.pdf
53 Hauser Center, Donors Kept in the Dark on Where Money Goes http://hausercenter.org/chinanpo/2010/06/donors-kept-in-the-dark-on-where-money-goes/
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government policies often fail to encourage charitable actions...Moreover, the policy only
applies to donations made to the very few government-sanctioned charities, which are
commonly blamed for lack of transparency or even corruption.54 Domestic foundations
receive annual government inspections and submit annual reports every year, but the
responses are only accessible by the government, not the public. A lack of rating agencies
also contributes to the problem. Apart from government supervision, there are no
independent third-party agencies monitoring these charities.55 Deng Guosheng further
argues that the scandals in the social sector industry might disappoint the public, but
refusing to donate was not a reasonable action and it would eventually hurt people in
need. Instead, people could and should invest time in finding the most transparently
operated charity organizations.56
The State and transparency
Transparency is important both from the perspective of the government and
society. Transparency regarding the activities of social sector organizations is important
for the government because it is helpful for them to know what types of activities these
organizations are engaged in so that they can develop stronger partnerships with these
organizations. For the general society, transparency is important because it helps to build
trust in the social sector organizations. The Ministry of Civil Affairs suggests that, Still,
much can be done to improve the professionalization and accountability of Chinas
burgeoning civil society sector. The governments proposed reforms to expand
registration options for NGOs in China will help broaden the scope and potential of civil
society to promote responsible competitiveness.57 Zhou Xiaozheng, a professor of
sociology at Renmin University, suggests that, "We urgently need laws to regulate the
area of charityPeople can't just say they are going to donate to charity, receive the
public's praise and do nothing afterwards. 58" Zhou further points out that promised 54 Jessie Jiang, Amid China's Economic Boom, Philanthropy Lags http://www.time.com/time/world/article/0,8599,2027055,00.html 55 Hauser Center, Charity transparency criticized, http://hausercenter.org/chinanpo/2011/02/charity-transparency-criticised/
56 Global Times, Trust in charities waning http://china.globaltimes.cn/society/2011-04/646502.html
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charity recipients have the right to sue donors for fraud if they do not carry through on
their promises. However, this channel is rarely used, as there is limited legal support for
transparency cases.
The Wenchuan earthquake of 2008 had a significant impact on transparency in
philanthropic organizations in China. The state insisted on maintaining control over all
emergency aid initiatives. Brian Hoyer suggests, Although the state deserves praise for
its handling of the response, a lack of transparency in terms of specific data and details of
the response have concealed many of these successes, as well as obscuring areas for
improvement.59 After the initial rush of donations had passed, the disaster and the large
donations triggered public scrutiny and transparency over the use and impact of
charitable funds. 60
Challenges of promoting transparency amongst donors
The Chinese philanthropists are generally unwilling to divulge much information
about philanthropic activities they undertake. This proved to be a potential problem
when Bill Gates and Warren Buffett organized a dinner for Chinese billionaires on
September 29th 2010. Many of the invitees were concerned that they would be asked to
participate in a public pledge.61 One of the reasons that people are reluctant to be too
public about their giving is the fear that they will then be harassed to donate to many
different causes. One philanthropist that I interviewed in Hong Kong indicated that 57 Statistics from Chinese Ministry of Civil Affairs, Bureau of Management of Nongovernmental organizations, http://www.chinanpo.gov.cn/web/listTitle.do?dictionid=2201
58 Beijing Global Times, Checking up on charity, http://beijing.globaltimes.cn/society/2011-04/635928.html
59 Brian Hoyer, Humanitarian Exchange Magazine, Lessons from the Sichuan earthquake http://www.odihpn.org/report.asp?id=3008 60 Business for Social Responsibility, Catalyzing Social Investment in China http://ciyuan.bsr.org/data/resources/Catalyzing_Social_Investment_in_China_BSR_CiYuan_November_2011.pdf 61 However, approximately two-thirds of the invitees eventually came.
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Chinese billionaires have an iron-wall security around them protecting them from being
harassed by the many needy people and organizations. However there are some
exceptions to this. Some people enjoy the public attention that they receive from giving
and are actually criticized for how public they are about their giving. For example, Chen
Guangbiao, president of Jiangsu Huangpu Renewable Resources Company, constructed a
money wall at the Industrial and Commercial Bank of Chinas (ICBC) Jiangsu Branch
to collect donations. The wall had 330 bricks made up of 100-Yuan bills worth 100,000
Yuan. He also goes into the streets and hands out money and encourages others to do the
same.62 He visited Taiwan in early 2011, on a thanksgiving trip to thank the Taiwanese
for their contribution to the Wenchuan earthquake relief effort63.
However, the notion of Chinese personal and corporate philanthropy is growing.
Many super-rich Chinese have come from humble backgrounds and have a sense of
wanting to help the less fortunate. The obstacles are that they are not always sure
whether their philanthropic gifts will reach the desired recipients. Appendix 5 shows
the increase in Chinese Corporate Philanthropy.
Social Sector Organizations Visited in Beijing:
A common thread that ran throughout my interviews was the emphasis that was
placed on the importance of accountability and transparency amongst social sector
organizations64. Another important element that emerged was the extent to which an
individuals status and their guanxi (relationships) played in their perception of the
social sector. Xiaotong Fei describes the interconnectedness of personal relationships,
"The path runs from the self to the family, from the family to the state, and from the state
62 Xinji Letu, Top philanthropist tangled in fraud accusations http://www.beijingtoday.com.cn/tag/chen-guangbiao
63 Ko-Shu-ling, Government stewed over tycoons visit http://www.taipeitimes.com/News/taiwan/archives/2011/01/28/2003494635
64 See Appendix 1 for Interview list
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to the whole world.65" The higher an organizations social standing, the stronger their
government connections, the more likely they are to have a favorable view of the sector.
This is because it is much easier for individuals and organizations that have these types of
relationships to gain access to funds and to freely operate. For a full list of all
organizations and individuals interviewed, please see Appendix 1. I have documented a
few particularly noteworthy examples below.
1) China Foundation Center (CFC)
The China Foundation Centers66 mission is to bring transparency to philanthropic
markets through access to the highest quality data, news, and analytics to enhance a
bigger social impact of philanthropy. In 2009, a delegation of several Chinese Private
Foundations visited the US Foundation Center in New York. The participants on this trip
were greatly inspired by the US Foundation Center and this led to the formation of the
China Foundation Center in 2010. The US Foundation Center uses data, analysis, and
training to connect people who want to effect social change to the resources they need to
succeed. Their aim is to inform public discourse around philanthropy and encourage a
broad understanding of the role that non-profits can play.
The China Foundation Centers executive team includes Cheng Gang, Geng
Hesun and Tao Ze who all have experience working in the philanthropic sector. CFC
received initial seed funding from the Ford Foundation and has recently received further
funding from LGT Venture Philanthropy. CFC uses a network map system designed and
developed to provide easily accessible information about foundations. Foundations can
voluntarily upload information regarding their annual giving and annual expenditure,
which can then be viewed by the general public. CFC is currently working on developing
a transparency index and rating system that would be similar to Morningstar or Nasdaq
for social sector organizations. They are also working on initiatives to promote more 65 p.66, Xiaotong Fei, From the Soil: The Foundations of Chinese Society 66 China Foundation Center, http://en.foundationcenter.org.cn/index.html
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professionalism in the social sector through training programs for foundation leaders. I
have had the opportunity to spend extended periods of time with both Cheng Gang and
Tao Ze and they both have a keen desire to help support an infrastructure for social sector
organizations in China.
2) China Charity Donation Information Center (CCDIC)
Established in 2008, and led by Peng Jianmei, who has extensive experience
working in the media, business and the philanthropy sectors in China, the China Charity
Donation and Information Center (CCDIC) is a non-profit organization supported by, and
working closely with, the Ministry of Civil Affairs in China. Its mission is to promote
effectiveness and transparency of Chinese civil society organizations (CSOs) and of the
sector as a whole.
In 2011, in response to growing transparency problems, the CCDIC published a
report on the state of the charity sector transparency in China. The CCDIC reviewed the
disclosure practices of 99 nonprofits but received feedback from only 65 of them. These
organizations included non-public offerings and local non-governmental organizations.
Of the 65, 42 percent of them claimed to have no guidelines on information disclosure,
and 37 percent said no staff was specially designated for carrying out related work.
Furthermore, the report found that, 90 percent of the public is dissatisfied with how much
information is being disclosed and the way it is made public. Among the 99
organizations, 20 percent of them did not have their own websites and, for those with
websites, 43 percent were not updated regularly or users found them to be unhelpful
when searching for information. Only 10 percent of the public interviewed in this survey,
expressed that they were partly or very satisfied with the state of information disclosure.
According to the Global Times, 90 percent of interviewees felt that they were not given
enough information about the use of donations, the result of sponsored projects, and the
final destination of
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their money.67 CCDICs research team believes that a lack of relevant laws and
regulations, standards for information disclosure and the training of professional
personnel were the main reasons for poor performance in transparency for domestic
charitable organizations. In the charity field of China, information disclosure has both
mandatory and voluntary aspects. A related government department supervises
mandatory disclosure but there are differences in the responsibilities between local and
central government and this makes it difficult for The Ministry of Civil Affairs (MOCA)
to oversee charities that lack registration records.68
In November 2011, CCDIC announced that its newly-created online disclosure
platform would kick off next year, enabling any member of the public to see how
charities are receiving donations, and where they are spending them. The Ministry of
Civil Affairswhich oversees the CCDICsaid a new 2012 donation information law
will also force charity organizations to disclose more of their accounting records.69 If
this is passed, this could have significant consequences on building transparency in social
sector organizations in China. It is however extremely difficult for them to collect
information from public channels to match the high scores charitable organizations give
themselves. The biggest gaps in the information disclosure are found in financial auditing
and personnel appointments. In an interview, Kong Can suggested that the CCDIC are
working hard to create training materials and programs to support the work of
philanthropic organisations in China.
67 Global Times, Trust in charities waning http://china.globaltimes.cn/society/2011-04/646502.html 68 Business for Social Responsibility, Catalyzing Social Investment in China http://ciyuan.bsr.org/data/resources/Catalyzing_Social_Investment_in_China_BSR_CiYuan_November_2011.pdf
69 Hauser Center, Charity Transparency Criticized http://hausercenter.org/chinanpo/2011/02/charity-transparency-criticised/
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3) Vantone Foundation
The Vantone Foundation was established in April 2008 as a non-public
foundation registered with the Beijing Municipal Civil Administration. The Foundation
aims to promote environmental protection and energy conservation, and to promote
harmony between man and nature. Its main business endeavor is to promote the
construction of ecological communities. The Foundation aims to become an important
driving force for the construction of urban ecological communities in China.70 Li Jing,
the Executive Director and Secretary General of The Vantone Foundation suggested in an
interview that The Vantone Foundation aims to build these ecological communities by
developing local partners and a strong feedback mechanism. This feedback mechanism
helps to ensure accountability and transparency. The foundation is run using a business
model and therefore has a strong set of internal metrics. They believe in attracting strong
talent and professionalism to the social sector and therefore pay their employees a lot
more than most other foundations. The Vantone Foundation is one of the few private,
grant-making foundations in China. Their vision is to generate positive social change
through developing the capacity of NGOs to influence the environment around them.
They have recognized that if they want these organizations to grow and prosper, it is
essential that they have a strong level of accountability between themselves and their
NGO partners to ensure that money is being used as intended. Mr. Feng Lun, the
chairman of Vantone Holdings, has great hopes for the Vantone Foundation and the
development of the philanthropic sector more generally in China. Therefore, they place
great emphasis on developing innovative models. They have a very strong internal
mechanism of accountability and transparency whereby projects are regularly presented
to the board and communicated to their partners. Furthermore, the Vantone Foundation
often runs capacity-building sessions with their community leaders to ensure efficient use
of funds.
70 Vantone Foundation, http://www.vantone.net/en/contents/427/1568.html
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4) Red Cross Society, Guo Mei Mei
As mentioned, transparency has become particularly important over the past year
because there have been some cases of corruption in social sector organizations that has
had the impact of in some ways delegitimizing the sector. In particular the Guo Mei Mei
case of June 2011 had a negative affect on peoples attitude towards the Red Cross
Society. Guo Mei Mei, a 20-year-old female Chinese micro blogger, flaunted her
extravagant lifestyle by posting photos of herself with luxury sports cars. She claimed to
be a general manager at a branch of the Red Cross Society. Although it turned out that
she did not work for the Red Cross, this case began to raise questions about the
legitimacy of not only the Red Cross Society but also other philanthropic organizations in
China. Data from the China Charity and Donation Information Center under the Ministry
of Civil Affairs suggests that there is a connection between this case and general giving
in the social sector. Certainly the case of the Red Cross scandal came up in many of my
interviews as a significant impediment to giving. Public
donations to charitable organizations dropped from March to May 2011 from
6.26 billion Yuan to 840 million Yuan, with a decrease of 86.6%, from June to August
2011.
The Guo Mei Mei case added to problems that the Red Cross was already facing
as a result of the information that came out earlier in the year regarding a huge amount of
funds being embezzled. There was exposure of a 9,859 Yuan ($1,510) dinner bill for Red
Cross staff in its Luwan, Shanghai branch.
Despite the quick handling of the case by the organization, public trust in the charity
plummeted as
news of the scandal spread. According to a report in the Beijing Times, the image of a
receipt was uploaded onto a sina.com micro blog. Many netizens were soon complaining
of the Red Cross' extravagance, and wondering where their donations were going. As one
of China's major charities, China's Red Cross enjoys heavy subsidies and its staff is often
treated as if they were government officials. It claimed that the money had already been
reimbursed but also appealed to
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all the Red Cross branches in the city to discipline themselves. There have been other
cases of corruption with the Red Cross. Southern Weekly reported that a staff member of
the Red Cross said they would send over 1,000 tents worth 13 million Yuan ($1.9
million) to the
earthquake-stricken area. The extortionate prices for the tents raised questions as to how
the funds were being spent.
5) Henan Soong Ching-ling Foundation
An accusation was made against The Henan branch of the Soong Ching Ling
Foundation that they have been 'abusing and profiteering from donation money' including
investing in a US$6.2mn land project in Zhengzhou, Henan's capital. According to Toby
Webb, This is a serious allegation as it is not just anonymous donations that have gone
astray but from poor farmers who have invested in the Foundation's "public welfare
medical insurance" scheme, run by the Foundation, and supposedly offering better
interest rates than the local banks. The financial experts argue the land deal makes the
fund fragile and any collapse would mean huge losses for very poor farmers.71 However,
others argue that the Soong Ching Ling Foundation are merely exploring innovative ways
of addressing social problems and are therefore not inherently corrupt.
6) Initiatives supporting corporate social responsibility
One initiative supporting corporate social responsibility in China was initiated by
Business for Social Responsibility (BSR). BSR was founded in 2002 and has the mission
to work with businesses to create a just and more sustainable world. In Spring 2011, I had
the opportunity to work with BSR to conduct monitoring and evaluation of a partnership
they were supporting between Nike and the China Youth Development Foundation. This
partnership helped to promote transparency in both organizations. Nikes community 71 Toby Webb, China charity tales: Where philanthropy meets corruption http://tobywebb.blogspot.com/2011/11/china-charity-tales-where-philanthropy.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+Tobywebbssmarterbusinessblog+%28Toby+Webb%27s+Smarter+Business+Blog%29
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investment strategy uses sport as a tool for positive change. This strategy leverages its
brand, experience, and passion for sport to improve the lives of the disadvantaged and
inspire others to take action. Nike launched a program to ignite a grassroots youth
movement using sports to tackle social causes. To achieve the desired impact in China
the company sought a partnership with the China Youth Development Foundation
(CYDF), which also engages and empowers youth. CYDF has networks nationwide and
the resources to connect with local government and local communities to expand Nikes
program. More information can be found about Business for Social Responsibility and
this partnership in Appendix 8.
7) Other Initiatives promoting transparency in social sector organizations in China:
Other organizations that are making significant headway in promoting
transparency amongst social sector organizations are the Social Venture Network, Qifang
and the Beijing Charity Association. The Internet, in particular social media, is playing an
important role in the promotion of transparency. One such organization is Qifang. Qifang
is an open platform and online community whose mission is to give everyone a way to
pay for their education. Leveraging the latest in web and community technologies, Qifang
efficiently brokers data and relationships through a transparent platform built on trust to
connect and assist everyone involved in education finance. Qifang is committed to
maximize social benefits through a sustainable business model.72
The government recognizes the importance of contributions and wants to facilitate
this by making the social sector organizations worthy of funding. The Ministry of Civil
Affairs has made significant steps in utilizing the web to promote transparency. They
have a very robust web portal for civil society, both nationally and locally. Karla Simon
suggests that, The national web portal73 has online application and filing mechanisms
for acquiring registration or changing registration and for filing annual reports. On the
basis of such reports, all CSOs (civil society organizations) are awarded grades and they 72 Qifang, http://qifang.com/pageAboutUs.htm?pageName=aboutUs 73 www.chinanpo.gov.cn
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are required to prominently display the plaques showing the grades awarded in the annual
inspection. These processes are obviously designed to enhance accountability and
transparency for CSOs. After a report unveiled by a subdivision of the Ministry of Civil
Affairs showed that about 75 percent of charitable organizations in China either lack or
have no guidelines on the disclosure of information, MoCA has taken these facts into
account and has responded in important ways. First, in the Five Year Plan for the
Development of Charity published in July 2011, MoCA pledged to adopt rules that allow
for an organized and regulated system that will encourage further charitable initiatives
from various enterprises. Specifically these will be: (i) the implementation of the charity
law; (ii) regulations pertaining to community fund raising and volunteerism; and (iii) new
regulations for the management of social organizations (including foundations and non-
profit social enterprises). 74 If these initiatives are put into place, this will have
significant ramifications for the social sector in China.
8) Other types of organizations that are engaging in the social sector: Impact Investing
The Impact Investing space is an emergent sector in the world in general but
particularly in China. Impact Investing involves investing in social ventures or triple
bottom line companies, which are companies that are trying to, maximize their social,
financial and environmental impact. The development of metrics to assess social ventures
has been essential for the growth of the impact investing space. These metrics help to
ensure accountability of the businesses. One of the most successful that has been created
so far is the Impact Investing Reporting Standards (IRIS). Societal demand for such
standards plays an incredibly important role in encouraging the development of impact
investing. As Amy Domini argues, For socially responsible investors, impact starts by
changing the dialog. That's what is accomplished by setting standards to what you buy.
There was no such thing as a corporate social responsibility report until responsible 74 Karla Simon, Fashioning new government-mandated charity policies for accountability and transparency http://philanthropynews.alliancemagazine.org/fashioning-new-government-mandated-charity-policies-for-accountability-and-transparency/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+alliancemagazine%2FDeMY+%28Latest+from+Alliance%29
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investors demanded them. Now there are over 4,000 published each year, according to
the Corporate Register. There was no pressure on the Securities Exchange Commission
for greater disclosure until socially responsible investors raised the issue. There was no
baseline ongoing corporate social impact being studied until the research needed by my
field created it. Applying standards to what we buy has literally changed laws; it has
changed corporate behavior; and it has done this globally.75
There are a number of impact investing funds that are currently operating in
China that I had the opportunity to interview. For example, LGT Venture Philanthropy,
which is the Lichentensteins princely familys impact investing branch, has a presence in
China with most of their investments being $1 million or more. There are a number of
smaller funds such as the Lanshan social investment fund, the Yu fund and Transist.
Although it is early days, these organizations have the potential to really drive forward
impact investing in China.
9) Social Entrepreneurship
Social entrepreneurship is a relatively new concept in China. Meng Zhao suggests
that there are three forms of social entrepreneurship in China. There is shehui qiye (the
social enterprise), shehui chuangye (the social startup), and gongyi chuangye (the startup
for public good). The reason for these distinctions is that in Chinese the words social
and enterprise have different meanings than in English. The word social in Chinese
does not connote nonprofit, philanthropy, or charity, nor is it used in phrases like social
sector or social economy. In Chinese, the term public good has been used more
frequently to refer to philanthropy or charity. The word enterprise in Chinese contains
little implication of innovation, risk taking, or venture. It narrowly indicates business or
company. On the other hand, startup has a clearer reference to innovation and
venture.76 One of the challenges with the growth of the sector is the lack of government 75 Amy Domini, Want to Make a Difference? Invest Responsibly http://www.huffingtonpost.com/amy-domini/want-to-make-a-difference_b_834756.html 76 Meng Zhao, The Social Enterprise Emerges in China
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recognition of the term social entrepreneurship. Therefore currently no organization can
register as a social enterprise. Currently, it is not possible for organizations to register as
social enterprises. For social enterprises that have a revenue producing model, there can
be a challenge conceptually as to whether an organization that is doing good should be
allowed to also make a profit out of this. As with many other grassroots organizations,
the government neither bans them nor overtly gives them the right to operate. There are a
number of organizations, which help to support the emerging social enterprise sector. For
example, the Schoenfeld Foundations ECSEL Program. The ECSEL Program helps to
support some incredible social entrepreneurs through mentorship, training and seed
funding.77
77 ECSEL Fellows Program, http://www.ecselfellows.org/en/about-ecsel
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Chapter 4: The Business Environment
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Chapter 4: The Business Environment
As China positions itself more and more on the central stage as a world economic
power, it is challenged both internally and externally on the need to be both accountable
and transparent. Internally, companies, especially those set up to supply the West with
branded labels made in China, are under scrutiny to incorporate more responsible
business practice and CSR (corporate social responsibility) into their working
environments; Chinese workers are equally demanding better working conditions and fair
wages. On the international scene, there is pressure on China to comply with international
norms on disclosure for company listings on the stock markets and to allow the Chinese
currency to float on international currency exchanges. The more powerful China gets,
the more it will be subject to intense scrutiny about its trading practices. China has a long
way to go to meet these demands, much of which is dependent on an evolving rule of law
The CCP is being forced to take account of these issues of
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