Chinese Press Targets Charitable Irregularities in Henan

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September 3, 2011; Source: South China Morning Post | Almost daily we read about the growing Chinese economy, which includes a relatively freewheeling corporate sector and nascent nonprofit and philanthropic sectors. Is the Chinese government taking a firm hand with the operations of its indigenous charities, or are they basically exempted from strict government oversight?

This article from the South China Morning Post, recounting an exposé published in the Southern Weekend based in Guangzhou, reminds us that the most important mechanism of oversight and accountability is a vigorous and intelligent press.

The China Soong Ching Ling Foundation is the third-largest charity in China. According to the SCMP, a regional branch of the foundation “has been accused of lending money to businesses for profit,” a finding that the Post calls “merely the latest in a string of allegations about abuse of donations at officially sanctioned NGOs.”

The foundation reportedly lends money to private companies through its own investment company. A foundation official “admitted irregularities” concerning the investment company, but said that the newspaper report “took issues out of context.” What was taken out of context? It made an eight-million-yuan loan to a local business for three months and asked for a donation of 1.6 million yuan as a substitute for interest. When the business didn’t repay, the foundation sued but failed in court because it wasn’t a licensed lender.

Another of the charges is that the foundation acquired 14.8 hectares of land in the provincial capital, Zhengzhou, to build a youth center in 2005, but has turned over four-fifths of the site to a private developer for a “luxury commercial housing development.” Also, the foundation branch “fail(ed) to comply with foundation regulations requiring it to make at least 70 per cent of donation proceeds in the previous year available to charitable projects.”

Named after the wife of Sun Yat-sen, the foundation was established in 1992 by a member of the Communist Party’s Politburo Standing Committee who was also governor and party secretary of Henan at the time. The Henan branch of the foundation, according to the Post, is financially independent from the main branch of the foundation in Beijing. The local official quoted by the Post said there will be a press conference sometime soon to explain the specifics of the controversy. No one answered the phones at the Foundation’s Beijing headquarters.

According to the Post, the story about the China Soong Ching Ling Foundation follows “a slew of revelations in recent months of irregularities and murky deals involving big names in the sector, including the country’s two biggest charities, the Red Cross Society of China and the China Charity Federation.” Will China act to rein in the Foundation or turn a blind eye?—Rick Cohen