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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

China’s 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 China’s civil society as it relates to

business, social sector organizations and governance.

Gold describes China’s plight: “China is vibrant, undisciplined, and rollicking,

yet simultaneously arbitrary, polluted, and oppressive…its 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

China’s 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 China’s 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

China’s 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 Mao’s 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 Union’s 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 people’s 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 Xiaoping’s 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, “China’s 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 people’s 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 Government’s 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

                                                                                                               13“The 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 organizations’18”

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 China’s Grassroots NGOs” http://www.jstor.org/stable/10.1086/660741#rid_rf1  19 Ye Zhang, “China’s 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 Women’s 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

‘people’s 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 China’s 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 Foundation’s 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 University’s 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 government’s policies toward NGOs pass through

alternating periods of restriction and loosening, and the shifts are often

unpredictable…The restrictions on NGOs are clearly motivated by the CCP (Chinese

Communist Party’s) 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 China’s 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 authority…the 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 NGOs—GONGOs, to be more accurate—corporatism 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 that…under 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 China’s 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 China’s 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 doesn’t say ‘no,’

you can experiment and understand their failure to say ‘no’ to mean ‘yes,’ or you can say

‘I thought since you didn’t say no, I could do this.’ That’s 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

  22  

we do take some risks here in our work.37” One supportive government official explains

the suspicion from the government’s 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 have…But 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, they’re outside of the civil

affairs system, but they’re not looking to do anything political. They’re 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 China’s Grassroots NGOs

38 Anthony Spires, “Contingent Symbiosis and Civil Society in an Authoritarian State: Understanding the Survival of China’s Grassroots NGOs  

  23  

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.

  24  

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 China’s 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 China’s 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

  25  

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 today’s 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 People’s Congress in 2005 and in the recent 12th 5-year plan, it

refers to ‘inclusiveness and improving people’s 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, “China’s 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

  26  

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

  27  

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 province’s recent

reforms relaxing the registration requirements for social organizations. These reforms

were followed up with The Standing Committee of the Guangzhou Municipality People’s

Congress passing a law entitled, “Guangzhou Municipality’s 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 China’s 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

  28  

  29  

Chapter 3: The Case for

Transparency and Accountability in

Social Sector Organizations

  30  

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 China’s 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,

  31  

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 people’s

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, Guidestar’s 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  

  32  

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

University’s 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/

  33  

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 China’s

burgeoning civil society sector. The government’s 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 charity…People 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  

  34  

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.  

  35  

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 China’s (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

individual’s 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 tycoon’s visit” http://www.taipeitimes.com/News/taiwan/archives/2011/01/28/2003494635

64 See Appendix 1 for Interview list

  36  

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 Center’s66 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 Center’s 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

  37  

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 CCDIC’s 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 Affairs—which oversees the CCDIC—said 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 people’s 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

  41  

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 Ch’ing-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. Nike’s 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 Nike’s

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

  43  

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 Lichentenstein’s princely family’s 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 Foundation’s 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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  47  

Chapter 4: The Business Environment

  48  

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 accountability to maintain

power and yet push forward its agenda of balancing its domestic and foreign agenda of

reform and economic stability.

Whilst China is coming to terms with Western demands for transparency when

dealing with international norms of trade, it has not progressed very far with labor rights

in the workplace. In the West workers rights are protected by labor unions for better

working conditions, minimum wage, security, etc. Although laws protecting the workers

rights do exist in China under the ‘All-China Federation of Trade Unions’, It has been

suggested that there is very little effort made to enforce any laws made.

As the scope of this paper covers the role of civil society in China, the focus is

necessarily limited to working conditions within China and the calls for corporate social

responsibility in the workplace, whether from foreign stakeholders or citizen demands.

Whilst there is a significant case to be made for business as it relates to the stock market,

currency trading, investors, property development and expansionist practices, these

subjects are too broad to cover in this paper.

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International Pressure for Corporate Social Responsibility

China officially joined the World Trade Organization in 2001. Since then, many

Chinese companies have expanded all across the world and are playing an increasingly

important role in the global system. Partly as a result of their engagement with

international markets, these companies have begun to take steps towards a greater

consideration of corporate citizenship. A significant factor pressuring these companies to

become more accountable has been the role of a broad range of stakeholders, including,

foreign partners, governments, the general public, nongovernmental organizations, the

media and internal and external investors. The influence of these actors has led to

significant progress both in China and abroad.

The World Economic Forum and BCG (Boston Consulting Group) released a

report in 2011 that details the change in perspective on corporate responsibility that has

taken place in China over the years. The document suggests that, “In the era of planned

economy, state-owned enterprises played a large role in assisting local governments and

communities. They offered healthcare and job training for their workers, and maintained

full employment as a form of economic contribution. They also built hospitals and

schools for their employees’ families, and replaced workers with their sons or daughters

after their retirement, to provide a predictable and secure life for everyone. These

practices together formed the system commonly known as an enterprise-run society.

However, such citizenship practices were not sustainable, as they did not help companies

to become more efficient. As a result, China reformed its state-owned enterprises (SOEs),

through ownership reform and price liberation. An initial outcome of this transition was

that many Chinese companies focused purely on profit and growth, leading to many

environmental problems. Facing this situation, China actively sought a more effective

balance between profitable growth and contributions to society, by learning from foreign

companies and joining the WTO. 78” There have been a number of rules and guidelines

that have been passed over the years to encourage corporate accountability and

responsibility. For example, in 2008, the State-Owned Assets Supervision and

                                                                                                               78 P.10, World Economic Forum, “Emerging Best Practices of Chinese Globalizers The Corporate Global Citizenship Challenge”

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Administration Commission (SASAC) released a formal set of guidelines for how central

government-controlled SOEs (CSOEs) could engage in corporate social responsibility

(CSR) and report their CSR activities. These guidelines required that all central

government-controlled SOEs publish corporate citizenship-related reports by 2012.79

One of the main incentives for companies to become more transparent and to pay

more attention to governance was their desire to be listed on public stock exchanges. The

Shenzhen and Shanghai Stock Exchanges were established in the early 1990s. Since then,

more than 2,000 domestically listed companies have been obliged to comply with key

disclosure requirements. There is still much more that can be done. However, there have

certainly been a number of initiatives that have spurred information disclosure and

modernization of corporate governance among vast Chinese companies. In 1999, China

initiated a strategy entitled “The Go Out Policy” whereby the Chinese government

promoted Chinese investments abroad. As a result, around 700 Chinese companies listed

on overseas stock exchanges, which enabled them to obtain capital from foreign markets

as well as other benefits. To list on these foreign stock exchanges there are significant

requirements that Chinese companies have to comply with. This has led to Chinese

companies beginning to adopt rules and standards that are widely accepted across the

world.80

Bad Working Conditions

One of the biggest challenges in developing corporate social responsibility in

China is the lack of a strong regulatory environment. Zheng Yongnian argues that it has

not been an easy task for the Chinese leadership to build this regulatory environment. In

particular, “legal fragmentation makes it extremely difficult, if not completely

impossible, to enforce laws, regulations, and contracts.81” Chinese labor law is extremely

                                                                                                               79 p.12, World Economic Forum, “Emerging Best Practices of Chinese Globalizers The Corporate Global Citizenship Challenge” 80 p.14, World Economic Forum, “Emerging Best Practices of Chinese Globalizers The Corporate Global Citizenship Challenge”

81 p.114, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance

  51  

comprehensive. However it is very difficult to enforce it due to the lack of accountability.

Yongnian suggests, “The lack of law enforcement gives firms an incentive not to perform

CSR.82”

Zheng Yongnian points out the huge affect that corporations have had on

people’s standard of living. For example, over 263,500 people died in industrial accidents

in two years (2004-2005). In the coal-mining sector, nearly 6000 miners died in 2005.

However, Yongnian also points out that it has been extremely difficult to enforce

effective policies to bring the situation under control.83 Cases involving labor rights are

particularly challenging. According to Yongnian, “Workers’ rights are routinely violated.

Workers are often required to work far more than 40 hours a week, have few days off,

paid below the minimum wage, and not paid required overtime compensation. Physical

abuse of workers and dangerous working conditions are also common.84” The lack of

accountability of this issue further perpetuates the problem.

One of the most significant cases of controversy that caught the attention of the

media and the world over the past year (2011-12) has been that of Foxconn. Foxconn is a

multinational electronics company headquartered in Taiwan. It is the world's largest

maker of electronic components and the largest exporter in China. Foxconn has been

involved in several controversies, mostly relating to how it manages employees in China.

Foxconn's largest factory worldwide is in Shenzhen where hundreds of thousands of

workers are employed at the Longhua Science & Technology Park, a walled campus

sometimes referred to as "Foxconn City” or "iPod City.” This area does not just include

the factories but also worker’s dormitories, a grocery store, bank, restaurants and various

other amenities. There have been various allegations of poor working conditions that

have been raised on a number of occasions85. In particular, there have been reports

                                                                                                               82 p.114, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance  

83 p.106, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance” 84 p.107, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance” 85 “The stark reality of iPod's Chinese factories”, http://www.dailymail.co.uk/news/article-401234/The-stark-reality-iPods-Chinese-factories.html

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highlighting long working hours, sometimes 16 hours a day for a paltry wage of $22.00

daily and discrimination against Mainland Chinese and peasant workers by

their Taiwanese co-workers. In 2012, Apple hired the Fair Labor Association to audit

working conditions at Foxconn. Foxconn was in fact found to be compliant in the

majority of areas when Apple conducted its audit. However the audit did substantiate

some of the allegations. As recently as March, 2012, there were strikes for better

conditions and a riot ensued at the plant in Chengdu following an explosion at a Foxconn

factory.

There have been a number of suicides that have been associated with Foxconn.

Sun Danyong, a 25-year-old male, committed suicide in July 2009 after reporting the loss

of an iPhone 4 prototype in his possession. In 2010, there were fourteen suicides of

Foxconn employees. Brown describes how the pressures in China, “became all too clear

in the spate of suicides…where workers in what seemed like a model environment with

state of the art facilities threw themselves off the top of one of the taller buildings on the

site. International coverage of this issue forced the owner, Taiwanese Terry Gao, to

mount a campaign to improve conditions in the factory.”86 Foxconn installed suicide-

prevention netting at some facilities, and it promised to offer higher wages at its

Shenzhen production bases. However, workers are also forced to sign a legally binding

document guaranteeing that they and their descendants would not sue the company as a

result of unexpected death, self-injury, or suicide.

Midler describes how outsourcing to China has not been as successful as is often

described. Midler argues, “China’s manufacturing operated in a world where principles

were in short supply and the court system could not be counted on to keep operators

honest.”87 This was particularly the case because badly-made goods were involved, some

of which were actually harmful. Furthermore, Brown suggests that increasingly powerful

Chinese factories were turning the tables on their foreign customers because of the

                                                                                                               86 P.72, Kerry Brown, “Hu Jintao: China’s Silent Ruler. A political biography.”

87 Paul Midler, “Poorly Made in China: An Insider's Account of the China Production Game”

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monopoly they were eventually able to exercise.88 A large part of the reason that Chinese

companies become more ethical is because of societal pressure to do so. Appendix 6

shows the increase in stakeholder pressure on companies in China. From the perspective

of the government, CSR initiatives took off in the West in the late 1990s, but mid 2005

was a turning point for CSR in China. In 2006, a law was passed which calls for greater

CSR. From 2006 to 2009, eight national CSR guidelines and standards were passed.

Steps towards Better Practice in the Workplace

As the demands continue for better working conditions and an end to social

injustice, especially for migrant workers who enjoy less rights than citizens of a particular

township, there is often little other choice than for workers to take to the streets in protest,

which often leads to beatings to dispel the crowds, and growing discontent.

In June, 2011 a senior official, Guo Chen, of China’s official trade union, the All-

China Federation of Trade Unions (ACTFU), is reported to have said that “unlike western

unions, which always stand against the employer, Chinese unions are obliged to boost the

corporation’s development and maintain sound labor relations”. However, this new era

of activism is forcing the hand of the ACFTU to re-examine its role and look for ways to

become an organization that really does represent workers’ interests. Although some

ACFTU officials are trying to make a positive impact, there are still many others who are

reluctant to involve workers and bring them into the collective bargaining process. Of

course any decision about the future direction of the ACFTU ultimately lies with the

Communist Party of China. But, the party’s ideals are not s et in stone; in today’s market

economy it has to be flexible, and officials are sometimes open to persuasion, especially

on issues related to labor. If the ACFTU can show it can better serve the party’s interests

(ensuring economic growth as well as social stability) by standing up for the rights and

interests of workers, the party will certainly take note. One thing is sure, the CCP cannot

ignore the increasingly angry calls for better working conditions.

                                                                                                               88 p.64, Kerry Brown, “Hu Jintao: China’s Silent Ruler. A political biography.”

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Government’s Role in Promoting Corporate Social Responsibility

In 2003, the Chinese central government launched “The Scientific Outlook on

Development.” Local governments followed with a number of similar initiatives. The

Shenzhen government started tracking social responsibility efforts in 2003 and published

a report, “Shenzhen Should Urge Companies to Fulfill Their Social Responsibilities” in

2005. In 2004, the Changzhou government established a Corporate Citizenship

Standardization Committee. This was the first system in the country to create formal

standards for these practices.89 The government seems to be taking steps to improve CSR

in big state firms. Zheng Yongnian suggests that, the development of the regulatory

regime pushes the firms to improve their corporate governance and thus become more

socially responsible.90

Steps towards Transparency and Reform

The CCP faces mounting problems of sustaining economic growth whilst being

subject to intense scrutiny about China’s trading practices. For example, it can seem very

attractive to partially privatize a state-owned enterprise to bring in foreign investors; but

afterwards there are demands for higher standards of transparency and accountability.

Beijing also wants to see small and medium-sized firms flourish as part of broader

economic and political reforms. Prime Minister Wen Jiabao said in March 2012 that

Beijing had to cut its growth target from 8% to 7.5% in order to meet economic

challenges.91 China is aware that in order to raise the productivity of Chinese enterprises

and rebalance the Chinese economy, it needs to generate savings and investment and

boost the internal market, which is vital to generating jobs and ensuring social stability.

                                                                                                               89 p.13, World Economic Forum, “Emerging Best Practices of Chinese Globalizers The Corporate Global Citizenship Challenge”

90 p.110, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance  91 Euronews Business, “China Praised for Easing Yuan Rules” http://www.euronews.com/2012/04/16/china-praised-for-easing-yuan-rules/  

  55  

In order to achieve this, however, China will have to accept better conditions in the

workplace, more economic and political pluralism, and the processes of justification and

accountability that go with it.

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  57  

Chapter 5: Government and Civil Society

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Chapter 5: Government and Civil Society

Policy of the Communist Central Party (CCP)

The challenges facing the CCP are enormous. On the one hand, stability, secrecy

and control from the inner circle are held as sacrosanct. Its top down and autocratic

approach to governance is strictly upheld and any attempt to dislodge this power is dealt

with sharply and without remorse. On the other hand, the CCP is not immune from the

growing discontent of civil society at the grass roots level. Public anger is growing over

the costs of reform with protests by laid-off workers, land grabs, demolitions, corruption,

and unpaid wages and pensions. Far from remaining obdurate and static, there are signs

the CCP is poised to make maximum use of research data and public opinion to start

making changes, primarily at the local level. The CCP absorbs many models from around

the world, experiments with them and adapts them, Chinese style. Their approach

embodies the combination of pragmatism and incrementalism. They have a vast body of

think-tank research centers, with over 4000 fulltime researchers at one of the centers in

Beijing alone92. Experiments are constantly being made through ‘Special Economic

Zones’93 to test out different models of market philosophy and social experiments. So,

despite their apparent ‘fixed’ attitude, the CCP remains alert, adaptive and ready to meet

challenges, albeit in a measured way.

Government Transparency

The history of top down lack of transparency and accountability goes back a long

way. Fukuyama suggests that, “Dynastic China…failed to create formal institutions of

accountability…The precocious consolidation of a modern state allowed Chinese

governments over the centuries to prevent the spontaneous emergence of new social

actors that would challenge its power, such as blood aristocracy, a commercial

bourgeoisie, independent cities, religious institutions, or an organized peasantry.94” He

further states that: “There is virtually no formal downward political accountability in the

                                                                                                               92Chinese Academy of Social Sciences (CASS)

2Special Economic Zones: http://www.china.org.cn/e-china/openingup/sez.htm

94 p.15, Francis Fukuyama, “The patterns of history”, Journal of Democracy

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Chinese political system. There are limited local elections, and Chinese citizens have the

right to sue local government agencies for performance failures as in other Asian

countries. Most observers contend, however, that these institutions do not confer any

significant power on citizens to change government behavior.95”

Strong institutions to promote accountability do not exist. Wang Xinsong,

Professor at the School of Social Development and Public Policy, Beijing Normal

University, in an interview, argued that there is a great need for local accountability and

in particular horizontal accountability within the system of governance. To do this, the

capacity of institutions needs to be developed. The Central Government issues dictate to

the Provincial Committees and from there the chain of command goes to the City

Committees, County Committees, Township Committees and Village Committees. At

each stage government officials are accountable only to their superiors. Their personal

and political fortunes are determined by how “those above” judge their accomplishments

and their failures. Political credit is given primarily for meeting economic growth rate

targets and ensuring “social stability.” With no transparency this often gives rise to

efforts to hide bad news, seek favor from higher officials and manipulate the truth.

Because, once they admit the problem, they know that they could lose political favor and

maybe lose their jobs. A well-known case of contaminated baby milk, for example, was

kept quiet to avoid political wrath. Fu Jianfeng, Southern Weekend newspaper wrote:

“For reasons that everybody knows, we were not able to investigate the Sanlu case,

because harmony was needed everywhere. I was deeply concerned because I sensed that

this was going to be a huge public health catastrophe, but I could not send reporters to

investigate.”96

However there are some ways in which the Chinese government has used its lack

of accountability as a source of its strength. Fukuyama suggests that, “The Chinese

government’s lack of accountability allows it to make fast decisions and put massive

infrastructure projects in place quickly.97” Certainly there is a benefit of not having to be

                                                                                                               95 p.21, Francis Fukuyama, “The patterns of history”, Journal of Democracy  

96 Fu Jianfeng, Southern Weekend 97 Francis Fukuyama, “What is governance?”

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accountable to the people in terms of the speed within which decisions are able to be

made.

Corruption:

The lack of transparency and accountability in China’s history has given rise to

corruption. Gold suggests that, “Corruption intensified during the 1990s as economic

growth accelerated and the opportunities for officials to profit from their positions

multiplied. Officials’ personal assets are not disclosed in a reliable way, and much of

their corrupt activity is conducted through family members. Many cases have involved

the collection of bribes for the procurement of licenses or the manipulation of regulations,

but the most flagrant examples of corruption center on land deals. While less common

than the mass protests in rural areas over corrupt land deals, protests also occur in the

cities, where many officials use their power to exploit the booming real-estate market.98”

Fukuyama suggests, however, that corruption is not so apparent in the Central Party,

“Most stories of egregious corruption come from the lower levels of the party and

government. Although high CCP cadres enjoy huge perks for themselves and their

families, one does not get the sense that they are diverting massive sums of money to

their own accounts on the scale of, say, senior Russian political figures.”99

The CCP takes enormous steps to maintain their monopoly on power and

maintain order. Any scandal, internal disputes or challenge to power is therefore kept

strictly out of the public domain. It was therefore with great interest that the world press

and Chinese media reported on Bo XiLai’s expulsion from the CCP in April 2012. His

sacking was all the more extraordinary as he was part of the 25-member Politburo and

contender to the inner circle of the nine member Standing Committee, effectively the

ruling power of China, in October 2012. There are various suggestions and rumours

regarding the precise reasons for Bo Xilai’s fall from power. Many consider that he had

become a political liability. He was a firm supporter of Maoist ideologies but he also

promoted capitalist development in Chongqing through what became termed, ‘The

                                                                                                               98 P.23, Gold, Thomas, “China, Countries at the Crossroads”

99 p.21, Francis Fukuyama, “The patterns of history”  

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Chongqing Model.’ Outwardly his fall from grace was a direct result of the attempted

defection of Wang Lijun, Chongqing’s gang-busting police chief and the suspected

involvement of his wife, Gu Kailai in the murder of Neil Heywood. It has been

suggested, however, that his extravagance, corruption and maverick approach to

leadership was an embarrassment to the CCP. The ultimate goal for the government is

stability. Roach suggests, “Those at the top no longer want to concede anything when it

comes to stability. By addressing…political instability by removing Bo, stability has

gone from a risk factor to an ironclad commitment.100” The inviolability of the CCP does

not extend to the local levels of government, especially in cases of well-publicized

violations and corruption.

Shanghai Land Corruption

In Shanghai, tens of thousands of people lost their homes and businesses from the

1990’s to the early part of the 21st century in a frenzied land-grab which resulted in one

of the largest building booms in recorded history. About 20 million square meters of land

was developed in the city between 2000 and 2005 alone. Citizens with justified

grievances found themselves fighting a city government and corrupt officials who were

making huge profits under the Shanghai Party Secretary, Chen Liangyu, receiving pay-

offs from developers. Chen was in a very privileged position and he and his minions felt

impervious. Firstly he held a seat on the Politburo and so had strong connections to the

CCP; secondly revenue from Shanghai’s government initiatives accounted for 80% of

Shanghai’s GDP and so was a very important source of income to the CCP and thirdly

too many people were earning vast fortunes out of these land-grabs to want to do

anything about it.

In the end Chen Liangyu went too far and over-stepped the mark. Unchecked

corruption resulting from these land gabs amounted to millions of dollars and created a

‘black-collar’ class of rich bureaucrats living an elitist life. Tales of the multiple land

disputes in Shanghai began to seep out of the city to the press and online platforms and

                                                                                                               100 Stephen Roach, “China’s Stability Gambit”, http://www.project-syndicate.org/commentary/china-s-stability-gambit

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complaints came pouring into Beijing. In 2006, Hu Jintao faced with many revelations

about corrupt officials throughout China blamed the abuse of power by party bureaucrats

for rising social conflict and public protests. In a speech in 2006 addressing the anti-

corruption commission, he said these protests could, “lead to a series of explosions which

would cause chaos throughout society and paralyze the administration101”. Chen’s final

downfall came when he challenged Hu Jintao publically over the CCP’s decision to cut

back Shanghai’s development programs because of the economic recession worldwide,

and public protests reached an embarrassing level for the CCP. Chen Liangyu was

imprisoned while his crony’s new people were brought in to take their place.

In May 2008, faced with the corruption charges related to the Shanghai land

seizures, a decree was announced by the central government which stated it recognized

the need for transparency that the local authorities were required to open their books and

reveal the terms and compensation for land seizures to citizens who requested the

information. However, a phrase was included that any information that could be

considered as harmful to state security and social stability could not be disclosed. Beijing

then closed ranks, the matter was considered settled, and further comment was

suppressed. The Shanghai case had nevertheless been one of the most highly charged

corruption investigation in the history of the People’s Republic of China.

The Wukan Approach

Problems in 2011 resulting from extensive protests related to land deals in Wukan

were dealt with in a different way. This gives an example of an attempt that has been

made to promote more accountability between local government and the people. For at

least twenty years, there had been complaints and petitions regarding illegal land grabs in

Wukan, Guangdong Province. 102 The Guangdong officials largely ignored these

complaints. In September 2011, the residents of Wukan had had enough and they went to

the streets in protest, storming a police station and an industrial park. Party officials were

                                                                                                               101 p. 139, Richard McGregor ‘The Party”

102 Kent Ewing, “Guangdong boss bets on velvet glove.” http://www.atimes.com/atimes/China/NA07Ad02.html

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forced to flee the scene to avoid the wrath of the mob. Rather than responding with an

expected, iron-fisted crackdown, Zhu Mingguo, Wang Yang’s deputy suggested a peace

offering. Wang Yang is the Chinese Communist Party (CCP) chief in Guangdong. This

response resulted in the immediate diffusion of the protests and instead the village elders

showered praise on the provincial authorities. This has been heralded as the Wukan

approach and there is hope that this occurrence will set a precedent for the response from

local Chinese government to future challenges in other areas.

As a response to the Wukan protests, the Guangdong Provincials gave Wukan

residents the opportunity to vote. On February 1st 2012, villagers were given the

opportunity to cast their ballots to select an election committee. According to Caixin

magazine, the elections were both open and transparent. Caixin magazine suggests, “At

the end of the day, nearly half of the 13,000-person village had entered the school yard to

elect 11 residents to the election committee, which will monitor upcoming elections in

March for the village committee that will oversee all local government operations. Weeks

ago, Guangdong officials appointed protest leader Liu Zuluan to the post of party

secretary, in a sign that they sincerely wanted to see free and open elections. The

villagers, however, say provincial officials have yet to fulfill other promises. For one,

they are still waiting for the return of the body of protest leader Xue Jinbo, whose death

in custody sparked the protests' resurgence late last year. Officials have also yet to move

forward with returning the tracts of land that villagers said were seized unfairly over the

last ten years.”103

The protests that took place in Wukan are not unique. However, the response

from the officials was. There have been increasing demands from civil society for more

accountability from the government. The World Bank suggests that, “Social risks are also

expected to arise…If the experiences of other countries is any guide, the rising ranks of

the middle class and higher education levels will inevitably increase the demand for

better social governance and greater opportunities for participation in public policy

debate and implementation. Unmet, these demands could raise social tensions; but if the

                                                                                                               103 Caixin magazine, “Weeks After Protests, Wukan Holds Elections” http://english.caixin.com/2012-02-02/100352814_2.html

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government finds ways to improve consultation and tap the knowledge and social capital

of individuals and nongovernment agencies, these demands can be transformed into a

positive force supportive of improved governance and public policy formulation.104” It is

therefore in the government’s incentive to work out ways to be responsive to the needs of

its citizens.

Hong Kong

In Hong Kong, the officials are checked by a three-prong system whereby the

officials “would not want to be corrupt” morally, “do not need to be corrupt” financially,

and “do not dare to be corrupt” legally105. This three-pronged system can work as a check

on corruption of all government officials. It provides economic incentives as well as

moral persuasion and legal constraints for being less corrupt.

Experiments with democracy at the village and township level

Mark Leonard suggests that the Chinese government has been increasingly

finding ways of involving the people in its major decisions about policy. Public

consultations, expert meetings and surveys are becoming a central part of Chinese

decision-making106. Various experiments with different forms of governance have taken

place in Chongqing. To some extent, all of the information that came out Spring 2012

regarding Bo Xilai undermines much of this experimentation but there are still lessons

that can be learnt from these experiments that can be applied elsewhere. Leonard

suggests, “Chongqing is trying to become a living laboratory for the ideas that Pan Wei,

Wang Shaoguang and Fang Ning described: strengthening the rule of law and consulting

the public over major decisions. Li Dianxun, the director of the city government’s legal

affairs office, has spearheaded the process…107” It is not clear however that the public

were genuinely consulted or whether this was merely another attempt at coercion. Li has

gathered around him a group of equally super-charged high-flyers: all with law degrees,

                                                                                                               104 P.13, World Bank, “China 2030”

105 p.103, George Fusun Ling, “China Developing: Cultural Identity of Emerging Societies”

106 p 67, Mark Leonard, “What does china think?” 107 Mark Leonard, “What does china think?”  

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some experience of living abroad and a good command of the English language. He

speaks of his ‘freedom of information clause’, and his ‘regulation on accountability’,

which allows the local heads of government offices to be questioned and investigated if

they make debatable decisions. However, they have also made the decision to make all

significant government rulings subject to public hearings – in person, on the television or

on the Internet. So far, Li has organized over 600 public hearings – involving 100,000

citizens – on compensation for peasants whose land has been requisitioned; on the level

of the minimum wage; and on the setting of prices for public utilities like water,

electricity, natural gas, road, bridges, education, public health, public transport, sewage

and refuse disposal. Hu Jintao and Wen Jiabao invited Li to make a presentation at the

government’s headquarters and the experiment is being emulated in other cities around

China. Chongqing is a huge city with a population of approximately 28 million. Its

bewildering scale – even by China’s standards, could give its experiments with public

consultation national significance.108 However it is possible that the overthrow of Bo

XiLai will make people question the integrity of these public consultations. It is not clear

that the motivation for these public consultations was a genuine attempt to understand the

needs of the masses but rather as an attempt to appease them and make them feel as

though they were part of the process when really their opinions did not matter to the local

leadership.

Experiment in Zeguo in Wenling City: Deliberative democracy

The experiments have not just been with elections but also with different forms of

democracy. For example, Zeguo experimented with different forms of consultation.

These consultations were unique, not just in China but in the world. They used a novel

technique called ‘deliberative polling’ to decide on major spending decisions. This

method, which was developed by the Stanford political scientist, James Fishkin, is

designed to help policy-makers consult their citizens.109 Deliberative polling tries to solve

the problem of uninformed voters by randomly selecting a sample of the population but

                                                                                                               108 p.68, Mark Leonard, “What does china think?”

109 p.70, Mark Leonard, “What does china think?”

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then invoking them in a consultation process with experts, before asking them to vote on

their decisions. So far, this is a one-off experiment but Fishkin and the Chinese political

scientist He Baogang, who advised the Zeguo government on the mechanics of the

consultation, believe that deliberative democracy could provide a template for political

reform in China. Leonard argues that, “It shows how governments, without party

competition or the conventional institutions of representative democracy as practiced in

the West, can nevertheless realize, to a high degree, two fundamental democratic values

at the same time – political equality and deliberation.110” Deliberative democracy is a

form of democracy in which deliberation is central to decision making. It adopts elements

of both consensus decision-making and majority rule. Deliberative democracy differs

from traditional democratic theory in that authentic deliberation, not mere voting, is the

primary source of legitimacy for the lawmaking processes. Lin Shangli at Fudan

University has argued that the deliberative model of democracy is more suitable to

China’s local conditions than traditional forms of democracy. He suggests that, “In facing

the pressures associated with the rapid democratization in Eastern Europe and Asia,

Beijing has tried to develop a new art of ruling that combines administrative order with a

consultative mechanism that will bring governments and people together, improve the

relations between cadres and the masses, and achieve good governance in local

politics.111”

The Appeals Process

One way in which the government has tried to give the impression that it is

responsive to the needs of its citizens is the Appeals Process. The Appeals Process is a

mechanism whereby constituents’ fundamental grievances can be brought to the attention

of local government officials. If the government is seen to be responsive to the people’s

requests, then this forum creates a sense of accountability and justice. However, the

appeals process often just acts as an appeasement rather than an appeal to justice. Cai

suggests that, “Believing that intervention by higher level authorities or leaders is helpful,

                                                                                                               110 p.72, Mark Leonard, “What does china think?”  

111 p.189, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance”

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Chinese citizens do not hesitate to appeal to them.112” With the Appeals process, it is

seen that local officials often try to cover up the extent of the problems. Cai continues,

“To achieve the goals set by the higher-level government, lower level officials at times

use repression to silence the discontented. Yet repression may not be sufficient to lower

the number of appeals, especially because most of the demands are legitimate.113” There

are, however, limits to what type of appeal would be allowed. Cai argues that, “The

government is tolerant of nonpolitical requests, but not of political ones114.” Further: “In

terms of modes of action, large, well-organized collective action is discouraged by the

government.115”

Social Media

The Internet in some ways is forcing the Chinese government to look at ways in

which they can become more transparent and to be more responsive to the desires of the

Chinese citizens and therefore ensure stability. The BBC suggests, “The State Council,

the Chinese government's highest decision-making body, issued a notice calling on

officials to "make more efforts to ensure transparency in government affairs."116 The

Internet has certainly played a powerful role as a potential source of transparency.

Fukuyama suggests that, “Countless stories appear in the Chinese press or on micro blogs

about corrupt deals involving local officials, developers, and other elites. Periodically one

will erupt into a major scandal, such as the melamine-tainted infant formula of 2008 or

the shoddy construction revealed by the Sichuan earthquake that same year. Selection of

political leaders, including for the upcoming transition in 2012, is a totally nontransparent

process.117”

                                                                                                               112 P.437, Yongshun Cai, “Managed Participation in China” 113 P.438, Yongshun Cai, “Managed Participation in China”

114 P.446, Yongshun Cai, “Managed Participation in China”  

115 P.446, Yongshun Cai, “Managed Participation in China”

116 BBC News, “Can micro blogs change Chinese rulers?” http://www.bbc.co.uk/news/world-asia-pacific-14422581

117 p.21, Francis Fukuyama, “The patterns of history”, Journal of Democracy

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Rawnsley suggests that, “Since its invention the Internet has been associated with

democratic political communication. 118 ” Rheingold further suggests that, “The

Internet…if properly understood and defended by enough citizens, does have

democratizing potential in the same way that alphabets and printing presses have

democratizing potential.119” Blogging in particular has had this affect. According to

Rawnsley, “Most attractive about blogging is that it represents a genuine bottom-up

process of unmediated and unfiltered communication. Bloggers can also challenge

prevailing social orders.120”

Despite some attempts to open up, there are still many limits on the Internet. Gold

suggests that, “The “blogosphere” may come to serve as a healthy safety valve for public

debate as well as an important means of communication between the people and the state.

However, the state continues its efforts to monitor, filter, and control the Internet,

erecting what foreigners call “The Great Firewall of China.121”

Many have highlighted the interference of the Chinese Communist Party to

restrict the Internet in China. The withdrawal of Google because of censorship, the

extensive monitoring of email, tweets and bloggers, and arrests made following

subversive comments are a very negative side of the Internet in China. Despite all this,

China now has the world’s largest population of Internet users, more than 380 million

people, and the use of the Internet has and is transforming Chinese society at a

remarkable pace. Weibo, China’s version of twitter has approximately 250 million

members. The Sichuan earthquake in 2008 received extensive coverage through the

Internet and helped to raise funds, which poured into the relief effort. Jet Li’s One

Foundation raised approx $4 million within three days of the quake. Most of this amount

came from individual online donors. This was an unprecedented response from society in

China.

                                                                                                               118 P.126, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance” 119 P.126, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance” 120 P.127, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance” 121 p.9, Gold, Thomas, “China, Countries at the Crossroads”  

  69  

Furthermore, in July 2011, the crash of a high-speed train in Zhejiang Province

was immediately shown on the Internet through Chinese twitter, weibo, despite

Government attempts to suppress the news, and the Government was obliged to take

responsible action. Branigan suggests that, “Internet users attacked the government's

response to the disaster after authorities muzzled media coverage and urged reporters to

focus on rescue efforts. "We have the right to know the truth!" wrote one micro blogger

called kangfu xiaodingdang. "That's our basic right!”122"

Often the Internet can create the illusion of transparency when in reality, it does

not exist. Fukuyama suggests that, “The Chinese government’s control and monitoring of

the Internet is legendary and, with a reported fifty-thousand censors, is much more

extensive than in other authoritarian countries. As is well known, when the extensive

micro blogging and Internet discussions move toward criticism of government

performance, they are usually shut down. But that several hour window in which

comments circulate allows the government not just to identify its critics, but also to listen

to what they say. It is rumored that Hu Jintao receives regular reports of public opinion as

expressed on Internet forums and Sina.com’s Weibo (Twitter-like) service. Through this

kind of mechanism, the Party does not just shape public opinion, but seeks to stay on top

of it enough to be able to respond to popular pressures before they erupt into violent acts

of social protest. One can look at this cynically and say that the government is letting

people blow off just enough steam to protect its own power and privileges; or one can

regard it as a form of democratic mimicry by which rulers seek to be responsive to public

opinion.123”

Rawnsley argues that, “with so many suggesting that the Internet will force the

eventual collapse of the CCP, it is little wonder that the regime feels under siege. It

therefore imposes control on Internet use.124” It is therefore clear that the tool of the

                                                                                                               122 Tania Branigan, “Chinese anger over alleged cover-up of high-speed rail crash” http://www.guardian.co.uk/world/2011/jul/25/chinese-rail-crash-cover-up-claims

123 p.22, Francis Fukuyama, “The patterns of history”, Journal of Democracy

124 P.131, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance”  

  70  

Internet can both be used for liberalizing goals but also as an instrument of tyranny. The

government is clearly committed to the potential of the Internet as a tool of governance,

but also anxious to restrain the use of the Internet and contain its power. The challenge,

as Rawnsley describes, is that “what is good for governance in China – the free flow of

information and ideas – is ultimately bad for the Chinese government.125” George Fusun

Ling suggests that, “The Chinese government through open expression on the Internet,

now has many ways to know the people’s interests and needs as to work toward their

well-being and also for what is socially beneficial…in the information age, technological

resources can give the government the means to listen to the voice of its people, apart

from the structured channel of the People’s Congress.126”

The Future:

There has been a lot of rhetoric about the need to be more responsive to the

demands of citizens. Mao Zedong was certainly very clear about the role that the Party

had in being accountable to the people. He argued, “Another hallmark distinguishing our

Party from all other political parties is that we have very close ties with the broadest

masses of the people. Our point of departure is to serve the people wholeheartedly, and

never for a moment divorce ourselves from the masses, to proceed in all cases from the

interests of the people, and not from the interests of individuals or groups...It (the Party)

should teach every comrade to love the people and listen attentively to the voice of the

masses; to identify himself with the masses wherever he goes, instead of standing above

them.127”

Wandering China also suggests that, “Wen Jiabao and other Chinese leaders have

pledged greater transparency and more attention to disputes between citizens and local

officials in an effort to reduce social unrest that could erode the Communist Party’s claim

                                                                                                               125 P.133, Joseph Fewsmith and Zheng Yongnian, “China’s Opening Society: The Non-State Sector and Governance”

126 p.90, George Fusun Ling, “China Developing: Cultural Identity of Emerging Societies”

127 p.315, The Selected Works of Mao Tse-Tung Vol. III

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to power.128” However, it is not clear to what extent this rhetoric is matched with action.

The CCP is aware of the corruption charges and the unrest of the people but it is also

aware that it is very much dependent on strong support from the whole chain of

provincial and local government. Richard McGregor in his book ‘The party’ quotes one

local official in Shanghai as saying: “We can’t push the anti-corruption campaign

indefinitely. For who else can the regime depend on for support but the great masses of

middle-level cadres? If they are not given some advantages, why should they dedicate

themselves to the regime? They give their unwavering support to the regime because

they get benefits from the system. Corruption makes our political system more stable.”129

As a result, a blind eye is often given to corruption unless the problem becomes acute or

overly publicized.130

As the voices of the poor of China become louder, the CCP is prompted to do

everything possible to maintain stability. Wen Jiabao, Premier of the State Council,

warned in 2007 of a Chinese economy that was in danger of becoming “unstable,

unbalanced, uncoordinated, and unsustainable.131” At the end of his term of office in

March, 2012, he said: “We must act with a strong sense of responsibility toward the

country and the people, take more effective steps to resolve these problems, strive to do

all our work better, and truly live up to the people's expectations”132. The CCP is fearful

of bottom-up rebellion and they want to avoid it at all costs. Wen Jiabao, when reviewing

his term in office, indicated that the CCP was very much aware of the mood of the

country: He said: “…We will carry forward reforms in social programs and income

distribution, strike a balance between economic and social development, and effectively

safeguard social fairness and justice. We will run the government in accordance with the                                                                                                                128 Wandering China, “Wen Says China should allow people to criticize government” http://wanderingchina.org/2012/02/02/wen-says-china-should-allow-people-to-criticize-government-bloomberg/  

129 p.168, Richard McGregor ,“The Party”

3As in the corruption related to the Shanghai land seizures and Wukan Land seizures, http://en.wikipedia.org/wiki/Protests_of_Wukan

131 Stephen Roach, “China’s Stability Gambit”, http://www.project-syndicate.org/commentary/china-s-stability-gambit

4 Fifth session of the Eleventh National People’s Congress on March 5th, 2012      

  72  

law and promote innovation in social administration, properly handle the relationship

among the government, citizens and social organizations, and build a service-oriented,

responsible, law-based and clean government.133”

Despite the many deficiencies in transparency and legal institutions, the Chinese

state has nevertheless held China together during the most dramatic economic upsurge in

recent history. It is yet to be seen whether the thrust of creating a harmonious society can

keep pace with this massive modernization program and increasing boldness by Chinese

citizens demanding social justice.

                                                                                                               133 Fifth session of the Eleventh National People’s Congress on March 5th, 2012

  73  

Chapter 6: Conclusion

  74  

Chapter 6: Conclusion

Despite the significant growth that has taken place since 1978 both in terms of

gross domestic product (GDP), business expansion, real estate development and social

organizations, there are still enormous social problems in China. The Chinese Communist

Party (CCP) has been reshaping The People’s Republic of China (PRC) into a market-

based and globally integrated economy, society, and culture. The poor are often left to

fend for themselves. Gold suggests that, “While producing GDP growth rates that are

among the world’s highest, the party’s strategy has led to the sort of severe inequality,

weak social-welfare system, worker exploitation, job insecurity, and environmental

degradation that is associated with capitalism at its worst.134”

Shifting away from export-oriented low-wage production, upgrading its economy,

improving social services, and boosting domestic spending are the inevitable direction

China needs to go. However, it is difficult for this to happen quickly due to China’s huge

population, complex state politics, warped yet hard-to-reform education system, and long

cultural tradition that have not emphasized innovation and originality.

As Jianying Zha argues, “The next great transition, from compliant subjects to

true citizens, from Made in China to Created in China, will be even harder to achieve

than what’s been accomplished thus far. It needs a good deal of bold yet careful

rethinking about existing political institutions, economic structures, education,

philosophy, and cultural conventions. It needs patient consensus building, complicated

negotiations, and difficult reforms. It needs vision, resolve, talent, and some luck. It

takes courage. It takes time. But everyone understands that only when China solves

these critical problems can one then talk about a true cultural renaissance.135”

Interestingly, despite the excessive focus on money-making and materialistic

success in modern-day China, the Confucian and Taoist virtues of common sense and

                                                                                                               134 Thomas Gold, “China,” Countries at the Crossroads

135 p224, Jianying Zha, “Tide Players”

  75  

decency, moderation and restraint, are also being discussed more and more. Along with

this comes the call for happiness indicators and the need to create and sustain a

harmonious society. The calls on Taoism and creating a harmonious and happy society

can be seen as attempts to quell a potentially rebellious society, but equally they can be

seen as setting the standard towards which all sectors of government and society should

aspire.

Civil Society Calls for Reform

In early 2011, various anonymous online calls for a ‘jasmine revolution’ along the

lines of the Arab spring led to a wave of arrests by the security apparatus136. To add a

further dimension to this, the Great Firewall of China, a filtering system that blocks

websites hosted outside the country, began to disrupt a much larger number of sites in the

early months of 2011. Whilst the response to a perceived threat seemed somewhat

draconian, if one puts it into historical perspective, it was merely a manifestation of an

age-old preoccupation of Chinese leaders with ‘stability’ faced with ruling over a country

of such vast proportions. The interesting thing was that there was little popular support

for a revolution. In fact in a Pew poll in spring 2010, 87% of Chinese expressed

satisfaction with their country’s direction. Two thirds believed that their lives were

better than five years ago and almost three-quarters of Chinese expressed optimism about

the future.

In a similar survey conducted by Tony Saich, reported in the East Asia Forum on

July 24, 2011, he said: “Two clear trends are visible. Citizens ‘disaggregate’ the state

and, while they express high levels of satisfaction with the central government,

satisfaction declines with each lower level of government. While in 2009, 95.9 % were

either relatively or extremely satisfied with the central government, this dropped to 65%

at the local level.137”

                                                                                                               136  ‘China:  A  sharper  focus’,  Financial  Times,  10  May  2011  

137 Tony Saich, “Chinese governance seen through the people’s eyes”

  76  

It would seem therefore that the calls for reform are primarily focused on the need

for the lower echelons of administration to be more accountable. The survey conducted

by Saich in 2009 indicated that 30% of the targeted poll thought their local officials were

incompetent, and 40% thought they just looked after their own interests. Corruption is

always ranked as the biggest problem. A graph showing his findings in surveys he

conducted from 2003-2009 is reproduced below.

Percentage of citizens relatively satisfied or extremely satisfied with

government

The key challenge seems to be whether the CCP can deliver the reforms

acknowledged by Premier Wen Jiabao as he leaves his term in office in 2012. He has

been remarkably forthright and persistent in calling for political and legal reform. The

key factor is whether the new top leadership will follow through with these reforms and

find ways to deal with the multiple challenges it faces (inequality, social unrest,

unemployment, effective urbanization, environmental degradation). The absence of

checks and balances, official secrecy, cronyism, the misuse of official positions along

with poor safety standards and weak regulation raises the question as to whether these

  77  

obstacles will rise to a level where they overwhelm the administrative capacity to deal

with them.

According to the chart above, Chinese citizens are looking to the CCP for reform;

the question is whether and to what extent they will be able to deliver.

Legal system and Government Reform

Whilst there is a long way to go, there are some attempts to support accountability

and transparency within the legal system. China is one of the only one-party states to

allow citizens to sue the state in court. The number of law suits of citizens against the

government has increased from 10,000 five years ago to 100,000 in 2005 – and the

success rate is slowly improving.138 It seems that the government realizes that developing

institutional ways of dealing with grievances can make the state more stable. They are to

some extent working out ways in which citizens can be compensated for ills rather than

merely punished for dissent. The senior leadership has intervened on several occasions,

managing to deflect criticism on to ‘corrupt local authorities’ thereby allowing

themselves to take the side of the ‘little guy’. However this is seen as appeasement and

may prove more challenging in the long run.

This seems to highlight a greater need for increased feedback loops between

society and the government. It is in the government’s interest to allow for more openness

of information as it enables them to understand the needs of the population better. It helps

to maintain stability and decrease the likelihood of significant protests. As this paper has

continually argued, one of the greatest needs and challenges in China is that of

accountability, transparency and better governance of many different types of

organizations, from business to foundations to grassroots non-governmental

organizations to the government itself. I strongly agree with Ling’s suggestion that, the

Chinese “centralized government need not be authoritarian, nor need it be operating only

                                                                                                               138  p.  73, Mark Leonard, “What does china think?”  

  78  

for its own benefits. It could be a centralized effort to implement programs for social

benefits in a pluralistic society with transparency and accountability.139”

Increasing Role of China in the Global Sphere

The implication of transparent and accountable Chinese institutions is not just felt

within China but all across the world. In the long term, as some Chinese scholars

recognize, Beijing will struggle to achieve global legitimacy without substantial changes

at home. The CCP talk about the success of gradualism and the ‘Harmonious Society’,

and peaceful development but to achieve acceptance on the world stage, they will have to

back this up with building trust through the rule of law and accountability. Leonard

suggests, “Its gargantuan domestic problems are driving it to seek a new model of

globalization. And its huge size means that other economies and nations connected to it –

from America to Zimbabwe – will need to reform their own systems to cope with China’s

new ideas about economic development, political reform and world order.140”

                                                                                                               139 p.91, George Fusun Ling, “China Developing: Cultural Identity of Emerging Societies”  

140  P.  7,  Mark  Leonard,  “What  Does  China  Think?”  

  79  

Appendix

  80  

Appendix

Appendix 1: List of Interviewees

Adam Lane, CI Yuan, BSR Adam Mahamat, China Africa Business Council (CABC) Ben Rudick, Schoenfeld Foundation Ben Xu, China Children and Teenagers Fund Bill Valentino, ex-CSR Manager for Bayer Binghua, Beijing Normal University Philanthropy Research Center Brett Rierson, CEO, UN World Food Program Calvin Chin, Schoenfeld Foundation Carma Elliot, Half the sky foundation Carol Hamrin, Global China Center Scholar Cecilia Zhang, LGT Venture Philanthropy CI Yuan, BSR, Brooke Avory Claire Pearson, Corporate Social Responsibility Manager, DLR Piper Clayton Hurd, Haas Center for Public Service CY Yeung, CSR Director Intel Dale Rutstein, UNICEF Daniel Foa, 51 Give Ding Li, Non-Profit Incubator (NPI) Duncan Frayne, Accion China Elizabeth Walker, NonProfit Consultant Elliott Donnelley, Co-Founder Phoenix Global Impact Emily Chew, Partner, Equilibrium Partners Emily Weaver, Beijing Normal University Philanthropy Research Center Fancy Hou UNDP, Public Private Partnerships Flavin Fan, Students for International Free Enterprise (SIFE) Grace Chiang, Social Venture Parnters Guillaume Gauvain, Bethel Orphanage Guorui Su, IJoin He Jianyu, Tshinghua Professor Henny Ngu, UNDP Holly Chang, Golden Bridges Huang Zhaojing, Youcheng Ian Robinson, British Council Ivy Yang, YSY Medicine Foundation Jean Oi, Professor, Stanford Jed Emerson, Executive Vice President, Impact Assets Joern Geisselmann, UNDP John Giszczak, Save the Children John Shi, CEO Arreon Carbon

  81  

Judy Goldstein, Professor, Stanford Karla Simon, Professor, Columbus School of Law Kelly Lau, CSR Director, Nike Kerry Brown, Chatham House Kevin Lee, China Youthology Li Jing, Vantone Foundation Linxiu Zhang, Rural Education Action Programme (REAP) Maaike Harrisen, Center for International Business Ethics (CIBE) Mark Chen, co-founder of New Philanthropy Partners Mark Mancall, Professor, Stanford May Farid, Badi Foundation Meixin Lee, Social Entrepreneur Meng Zhao, Professor at Moscow School of Management Skolkovo Michael Shiu, Global Business Council Nancy Bowen, organizer of Clinton Global Initiative Asia Patrick Schroeder, CANGO Pei Bin, previously Ci Yuan, BSR, now Gates Foundation Prof Fu Jun, Dean of School of Government, Beijing University Rob John, Asia Venture Philanthropy Forum Robin Zhang, Venture Avenue Ryan Du, Philanthropy China Magazine Scott Rozelle, Professor, Stanford Shawn Shieh, China Development Brief Songyan Chu, Chinese Academy of Governance Tao Ze, China Foundation Center Tom Lin, Advantage Ventures Wang Xinsong, Professor, Beijing Normal University Wei Wei, Right to Play Xiao Han, LanShan Foundation Xiao Han, LGT Venture Philanthropy Xiaomin Yu, Professor Beijing Normal University Xu Yongguang, chairman of the Narada Foundation Xueguang Zhou, Professor, Stanford Yang Peidan, China Youth Development Foundation Zhang Xin, Soho Foundation Zheng Wei, CSR Asia

  82  

Appendix 2

Number of social sector organizations in China

There is great debate regarding the scope of ‘social organizations’ in China. Part

of the difficulty of judging the scope of the sector arises because it is hard to ensure the

accuracy of many of the statistics that exist regarding non-profits in China. Thomas Gold

suggests that, “The Ministry of Civil Affairs reported 346,000 registered NGOs by the

end of 2006, an 8 percent increase over the previous year.141” The Chinese Ministry of

Civil Affairs outlined in its Blue Book that in 2008 China officially had 413,600

registered social entities. “Statistics from the Ministry of Civil Affairs of the People’s

Republic of China (PRC) demonstrated that by the end of 2010, the number of various

social organizations was 439,000. The number of foundations was 2,168, the number of

social groups reached 243,000, and the number of private non-enterprise units increased

to 195,000, especially private foundations.142”

143

                                                                                                               141P.7,Gold,  Thomas,  “China,”  Countries  at  the  Crossroads,  (New  York,  Freedom  House,  2007)  

142  People’s  Daily  calls  for  ending  charity  monopoly’,  Hauser  Center,  http://hausercenter.org/chinanpo/2011/11/people%E2%80%99s-­‐daily-­‐calls-­‐for-­‐ending-­‐charity-­‐monopoly/  

143  Songyan  Chu,  Chinese  Academy  of  Sciences,  Growth  of  Registered  Social  Organizations  since  1988  in  China  

  83  

Appendix 3

Amount of donations in China

In 2008, total charitable donations in China were in the range of US $8.9 billion

and $US15.7 billion144. In terms of Corporate Philanthropy, in 2008, 20 enterprises

donated over 100 million RMB; 313 enterprises over 10 million RMB and total corporate

donations were over 12.1 billion RMB. In terms of Foundation Philanthropy, it was found

that 1,245 foundations had total capital exceeding 10 billion RMB. The top 100

philanthropists in China’s total donations since 2004 added up to 15.7 billion RMB.”145

This was a significant increase from the previous year and the highest amount in Chinese

history.146

Appendix 4

                                                                                                               144  http://www.chinacsr.com/en/2009/09/21/6161-china-publishes-blue-book-for-philanthropy/  145 Philanthropists are hoping to break the mold in China By Cong Mu 146 p.152, The state of responsible competitiveness, 2009 by Alex MacGillivray, Gefei Yin (China WTO Tribune), Kate Ives (Accountability) , Joshua Wickerham and Yi Shi (Accountability)  

  84  

Motivation for people to be involved with Chinese philanthropic organizations

Much of people and businesses’ motivation in giving seems to be tied up with

their nationalism and strong identity as ‘Chinese.’ Often nationalism is used as an

inspiration for civic responsibility. For some, it is a natural consequence of one’s

identification as ‘Chinese’ that they want to give back to society. They are proud of the

success that has been made in China over recent years and they want more people to be

able to have access to this. Over the past thirty years, many people have been able to get

rich very quickly and now some have a wish to give back. Clare Pearson, Corporate

Social Responsibility Manager, DLA Piper UK LLP, argues in an interview that a huge

inspiration for people to give back is that they themselves have come from very

impoverished conditions and have witnessed a huge transformation in their own lifetimes.

There is an increasing number of high net worth individuals and businesses that are

considering their engagement with society. “There are 2.7 million high net worth

individuals (HNWIs) in China with personal assets of more than 6 million Chinese yuan

(equivalent to US$950,000) and 63,500 ultra-high net worth individuals(UHNWIs) with

assets of more than 100 million Chinese Yuan (US$15.8 million).147” They want to help

other people to achieve the same type of growth that they have achieved in their lives.

She further suggests that people view their philanthropic initiatives in a similar way as

their business investments. If this were the case then one would hope to see a similar

emphasis placed on metrics and accountability in the philanthropic organizations as is

seen in business. Despite the different motivations for giving, the lack of transparency

and accountability often acts as an impediment to giving.

Appendix 5

Corporations’ philanthropic contributions:

                                                                                                               147 Industrial Bank and Hurun Report, “The Chinese Luxury Consumer White Paper 2012” http://www.hurun.net/usen/NewsShow.aspx?nid=188

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Appendix 6

A large part of the reason that Chinese companies become more ethical is because of

societal pressure to do so. The following diagrams show the increase in stakeholder

pressure on companies in China.

  86  

Appendix 7

148 Appendix 8 Business for Social Responsibility (Project I undertook in May - July 2011)

The Beijing office of BSR is currently engaging in a three-year project, entitled Ciyuan

that has three main components.

i) The Foundation Development Initiative: This is designed to help Chinese foundations

gain expertise in the fields of governance, strategy, operations, and grant making. BSR is

working with the Cisco Foundation, the China Foundation Center, the Narada

Foundation, and dozens of other foundations to facilitate roundtable discussions, launch

demonstration pilot programs, and develop a practical toolkit.

                                                                                                               148 Chinese media reports on philanthropy by key words (2005-2010) http://www.google.com/imgres?um=1&hl=en&sa=N&biw=1024&bih=386&tbm=isch&tbnid=XVV6dfHb3vsJAM:&imgrefurl=http://www.bnu1.org/research/profit/research%2520paper/-Transitions-Reform-and-Innovation--Excerpt-from-the-2010-China-Phil/201104/06-168.html&docid=ORh6WmlaCGAjeM&imgurl=http://www.bnu1.org/uploads/110407/_100U9347.jpg&w=575&h=254&ei=N9aNT-btN6e0iQLjsICeCA&zoom=1&iact=hc&vpx=167&vpy=127&dur=809&hovh=149&hovw=338&tx=171&ty=115&sig=115232627887159928316&page=1&tbnh=53&tbnw=120&start=0&ndsp=13&ved=1t:429,r:1,s:0,i:72  

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ii) NGO Transparency Initiative: BSR has been working with the Ministry of Civil

Affairs, the China Charity Donation and Information Center, and a group of domestic

experts to develop a simple donation information disclosure standard for NGOs and

foundations to communicate financial performance and project impact. Caroline Neligan,

GuideStar International’s director of partnerships and development, and a member

CiYuan’s International Advisory Board, has provided insight on global best practices for

encouraging nonprofits to share information about their organizations openly and

completely.

iii) Corporate-NGO Partnerships Initiative: BSR is developing resources to catalyze

partnerships between Chinese companies and various NGOs, including some GONGOs,

and pilot programs that will focus on specific issues that are relevant to both

organizations. These programs will then be replicated by other organizations.149 These

partnerships play an important role in ensuring that each of the organizations is

transparent. One example of a corporate-NGO Partnership that BSR has been supporting

is the Nike/China Youth Development Foundation Partnership.

Nike/China Youth Development Foundation (CYDF) Partnership:

Kelly Lau, Sustainable Business and Innovation Marketplace Director for Nike in

China, and a member of CiYuan’s Chinese Advisory Board, pointed out that NGOs like

CYDF lend expertise and credibility to Nike’s program, as well as providing access to

community networks. The partnership aimed at enabling CYDF to learn from Nike’s

approach while expanding its own impact in engaging and empowering youth. Through

CiYuan, BSR’s role in the Nike-CYDF partnership was to bridge the gap between the

company’s and the NGO’s expectations and to build CYDF’s skills in partnering with

companies evaluating results. There is clearly great potential in such partnerships. BSR

argue that, “Such mutually beneficial partnerships create a strong civil society - a key

                                                                                                               149 For more information, see: http://ciyuan.bsr.org/about_ciyuan/ciyuan_bsr

  88  

component of the social investment needed to complement China's meteoric economic

rise.150”

I had the great privilege of working with BSR in Spring 2011 to help evaluate and

monitor the partnership between Nike and CYDF, which had been in operation for

approximately one year. It is a fascinating example of a large GONGO working with a

large international corporation. Nike has its own set of accountability mechanisms, with

which all its partners have to comply. It was therefore necessary for CYDF to buy in to

these accountability mechanisms. This case study highlighted the challenges encountered

by two organizations with different outlooks on timeline, strategy and accountability.

Although there were inevitable growing pains at the beginning of their joint venture, they

were and are both dedicated to the success of this endeavor and this will ultimately help

to facilitate its success.

Various issues prevented the smooth running of this partnership, which came to

light on evaluation. It is therefore important that a platform is created from the outset of

corporate-NGO partnerships whereby there is opportunity for frequent reflection and

review of the progress of the partnership. An issue arose in both organizations whereby

there was a discrepancy between the perspective of those involved in the project and the

perspective of the respective directors. In the case of CYDF, there was also the question

of the relationship between the central office in Beijing and the local partners in terms of

openness and accountability. For example, sometimes communication took place

between CYDF and Nike in Beijing but this was not directly communicated to the local

partners, leading to a difference of opinion amongst the organizations.

It took them a lot longer than planned to get the project up and running. This

could have been minimized if both sides had been more open about their other

commitments from the beginning. Each had their own outlook in terms of planning and

implementation and therefore there was a strong learning process that took place on the

                                                                                                               150 http://ciyuan.bsr.org/future_of_philanthropy

  89  

part of both organizations as they began to work with one another. It was clear from

observing this partnership that for social sector organizations to promote transparency in

the wider community, it is important that partners also work on promoting transparency

amongst themselves. It became apparent that there was not a clear delineation of roles

and responsibilities within and between the organizations.

This case study highlights one of the criticisms of GONGOs. They are often not

required to be reflective, accountable or innovative. It is not necessarily within their

culture to have a clear timeline and strategy and therefore they often just respond to

circumstances as they arise rather than see how occurrences fit into an overall structure.

This is therefore an intrinsic difficulty of working with a large corporation that has a

stringent set of accountability metrics.

Appendix 9 151

                                                                                                               151  http://yaleglobal.yale.edu/sites/default/files/images/2012/03/Grants2BIG.jpg  

  90  

  91  

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