By Xie Liangbin, Chen Yong and Zhang Xiangdong (谢良兵，陈勇，张向东)

Nation, page 14

Issue No. 540, Oct 17, 2011

Translated by Zhu Na

Original article: [Chinese]

There are two forms of charity in China – those that are related to the state, like the Red Cross Society of China, and those, like Jet Li’s The One Foundation, that are privately owned.

Although charities were formally separated from the government during the period of reform and opening up, they’re still closely related to the state and their positions correspond to the ranks of government.

The status of these “official charities” means that they can sometimes play a central role in providing aid, such as in spring 2008, when donations reached a peak as millions of people donated to help the victims of the Sichuan earthquake.

Until recently, official charities were rarely in the spotlight, and few questions were asked publicly about their spending. However, that the public’s trust has been broken by a sequence of scandals involving Guo Meimei, China-Africa Project Hope, Suntech’s fraudulent donations and the Henan Soong Ch’ing-ling Foundation.

From the earthquake in Sichuan to the one last year in Yushu, there have been questions about the way that charities collected and spent donations.

“China’s charities are like monopolies,” said one businessman, who complains of their “exorbitant profits.” The man, who asked not to be named, has established his own charity foundation.

As an example, he cites the 10% management fee charged by China Youth Development Foundation. “This is very high. What kind of industry has such high margins? The most important point is that the profits don’t require any capital investment. People give you money, and then you just sit there […] and wait to count the money.”

This point of view is shared by Cao Dewang, one of China’s richest men, who says that he would never donate to organizations like the Chinese Red Cross since he knows how they operate.

Last year, Cao donated 200 million yuan to the China Foundation for Poverty Alleviation, which was fighting the droughts in southwest China. He specified that the “the management fee should be less than 3%.”

Cao says that some businesses and individuals use charitable donations to exchange business opportunities with the government, and that this lead to all kinds of grey deals.

Jia Xijin of Tsinghua University’s NGO Research Centre believes that the government should separate itself for charities.

He now wants to donate shares worth 3.5 billion yuan, but under current regulations he would be required to pay out 500 million yuan in tax.

“Cao encountered a problem […] it wasn’t just that there were obstacles to this type of donation [in shares] – he was also taxed 500 million yuan,” said the businessman who asked not to be named.

Currently, China's charities can only accept donations of money or resources. Businessmen who want to donate complain that this limits donors' motivation and encourages corruption.