As foreign aid is phased out in China, new funding challenges are cropping up

The face of China's civil society has undergone a dramatic makeover in recent years, none more so than in the way its organizations are funded.

Less than 20 years ago, China's voluntary sector was wholly reliant on overseas donors. Seed funding from US organizations such as the Ford Foundation kick-started the development of China's voluntary sector after the United Nations' Fourth World Conference on Women, held in Beijing in 1995.

Foreign funding enabled the establishment of more-or-less autonomous citizen groups in China designed to alleviate poverty, strengthen rights of women and disabled people, and protect the environment. While "government-organized non-governmental organizations" have existed in China since the early 1980s, it was money from overseas that drove the growth of grassroots organizations throughout the 1990s.

European funding soon followed. Whereas US funding agencies had the political mandate to support grassroots NGOs in China, European organizations found their operating space more politically circumscribed: development aid was primarily used as a foreign policy instrument to improve EU-China trade relations.

This created two distinct approaches: more Anglo-Saxon support to China's grassroots NGOs and a more cautious European approach of supporting Chinese government-organized NGOs.

China's rapid economic ascent has transformed the current fundinglandscape. International support for Chinese civil society organizations is on the wane. Organizations such as AusAid of Australia and Gesellschaft fuer Internationale Zusammenarbeit of Germany have begun phasing out their development aid to China.

The end of traditional Western assistance raises questions about the future trajectory of China's civil society development as CSOs become increasingly reliant on domestic funding to survive.

Private Chinese funding organizations such as the One Foundation (Yi Jijin), established by the Chinese actor Jet Li, as well as the Alashan Foundation, founded and supported by a group of Chinese entrepreneurs with a mission to protect China's environment, have emerged as new promoters of CSOs.

The Chinese government has also entered the fray. It now not only provides overseas development assistance, but has also started to channel domestic funding for registered Chinese CSOs through state institutions, for example the Ministry of Civil Affairs.

These changes present both challenges and opportunities for China's burgeoning civil society. This kind of government procurement of CSO services raises the prospect of an increasingly state-led civil society; certain sections of civil society could struggle to tap funding streams.

Chinese CSOs likely to be excluded from government funding can seek financial support from Chinese private foundations or look to the emerging social enterprise model as a source of inspiration. In Britain increasing numbers of nonprofit organizations are harnessing the power of the markets to provide monetized social services.

Revenues generated this way are not distributed to the social enterprises' shareholders but reinvested in the organization, thereby enhancing its financial independence in relation to the state.

In the meantime though, Chinese CSOs are relying on more formal mechanisms to guarantee them the funding they need to continue their work. Government procurement of public services has a short history in China, which explains why there is not yet an overarching political and legal framework for the procurement of CSO services.

The Shanghai department of civil affairs took the lead in 2000, funding social organizations to provide services for elderly people in six districts. In 2004, three Shanghai-based "people-run non-profit units" received funding to provide social workers to combat drug use and engage in community youth work.

Two years later, Shanghai's new Pudong district instigated funding for the education of children of migrant workers. Eight municipal government departments and 13 social organizations signed procurement contracts worth 60 million yuan.

In July 2010 the Beijing municipal government allocated 100 million yuan to support 300 welfare projects. Local experiments were then scaled up to a national level when the Ministry of Finance last year allocated 200 million yuan to support the delivery of social services by CSOs.

Officials have hailed the devolution of government functions to CSOs as a major breakthrough in the way the Chinese government provides social services. From a government perspective, procurement of CSO services helps to reduce costs, encourage innovation within government and institutionalize the relationship between government agencies and Chinese CSOs.

Crucially it has the potential to transform attitudes among government officials toward the role Chinese citizens and CSOs can play as partners in the country's social development. The beginnings of this cultural shift are indicative of an increased confidence within the Chinese government to actively shape the development of China's civil society, rather than simply to react to societal self-organization.

This change in perspective speaks well of the Chinese government's willingness and capacity to adapt. At the local and national level, government officials face the complexities of a transition from a planned economy to the more diversified provision of public service under the conditions of a market economy. As such, the Chinese government has recognized the value of CSOs as intermediary organizations and service providers.

This presents an opportunity for all Chinese CSOs willing to align themselves with the policy goals of the Chinese government.

Civil society practitioners have generally welcomed the emergence of government funding for Chinese CSOs. Huang Haoming, executive director of the China Association for NGO Cooperation, sees government funding for CSO-led projects as an opportunity to increase their organizational capacities and professionalize their services.

Critics of government procurement of CSO services say the Chinese government may use CSOs to "manage society". Besides the danger of co-optation they have also raised the possibility that government-affiliated organizations may benefit disproportionately from government funding.

This would be problematic since such government-affiliated organizations already provide up to 80-90 percent of public services in China, thereby blurring the boundaries between funding provision and service production.

As government procurement of CSO services emerges in China there will be winners and losers. Social service CSOs focusing on community services, child services, the elderly and disabled people, as well as health services will be the main beneficiaries of new government policies.

However, labor NGOs, for instance, that deal with industrial relations will find it much harder to adapt as change occurs and will find it hard to sustain their operations in the face of dwindling international support.

Chinese environmental groups also find themselves between a rock and a hard place. So far, they are excluded from government-sponsored projects since the Ministry of Civil Affairs has not made environmental protection a priority area for CSO-led service delivery, and the Ministry of Environmental Protection is yet to provide funding for environmental CSOs.

This leaves environmental NGOs, which have spearheaded the building of a civil society in China over the last 15 years, at a crossroads.

On Weibo, China's equivalent of Twitter, the environmentalist Li Bo has suggested that environmental groups could lobby for government funding aimed at preventing local environmental conflicts. However, such positioning could lead to a widening gulf between Chinese citizens, who want to protect their basic rights, and environmental CSOs, keen to gain access to government funding.

Despite the recent upsurge in government funding for CSOs, a number of key challenges persist that are likely to impede the development of a collaborative relationship between Chinese government organizations and CSOs.

On a national level the Ministry of Civil Affairs started to procure CSO services only last year. Chinese academics have pointed out that in many localities cadres are still very much unaware of CSOs since their development across China has been uneven, with clusters of CSOs in urban centers such as Beijing and Shanghai.

In more remote provinces like Qinghai or Yunnan, civil society practitioners often have to use a substantial proportion of their own organizational resources to persuade local government officials to cooperate. Success hinges on the enthusiasm of local officials and their ability to tap into the new government funding streams.

In the absence of an overarching political framework for collaborative government relations with China's emerging civil society sector, such personal relationships have a tendency to be short lived. Because of China's cadre rotation system, many CSOs have to rebuild personal relationships once a willing cadre is promoted or has moved to another administrative division or locality.

This over-reliance on personal contacts leads to an underdevelopment of formal systems based on the rule of law, which should guide government procurement of CSO services.

This situation indicates there is scope for future international cooperation projects with China that will enhance the Ministry of Civil Affairs' capability to institutionalize transparent and accountable rules for the procurement of CSO services. Both government officials and civil society practitioners would benefit from capacity building initiatives that make it easier to cooperate.

The author is senior fellow of the China Policy Institute and Lecturer at the School of Contemporary Chinese Studies, University of Nottingham. He is Program Manager for the EU-China Civil Society Dialogue. The views do not necessarily reflect those of China Daily.

(China Daily 05/03/2013 page9)