Red Cross in the Crosshairs
Filed under:News | Tags:charity, corruption, earthquake
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The Chinese Red Cross is playing a critical role in managing relief donations for victims of the earthquake. However, along with great authority comes great responsibility. The Red Cross is now being hit with allegations of corruption from every corner.
Within 24 hours of the earthquake, CCTV (and all other news organizations) began to redirect all donations to the Chinese Red Cross. Chinese Red Cross account numbers has been a regular presence on the scrolling banner on the bottom of every TV station ever since. Although this isn’t clear, I suspect the donations being collected by government-affiliated overseas Chinese groups (including the Chinese embassy) is also largely being directed to the Chinese Red Cross. Even the money collected by many independent funds (like Jet Li’s One Foundation) are ultimately being redirected into the Chinese Red Cross.
Most Chinese are unfamiliar with the Red Cross; public charity on this scale has simply never been done in China before. Therefore, many have been shocked by a few ugly facts that the West is more familiar with… including the heavy processing fee the Red Cross can claim for itself. (For example: the American Red Cross CEO has an annual salary of more than $650k).
In China, the law regulating charitable organizations allows charities to take up to 10% of all donations as a “processing fee”, to pay for operations. The Chinese Red Cross apparently takes 5% off the top of all donations. For many in China, the realization that the Red Cross isn’t a volunteer organization, but instead is in effect making a living off of donations intended for earthquake victims, has been very difficult to stomach.
Many Chinese have seen this ugly YouTube video of a Red Cross organizer in Hainan, counting cash and arrogantly insisting that she “deserves” the processing fee. It’s not clear whether this video was recorded recently, or after a previous disaster.
This problem was exacerbated when an Internet report began to circulate that a Chinese Red Cross representative had said on CCTV-4 they were in the process of sending 1,000 tents worth 13 million RMB ($1.85 million USD) to the disaster zone. Some quick math convinced many Chinese that the Red Cross were buying tents at 13,000 RMB each, which is many times the fair market value. The questions immediately followed: who’s swallowing the difference? Is the Red Cross or any government officials associated with any sporting goods factories?
A story quickly followed that a major portal (NetEase) had broken off its fund-raising relationship with the Red Cross because of accounting issues. This story is somewhat technical; NetEase wanted to fully document the donations by its members and track its usage, and the Red Cross was either unwilling or unable to do so. NetEase has subsequently linked up with a different charity. This story might be an innocent accounting issue, but it contributed to the fears of many that the Red Cross was crooked.
After a very long delay (in Internet time), the Chinese Red Cross finally came clean with something close to an explanation. They claimed that they could find no proof anyone from the Red Cross had been interviewed by CCTV4, and that their tents cost only 1174 RMB ($167 USD). All of this might only have been simple miscommunication, as the Red Cross might have said the donation amount included 1000 tents and other supplies. The effect that this has had on donations for the earthquake can be imagined.
The story has spread from there. Others looked into news stories about the amount spent on rice (2 million RMB for 30 tons), and compared prices to market prices. Others began to report that Chongqing Red Cross members were seen splurging on food and liquor; the local chapter published its receipts in response to this pressure, explaining that they were “forced” to eat out on that particular day. But this still wasn’t very satisfying to many Chinese netizens, as the amount paid (46 RMB/person) suggest a more than decent meal.
As public pressure built, one unnamed Red Cross worker claimed that the Chinese Red Cross would bypass its customary service fees, and donate 100% of all funds to disaster relief. Many netizens remain very skeptical. The Chinese Red Cross touted its web-based system that allows individual donors to track their donations by entering a confirmation transaction number, but many Chinese netizens want much more transparency on how funds are spent.
From the point of view of Chinese society, this sort of public scrutiny can only have a very positive effect. The Chinese Red Cross has made promises that its accounts and operations will be made “more” transparent; if it fails to do so, public outrage will quickly rise again.
UPDATE: On May 22nd, the Hainan Red Cross announced at a news conference that the organizer captured in the video above has been suspended from her job. The video is apparently from a fund-raising drive in March, before the earthquake.
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May 23rd, 2008 at 12:38 am
“For the many Chinese critical of their government, their number one concern isn’t “human rights” or “freedom of expression”… instead, it’s corruption pervasive throughout Chinese society.”
I think you will agree that all three are linked, and that one cannot exist without the other two – without human rights there can be no freedom of expression or power to oppose corruption, without freedom of expression you have no real rights and now power to reveal corruption, and in a country where corruption is wide-spread rights and freedom of speech are meaningless. The only long-term solution to corruption is returning power to the people and giving full powers of expression to the press, let them vote out of power those corrupt politicians that the media exposes. We have a prime example of this in the recent elections in Taiwan – more of the same would help cure mainland China of its correuption problems.
May 23rd, 2008 at 12:56 am
FOARP,
To a certain degree they are linked, but I hope you will also agree that it’s not as simple as provide human rights and corruption will disappear.
I would only need to refer to other nations at a similar level of economic development: Brazil, Mexico, India… these democracies have “human rights” (as defined by activists in the West), a free press, and freedom of expression… but the stain of corruption is also in every corner of those societies. If returning power to the people is the “long-term solution”… why hasn’t it worked in these other nations?
I will agree, however, that after a decade of confused struggling, Taiwan is proving to be an excellent instructional example for the Chinese nation as a whole, and I’m envious of what they’ve achieved.
May 23rd, 2008 at 1:16 am
I am glad to see this sort of public scrutiny starting on such a big scale. And I am very confident to see the same sort of public scrutiny would more appear in the future including towards the government. even the central government knows the problem and many corrupted officers get arrested each year. But the government’s anti-corruption department would get more efficient and the money would get much better used with the big scale of public scrutiny .
I also agree with FOARP,corruption and human rights or freedom of expression are all linked but only on a certain degree.
many democratic countries like some in Latin American and Asia have no less and even more corruptions than in China.
I’m sure the increasing human rights and freedom of expression would definitely reduce the corruption and would lead to the path of democracy in China.
Thank for the revolution of internet which can hardly been controlled.
May 23rd, 2008 at 1:28 am
none-democratic Hong Kong and Singapore have less corruption than democratic Taiwan if we compare similar backgrounded people. I am not saying because of democracy in Taiwan cause more corruption. I am saying there are other factors play into the corruptions.
China might need learn democracy from Taiwan and learn some other very efficient governance from Hong Kong and Singgapore.
They have something more suiteble in mainland China than something directly borrowed from the west.
May 23rd, 2008 at 2:10 am
FOARP –
I definitely am for human rights (loosely defined), freedom of expression, and a reduction in corruption. But I’m not sure if human rights, freedom of expression, and corruption are actually linked.
In the U.S., for example, the cost of corruption to the people may actually be higher than in China. Consider the legislative favors offered to special interests: how much does a favorable regulation to a drug company actually cost to the people? (potentially billions of dollars)
You also said: “We have a prime example of this in the recent elections in Taiwan – more of the same would help cure mainland China of its correuption problems.”
Not sure if you have been keeping up with the news in Taiwan the last few months or even the last year or so. Corruption by the DPP has been huge and a big embarrassment!!!
May 23rd, 2008 at 2:46 am
In the West, any reputable charitable organization will publish annual reports with a summary circular pie chart, showing how every donated dollar is spent. It is unreasonable to expect that 100% of every donated dollar goes toward relief, since the organization justifiably incurs expenses in the process of doing its work. I believe the accepted convention is that a 10% “expense” ratio is considered reasonable in the West. I don’t know if the CHinese Red Cross is affiliated with other national Red Cross agencies, but if it is, I’m surprised that such information wasn’t previously readily-available or routinely scrutinized.
I must say I’ve never heard of “Red Cross organizer… counting cash and arrogantly insisting that she “deserves” the processing fee” happening in the West. But that’s also not to say that there aren’t crooked “charities” in the WEst either, though the Red Cross has a deservedly good reputation around here.
I don’t know if human rights, freedom of expression, and combating corruption are linked, but to me, they all represent fundamental goals for all people.
May 23rd, 2008 at 3:03 am
By the way, I feel silly even having to explain this…
… but what I said above is absolutely only my opinion, not the opinion of “the Chinese”. Many Chinese agree with FOARP that freedom of expression, and various forms of political rights would curb corruption in China. I personally am not that optimistic, perhaps because I’ve had more opportunity to see how democracies actually function in developing countries.
I want to point out too that even the many young Chinese that call for freedom of expression + political rights see it only as means to an end: reducing corruption… that is really the major plague affecting China today.
May 23rd, 2008 at 3:44 am
test.
seems commenting stopped working
May 23rd, 2008 at 5:21 am
The issue of corruption is paramount in any society. The prosperity of the people is linked to corruption. Where corruption is endemic, prosperity is hampered. In simplistic terms, corruption is to a society as internal bleeding is to the body. Corruption tramples human rights.
In order to deal with corruption, you must be able to identify it. Like most things rotten, it thrives in the dark. If you are unable to speak out, you are unable to identify corruption. So, while the government may say that they want to fight corruption, it is only when the people can speak out will anything be done about it. Therefore, I think it is a very positive sign that the people are challenging the Red Cross about corruption. With the scope of the earthquake disaster, I expect more and more questions will be asked about corruption in all areas. After this unprecedented three day mourning period, what official will be able to sweep these questions, or the questioners, under the rug?
May 23rd, 2008 at 5:49 am
S.K. Cheung,
Yes, the Chinese Red Cross is under the auspices of the International Red Cross, and has the same reporting guidelines. However, by the same logic, China has long had firm laws limiting corruption and police abuse. Nothing in the real world is quite that simple, however. In the case of the Chinese Red Cross, people have dug out its earlier annual reports, and details are minimal. Broad categories of expenses, nothing specific.
In terms of charities that donate don’t take a penny of operating expenses… look at Tzu Chi. Tzu Chi is one notable exception by Western standards, but very much in the traditional Chinese mold. It accepts donations for its operations, and it accepts donations for relief operations… and the two do not mix. Their “workers” and representatives are all volunteers, and are not paid a penny for their time.
I’ve given to Tzu Chi, and happy to have done so. I’m confident every cent of my donation will be going to help the victims of the earthquake.
See here for donation instructions:
http://blog.foolsmountain.com/?p=90
May 23rd, 2008 at 6:04 am
MutantJedi,
After this unprecedented three day mourning period, what official will be able to sweep these questions, or the questioners, under the rug?
I agree with you, I think this could have very positive side-effects. The entire city of Chengdu has been turned upside down over the last two days by netizen volunteers, looking for evidence of stolen relief goods.
We know now tents have been “redirected” from earthquake relief into private stores, and ultimately into expensive private housing districts. But where-ever these tents are showing up, their neighbors are spreading the news and calling 110 (public security). Those responsible are being taken into custody.
There will be a great deal of pressure on Chengdu public security as well to deal with this transparently and openly. That’s a good thing for Chinese society.
May 23rd, 2008 at 6:07 am
First off, I think it’s a little premature to discuss the links among human rights, freedom of expression, and corruption when we each have different definitions of those words in our heads.
Second, I’m glad to see people being more keen on uprooting corruption(which I feel is the greatest problem in China) but isn’t this red cross thing going a little overboard? Beyond hearsay and a less than pleasant red cross worker, nothing illegal happened.
And even if the lunch story is true, it’s such a small issue, because less face it, there are acceptable amounts of corruption, which I define as corruption that will cost more to eliminate than the savings/benefits you receive. While admirable, I think the attention should be focused on the possible corruption associated with the shoddy construction of buildings in Sichuan.
May 23rd, 2008 at 6:21 am
yo,
The shoddy construction story is hugely important to the people who lost their children, and I sympathize with them. But from a national point of view.. it’s a tiny story. Even if we traced it to the bottom, we’ll most likely find a peasant construction head with 6th grade education who cut corners so he could afford a motorcycle.
Even if we executed him 100 times over, it won’t bring back the lives of the dead children, and it won’t have significant impact on the same type of corruption in poor counties around the countr.
The Red Cross story is different. It is dealing with *huge* sums, certainly in the hundreds of millions of dollars, possibly in the billions. And every Chinese person who’s donated any money in the last week (a few hundred million people) will feel like they have an obligation and responsibility to see they weren’t “cheated”.
A few guys eating out is indeed a small story, but the bigger implications are huge. The Red Cross must open up its books.
May 23rd, 2008 at 8:58 am
It strikes me that every week in China there is a need for a new public scapegoat for the population to vent their anger upon. Carrefour, McDonalds, a dimiwitted female blogger criticising the relief effort, now the Red Cross. Public hatred seems to be like a roaming gunsight, settling on some target for a while and blasting away until another apparent source of badness is revealed. A perverse pressure valve for a society that his little accountability and limits on public dialogue and criticism?
May 23rd, 2008 at 1:56 pm
Actually this is not the first time the Red Cross has come under fire for the way it’s handling disaster relief funds. There was a huge scandal over how the American Red Cross handled donations meant for the relief of 9/11 victims, and I’m surprised that no-one had brought it up yet. The corruption at some local chapters of the American Red Cross ultimately led to the Society halting solicitations for September 11 victims and bringing in an outside auditor to review the organization’s spending.
See here for a few links of how the West reported the story:
“Red Cross defends handling of Sept. 11 donations”
http://archives.cnn.com/2001/US/11/06/rec.charity.hearing/
“Red Faces At The Red Cross: Local Chapters Kept 9/11 Money Instead Of Sending It In For Victims”
http://www.cbsnews.com/stories/2002/07/30/eveningnews/main516886.shtml
“Storm Brews Over Sept. 11 Funds: $200 million goes to other Red Cross programs” (Reprint from Toronto Star Newspapers)
“http://www.commondreams.org/headlines01/1029-05.htm
And how things apparently haven’t changed much in the more recent Katrina disaster:
“http://www.huffingtonpost.com/richard-walden/the-red-cross-coming-home_b_7653.html”
May 23rd, 2008 at 2:07 pm
So I think Netease was absolutely right to ask for documentation for where the donations go from the RCSC. The Red Cross is the first port-of-call for millions if not billions of disaster donations, both in the West and China, and I thought the International Committee of Red Cross would have developed accountability guidelines following the criticisms from the 9/11 scandal. I myself have donated to the Red Cross and have reposted donation information for the charity on my blog from Xinhua, and in fact the Irish government channelled its entire aid for the disaster relief of China earthquake victims through the Red Cross. Donors are keen to see that moneys go to where they are needed by victims, and to smear such concerns as public hatred on a par with nationalistic youths lambasting a silly blogger is both unhelpful and inaccurate. I agree with the other commentators who said that such open questioning is a very positive sign for increasing transparency in Chinese society.
May 23rd, 2008 at 7:32 pm
Buxi,
I agree that it’s true that shoddy construction is more of a necessity in poorer areas(you want a house at this price or do you want your family to sleep out in the rain?). This is what I call the “good enough” philosophy, and for poor villagers, it’s a grey area.
However, it was my impression that shoddy construction was widespread in “urban” areas hit by the earthquake, and this is the distinction I want to draw. In these cases, the resources ARE there(e.g. money) and we are talking about extremely dense populations where the risk of mass fatalities is high if there is building collapse. In these cases, there should be investigations on possible cases of bribery. I understand that the local governments probably don’t have the resources to check every building, or even if they should enforce the building codes for peasant farmers who can’t afford the improvements, but they are responsible to at least check high rise buildings like schools and apartments.
And this issue effects the entire country, look at the cost of human life, cost of the relief efforts, rebuilding cost, opportunity cost etc. It’s enormous and growing, and I believe it would have been much lower if more buildings were up to code and still standing. According to government newspapers, public spending will be cut by 5% because of the earthquake damage. Tackling the issue of building codes and possible corrupt officials should take priority and should be an issue for the nation.
As for the red cross issue, let me clarify my position. I think it’s premature to assume corruption when there is no verifiable evidence to suggest it(correct me if i’m wrong). However, if we are talking about transparency in spending, then that’s something I agree with.
May 23rd, 2008 at 8:21 pm
yo,
However, it was my impression that shoddy construction was widespread in “urban” areas hit by the earthquake, and this is the distinction I want to draw.
That largely isn’t true. Keep in mind that the very, very densely populated metropolitan area of Chengdu (capital of Sichuan province) was only about 50 miles from the epicenter of the earthquake. But casualties in Chengdu were kept low; I’m not aware of any complete collapses in Chengdu at all.
In my not very informed opinion, the only questionable collapses were of a few specific buildings in the county-level town of Dujiangyan. But even there shoddy construction wasn’t “widespread”… which is part of the reason people are convinced corruption and cost-cutting is responsible for the few buildings that did collapse.
I shouldn’t say its purely a money thing; it’s also a political priority thing. The only problem is that when you have little money, your priorities are more exposed. Definitely, I think China will have learned a lesson from this in terms of prioritizing. Government building collapses aren’t exactly a good thing, but you simply can’t have schools collapse.
Many Chinese over the past week remembered a deadly fire in Xinjiang about 5-10 years back. The story goes, a fire started in a theater where the school-children were putting on a show. As the evacuation started, those in charge held the children back and repeatedly said: “let the officials go first”… allowing political leaders in the audience to leave first. Unfortunately, many of the children held back never left that theater. The analogy to government buildings still standing in many Sichuan counties should be obvious.
That story is notable not only because of the political story, but because it happened during a period in China in which it seemed deadly fires were happening every other month. I remembered opening up newspapers and reading about deadly fires of huge scale in nightclubs, internet cafes (one especially case in Beijing itself), movie theaters… everywhere. Fire safety doors and windows in these places were usually found locked to prevent people from sneaking in.
But now…? These stories are far and few between. And it’s because the political leadership in areas where these deadly fires occurred were heavily punished by Beijing, meaning much greater priority is now placed on fire safety. I think the same will happen nation-wide now in terms of school-building safety.
May 24th, 2008 at 4:44 am
Just to add to the story of school collapses… according to this news report:
http://www.mitbbs.com/article_t/ChinaNews/31547300.html
Five schools collapsed in Dujiangyan, but most of these were built before 1990. One of the companies implicated in the building went bankrupt back in 2000, because many of the residential buildings it built were seen as being very poor in quality.
I really see this as a sad combination of poverty and negligence.
May 24th, 2008 at 4:50 am
I watched one report on the CBC (Canadian Broadcasting Corporation) where they pointed out that the school was built in the 1960’s… I can’t imagine that “quality was job one” at that time.
May 24th, 2008 at 6:02 am
Buxi,
According to Xinhua, officials are looking into the school collapse which is good:
http://news.xinhuanet.com/english/2008-05/16/content_8184722.htm
This article was written early on, but at that time, they confirmed over 6,000 school collapses, and 216,000 building collapses overall. Overall building collapses aside, the sheer number of school collapses is alarming. I hope this investigation sheds more light on the entire situation(not limited to schools) and brings upon improvements.
“But even there shoddy construction wasn’t “widespread”… which is part of the reason people are convinced corruption and cost-cutting is responsible for the few buildings that did collapse”
I’m not sure what you mean by this considering the Xinhua article.
My reference to urban areas was referring to cities/towns where buildings actually collapsed. Cities like Beijing and Shanghai, which also felt the quake, were unaffected and I was not considering them in my post. My impression of Chengdu was that they were relatively unscathed despite it’s proximity to the epicenter while other towns were affected disproportionately. For me, this suggest something is happening (corruption, shoddy construction, lack of regulations, whatever) because all things being equal, Chengdu should be in ruins or on the flip side, towns like Beichuan should still be standing. Of course, we will wait and see what the investigation brings up. Preliminary inspections of collapsed building (according to a MSNBC video) done by engineers reveal shoddy construction so that is why I’m leaning in that direction.
May 24th, 2008 at 7:56 am
Well, it’s pretty well known here (Canada) that charities aren’t all volunteer. I believe there have been accounts of “charitable” organizations here that use up about 85% of the donations they receive for administrative things leaving only a measely 15% that gets to where it’s intended to by the people. Even the most humanitarian of organizations such as Amnesty International and World Vision have been scrutinized by many here and accused of not using a sufficient proportion of donations as intended by donators. Charities these days aren’t charities really, they’re businesses. At the bottom you’ve got some kind-hearted, well-meaning volunteers, you go up the ladder and very quickly you find those CEOs and executives aren’t much poorer than corporate CEOs and executives.
May 24th, 2008 at 2:49 pm
If I understand correctly, many in Chinese internet is asking for item-by-item disclosures, not the usual annual report staff which I believe they provides. Some of what they push for are nothing short of a reform of Red Cross practice.
In general, the item-by-item procurement and spending scrutiny is subject to auditing only, but not to the general public. The problem is, Chinese just doesn’t trust the state auditing service. It’s probably wise for the Chinese Red Cross to hire an outside (meaning Western) auditor. But even that won’t be enough to satisfy many Chinese because auditing doesn’t prevent under-table discount deals. They would have to overhaul the whole Chinese business environment to be trustworthy.
One other problem is that many Chinese are just not familiar with the pracitce of Red Cross and NGOs, and uncomfortable with the executive charge which is said to be at 6.5% for Chinese Red Cross. Thee charge is banned by government executive order for this time.
May 24th, 2008 at 4:16 pm
But even that won’t be enough to satisfy many Chinese because auditing doesn’t prevent under-table discount deals. They would have to overhaul the whole Chinese business environment to be trustworthy.
Very true. One story/rumor going around is that buyers for a charity (perhaps the Red Cross) attempted to buy medical goods worth 10k RMB, but demanded receipts showing 50k RMB. The representatives could then pocket the 40k difference.
This kind of gray-color corruption is common in the Chinese business environment in general. You can’t have the sort of clarity that the Chinese people are demanding (and deserve) unless we overhaul the whole system. I hope this helps that process.
May 26th, 2008 at 8:09 pm
The woman has no clue that asking for a processing fee is out of line. At the same time, the Chinese Red Cross cannot operate without basic overhead covered. She’s caught in a quandary.
This tells me: China does not have much of an institutionalized civil society base because this is not encouraged by the authorities — who would want to share power with someone else?
Holding the woman responsible is like killing the messenger. It doesn’t solve the underlying problem.
May 26th, 2008 at 8:10 pm
And I agree with Buxi’s comment no. 24, transparency is key. But again, for obvious reasons it’s not encouraged by most Chinese authorities.
May 26th, 2008 at 11:02 pm
Wu Di,
I take exception to your statement that “most Chinese authorities” are against increased transparency. I can’t agree. I believe the majority of both officials in government and members of the Communist Party would like to see a cleaner, transparent government. I believe many are working in that direction.
See this for one example of policies intended to enable exactly that:
http://blog.foolsmountain.com/?p=81
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