As Foreign Funding Dries Up, Gansu NGOs Find It Harder to Survive

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Introduction: This article examines the dilemma faced by grassroots NGOs in the western part of China with the decline of international funding, and whether domestic funding, particularly from private foundations, might fill the gap. The challenges of grassroots NGOs attracting support from Chinese foundations, which tend to have a different approach than international funders, is a theme that runs throughout our Special Issue on Philanthropy and Civil Society in China

Chinese grassroots NGOs have from their very beginning been dependent on Western funding, governance models and philosophies.  Although the development of Chinese civil society and the sequencing of economic transition in China are not entirely decided at the local level, regional civil societies have distinct characteristics based on differences in cultural backgrounds and economic development levels.  For example, NGOs in western provinces favor more foreign funding assistance than groups in the central provinces.  This has resulted in Yunnan and Chengdu in the southwest, and Shaanxi in the northwest, developing a larger civil society community than other provinces. In 2005, when China Development Brief staff conducted capacity building training in Qinghai,  they noticed that local minority speakers were more fluent in English than Chinese, providing a glimpse of the significant role played by “foreign milk (funding)” in the development of these grassroots organizations.

In the western provinces, Gansu’s poverty, environment, education and other related problems require the participation of local NGOs; however, the development of civil society organizations in Gansu has lagged behind with only a few organizations known to the outside world. Relative to other regions, Gansu NGOs are not active enough; in fact, a few years ago, only 20 to 30 local organizations had been formed. In recent years, international funding has gradually declined in China, but that decline is countered by the gradual growth in domestic investment1.  Will Gansu’s NGOs be able to survive in this changing environment?

The Current Situation

At the beginning of this year, the head of the Gansu Yutian Rural Development Volunteer Team (甘肃雨田农村发展志愿者团队 hereinafter referred to as “Yutian”), Hu Xiaojun was talking about whether Gansu NGOs were on the decline.  By mid-year, Yutian had ceased operating. In 2007, several graduate and doctoral classmates formed the core volunteers that founded Yutian; however, when these students graduated, the continued existence of the organization became a problem. In 2010, half of the students graduated and had to decide whether to leave the organization or stay to work on the poverty alleviation of rural communities. This was a difficult choice since the pay level of local grassroots NGOs is low. Hu Xiaojun, as the person in charge, recommended that they look for other jobs. Li Jianqiang was once part of this core of volunteers, but last year moved to work in the Chengdu office of Oxfam Hong Kong (香港乐施会). This summer, all of the core volunteers graduate  and current projects end, so Hu Xiaojun will go to Guangzhou to focus on researching the domestic charity field.

Yutian is an important partner for a number of international organizations, so its closure is a loss for its international partners working in the western part of China. Before Hu Xiaojun leaves for Guangzhou, he must spend a lot of energy to explain the reason for his relocation to their partners.

If the closure of Yutian was due to special factors, other organizations also experienced similar changes over the last few years. As the director of the Lanzhou Xingbang Cultural Renewal Consulting Service Center (兰州兴邦文化咨询服务中心 hereinafter referred to as “Lanzhou Cultural Center”) told students, a few years ago, not just capital investment, but also a variety of trainings, meetings, and project bidding notices were abundant. But since last year, these opportunities have declined, and he rarely hears of NGO trainings or various forums being offered.

Similarly, the situation of shrinking funds occurred in other organizations, such as the Lanzhou Cultural Center’s long-term donors – the Canada Fund ’s investment in China was also reduced year by year, and only a few long-term partners continue to receive funding assistance. Hu Xiaojun also mentioned that in the past a centain embassy supported one-year projects, but now all projects have been changed to only six months, which is too short of a time period to complete community projects in rural areas. Many bilateral projects such as these are in transition.

Funding is not the biggest problem

The above changes give the impression that the problem is one of “not enough money”, but both the Lanzhou Cultural Center and Yutian say that “money is not the biggest problem.”

In 2004, the Center attempted to register with the Bureau of Civil Affairs but was not successful.  In May 2005 after registering as a commercial entity, it developed a comprehensive set of NGO capacity-building, entrepreneurial skills training, volunteer service, education and poverty alleviation programs. Now its main work is in three areas: Minority College Students Small  Loan Project (in collaboration with a number of other institutions), Gansu Province Capacity Building Training Programs for civil society organizations (in cooperation with the Misereor Foundation 米苏尔基金会), and a College Volunteers Support and Education Project (in cooperation with the Gansu Province Minority Culture and Education Advancement Society (甘肃省少数民族文化教育促进会)).

Although international funding is gradually being phased out, the Canada Fund continues to support the Center which began cooperating with a Hong Kong organization on a microfinance project  though due to the instability of funding sources, the Center is now in the process of  localizing its programs and funding. In 2010, it was awarded the China Merchants Group (招商局) Poverty Alleviation Innovative Action Award and the One Foundation’s “Potential Innovation Model Award”, with the prize money allocated to the entire project.  It also intends to establish long-term relationships with local companies in Gansu in order to establish a fund of its own but the plan has not yet succeeded. As a consequence of receiving the One Foundation award, it is discussing its capacity-building program. It also received 170,000 RMB this year from the China Foundation for Poverty Alleviation which provided 5 million RMB to fund NGOs working in earthquake-stricken areas.

The Center’s Bai Shengyi stated: “We’ve determined our purpose, service areas and development goals, and hope that international institutions such as the Misereor Foundation will continue to cooperate with us; however, we now seek diversified funding sources not limited to international organizations.”

Hu Xiaojun also responded by saying: “Funding has never been a big problem. With the rise of domestic private foundations, many of these foundations began supporting grassroots NGOs, which from the perspective of grassroots NGO development is an important strategic opportunity. In addition, Yutian previously strategically partnered with some donors which is not the same as just passively applying for projects and could propose its own ideas.  The main problem then is not money but rather resources and policy uncertainty regarding the registration thresholds for grassroots public interest organizations.”

The voluntary decision by Yutian to stop operating was due in part to low salaries which cannot guarantee an adequate standard of living for practitioners, and also in part to a difficult policy environment. One of Yutian’s funders and partners has an office in Kunming, Yunnan Province where the new regulation rules that INGOs should not fund Chinese NGOs registered as business2.  Similar requirements have not yet emerged in the Northwest provinces so, in the meantime,  international donors are walking a fine legal line between funding groups registered as businesses and not giving the provincial governments an excuse to close down all projects by explicitly breaking the law.  But the overall trend is that organizations not registered through normal channels will face more restrictions3.

Yutian, Lanzhou Cultural Center, and Green Camel Bell (绿驼铃) are undoubtedly the best grassroots organizations in Gansu, but there are only a few groups like this because unregistered groups cannot receive funding and therefore face limited project opportunities. Gansu’s other groups – such as an environmental organization said it is losing interest in the work because it finds it difficult to secure even a few thousand RMB in funding.

Founded in 2005, the Gansu Yixin Psychological Counseling Center (甘肃怡欣心理咨询中心), developed rapidly over the last two or three years. The agency works on post-disaster reconstruction projects, and also received an award from the Foundation for Poverty Alleviation. Bai Shengyi thinks that previously international foundations could give start-up funding to all types of grassroots organizations, but now foundations can only support stable groups. For newly formed grassroots organizations, the ability to proactively design and plan projects will determine whether groups can obtain financial assistance from donors.  From the donor perspective, regardless of what stage of development a group is in, groups that can implement and manage the project, with or without a reputation for doing this type of work, are more likely to be considered for funding.

Factors Behind the “Good Old Days” and the Recent Decline

At its peak, Gansu had an estimated 20-30 active grassroots organizations. In what environment were these organizations formed? One founder of a local grassroots organization said that first, macroeconomic policy at that time was more lenient so that the government encouraged and supported these groups, and second, that international development agencies sought domestic partners for project management, leading to more support for funding, capacity-building training, as well as funding for small projects.

From Bai Shengyi’s perspective, 2003 to 2005 was a relatively fast period of growth for Gansu NGOs. One very important reason for this rapid development until as late as 2007, is that Oxfam Hong Kong became very active in Gansu by initiating more projects and activities, holding international NGO meetings, trainings, and offering small grants.  In particular, increased investment in capacity building for grassroots groups fueled this period of enthusiastic growth.

The Director of Lanzhou University’s  Western Environment and Social Development Center (兰州大学西部环境与社会发展中心,hereafter Western Development Center), Ding Wenguang,  contends that after the “color revolutions” between 2000 and 2005, many types of development projects were no longer encouraged4. However, community development ‘hardware’ projects such as rural infrastructure, disaster management, poverty alleviation are still encouraged. Two factors result in relevant government departments in Gansu controlling  foreign NGO activities. First, some international development agencies do not understand Chinese policies and engage in sensitive activities that upset the government; and second, grassroots NGOs are not informed about the government’s management program and fail to register their projects. Ding Wenguang believes that the improved implementation in both of these areas will  satisfy  the government, and result in better projects for the community.

Founded by Professor Ding, the Western Development Center was approved by Lanzhou University.  It also successfully registered as a “civil non-enterprise unit” (民非) with the Gansu Provincial Civil Affairs Department under the name “Gansu Modern Environment and Social Development Research Center” (甘肃省现代环境与社会发展研究中心,hereafter the Gansu Research Center). The Center is committed to working with government agencies, intergovernmental organizations, academic institutions and development agencies at home and abroad, on challenging development projects in the areas of climate change, community development, disaster management, ecological poverty alleviation, environmental education and capacity-building. The Center “walks on two legs” meaning that half of the organization (Western Development Center) is affiliated with the university, while the other half (Gansu Research Center) is a legally registered organization with the Civil Affairs bureau.  This dual status creates a better working environment than that experienced by grassroots organizations.

Hu Xiaojun contends that the color revolutions did not discourage civil society development.  In fact, civil society organizations developed quite rapidly in Gansu in 2005-2006. One sign of this is that Lanzhou University convened a “NGOs Develop Harmonious Society Symposium ” in 2005. This was a large-scale symposium, with the director and other leaders of the NGO Management Bureau in the Gansu Provincial Civil Affairs Department attending.

Prior to 2005, large-scale capacity-building was not present in western regions such as Shaanxi and Gansu; however, in 2005 and 2006, Gansu and Shaanxi saw the emergence  of several organizations, such as the Shaanxi Women’s Studies Institute (陕西妇女研究会) and  Lanzhou University’s Community Development Center (兰州大学社区发展中心).  Later, the Community Center was unable to continue its work, and the Shaanxi Women’s Studies Institute continued its work alone. In addition, after the 2008 Wenchuan earthquake, disaster relief became a major “theme” of NGO work, with many other projects being shelved, and donors focusing  support on joint projects and showing less interest in long-term capacity-building.

Future Concerns about the New Environment

Several Gansu NGOs believe that the greatest impact on the development of Gansu civil society organizations is not the withdrawal of international donors. Although some donors have begun to reduce funding or withdraw altogether, there are also new donors entering Gansu. For example, a Hong Kong foundation and a GONGO partnered to set up an office in Gansu a year ago, and Oxfam Hong Kong is increasing its investment in the western provinces and has expanded its Gansu office. Moreover, the diversification of funding sources means that the impact of decreased foreign funding is not large.

Regarding NGOs in Gansu, the biggest factors shaping NGO development are government policy and capacity building.

Problems of Projects Funded by Chinese Foundations

In recent years the rapid development of domestic foundations has proceeded inexorably, with the more established organizations from Gansu and other areas accepting new domestic resources. According to the experience of several organizations who were awarded domestic funding, project bidding for both international foundations and domestic ones is the same.  The project should address local needs, the budget should be reasonable and the application should be logically organized.

However, the practice of domestic and foreign foundations does diverge when it comes to evaluating the project’s worth. One founder of a grassroots organization stated that international donors generally first conduct field investigations and ample discussions, regardless of the size of projects, before the grassroots organizations begin project proposals leading to application success rates of 60 percent. International donors even participate in and help modify the project proposals. This type of solid pre-assessment work, while perhaps producing expensive and unattractive proposals, allows donors to identify truly valuable projects.

Domestic foundations differ in their approach.  For example, recently when the China Foundation for Poverty Alleviation allocated 5 million yuan in funding for project bidding in disaster areas, some project budgets went over by 400,000 to 500,000 RMB and had to trimmed. The practice of the Foundation was to first screen the project proposals and then concentrate the projects in certain areas, but even really big projects did not require field research or visits to project sites to pass the selection process.

Another problem, as Ding Wenguang notes, is that in recent years the resources of domestic development organizations have undergone structural changes as the proportion of local resources has significantly increased. Many local foundations, especially private foundations, are founded by private entrepreneurs, and these institutions support the implementation of projects related to the entrepreneur’s personal interests, and not the needs of western provinces. The fact that a considerable number of the NGOs winning awards are from big cities reflects the need to improve the fairness and transparency of the award process. A second problem is that domestic NGOs commonly lack high-quality project officers.  A third problem is that the systematic nature and sustainability of projects is not strong and has not made much progress in recent years.

Conclusion

Through funding assistance, the international development sector in China has been instrumental in creating a number of NGOs over the last 20 years.  However, Ding Wenguang believes that in Gansu, the number of GONGOs are increasing and the number of grassroots organizations supported by international institutions is on the decline. As domestic funding replaces international funds, we may see  changes in the power structure within the public interest sector, and  learn from the past 20 years about  the successes and failures of civil society organizations.


  1. Editor’s Note: The growth in domestic funding is coming from the rapid rise of Chinese foundations.  See our Special Issue on Philanthropy and Civil Society in China 

  2. Editor’s Note: At the end of 2009, the Yunnan provincial government issued a new regulation governing international NGOs.  This new regulation established a documentation (备案) system that allowed INGOs to gain quasi-legal status.  As a result of that regulation, INGOs were also required to document their projects and local partners.  If the local partners were Chinese grassroots NGOs, then they had to be registered with Civil Affairs.  Grassroots groups registered as businesses would therefore have difficult partnering with INGOs under this new documentation system. 

  3. Editor’s Note: In other words, organizations not registered with Civil Affairs will continue to face more barriers as the government seeks to standardize the public welfare system. 

  4. Editor’s Note: the “color revolutions” refer to the regime changes that took place in 2004-2005 in the former Soviet republics such as the Ukraine, Georgia and Kyrgyzstan. China criticized the role that “democracy promotion” NGOs played in these regime changes and afterwards begun to more closely monitor and control the work of INGOs in China. 

In Brief

This article examines the dilemma faced by grassroots NGOs in the western part of China with the decline of international funding, and whether domestic funding, particularly from private foundations, might fill the gap.
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