The risks of local government debt have not diminished, yet funds from public welfare and charity organizations have also flowed into this domain, forming new hidden debts.
The National Audit Office recently disclosed in the “Audit Report on the Implementation of the Central Budget and Other Fiscal Revenues and Expenditures in 2024” (hereinafter referred to as the “Report”) that in 11 regions, 15 financing platforms and others raised 150 million yuan in new hidden debts by issuing non-standard financial products and borrowing from more than 1,600 individuals, 45 public welfare organizations, and village collectives.
The “Report” cited typical cases, stating that since September 2024, a financing platform in Jinjiang, Fujian, borrowed 1.502 billion yuan from nine provincial public welfare organizations such as the Charity Federation and the Courageous Acts Association, part of which was used for government investment projects, thus forming hidden debts.
Among the two public welfare organizations named, according to its official website, the Jinjiang Charity Federation (hereinafter “Jinjiang Charity”) was founded on December 18, 2002. It is the first county-level private charity organization in the country, with council members mainly comprising entrepreneurs and local gentry. As of June 30, 2024, its total donations raised amounted to 4.754 billion yuan, with cumulative assistance spending of 3.253 billion yuan, covering poverty alleviation, student aid, compensation for households affected by requisitions, support for impoverished mothers, and assistance for women suffering from severe diseases, benefiting more than 192,000 people.
The Jinjiang Association for Courageous Acts was established in 2013 under the supervision of the Jinjiang Public Security Bureau. Its predecessor was the Jinjiang Foundation for Courageous Acts founded in September 1993. By the time it was transformed into an association in 2013, it had raised a cumulative fund of 37.5 million yuan through social fundraising.
Charity Organizations Entangled in Local Debt
The Jinjiang Charity’s official website only publishes audit and work reports for 2020 to 2023. Even before September 2024, as disclosed by the National Audit Office, this charity organization with annual donation revenues of only 200-300 million yuan had already carried an account receivable exceeding 1 billion yuan for several consecutive years.
According to those reports, Jinjiang Charity’s annual donation revenues from 2020 to 2023 were 240 million, 312 million, 266 million, and 189 million yuan, respectively.
Its 2020 audit report mentioned that by the end of that year, Jinjiang Charity held an account receivable from Jinjiang City Construction Investment & Development Co., Ltd. (hereinafter “Jinjiang Urban Investment”) with a book value of 1.0355 billion yuan. The reason for the debt was “borrowing,” and the debt age was 1-2 years. In the following three years’ reports, the amount remained above 1 billion yuan, with the same debt age of 1-2 years. However, in the 2023 report, the reason for the debt was changed to “entrusted.”
According to the National Audit Office’s “Report,” this account receivable is defined as “borrowing,” which violates two departmental regulations. The “Several Provisions on Regulating the Behavior of Foundations (Trial)” by the Ministry of Civil Affairs stipulate that foundations must not provide loans unrelated to public welfare activities to individuals or enterprises. The “Interim Measures for the Management of Charitable Organizations’ Investment Activities for Preserving and Increasing Value,” implemented in 2019, also clearly prohibits charitable organizations from lending under the guise of investment to individuals or enterprises.
Credit rating reports from several agencies in recent years also show that Jinjiang Charity had financial dealings with Jinjiang Urban Investment even before 2020.
Reports from China Chengxin International and Orient Jincheng mentioned that as of the end of March 2018, Jinjiang Urban Investment’s top five other payables included Jinjiang Charity in second place with 659 million yuan, following the Jinjiang Finance Bureau’s 2.993 billion yuan. By the end of 2019, payables to Jinjiang Charity had risen to 1.13 billion yuan, making it the top “other payable party.” In 2023, Jinjiang Charity remained a major payable party, alongside Jinjiang Ping’anxing Public Welfare Charity Foundation.
According to Jinjiang Economic Daily, the Jinjiang Ping’anxing Public Welfare Charity Foundation was launched in June 2018 and had raised more than 110 million yuan by June 2021, mainly for judicial public welfare restoration and aid to impoverished groups.
Can this receivable be recovered? According to Jinjiang Urban Investment’s financial report, as of September 2024, the company’s total debt stood at 62.738 billion yuan, with short-term debt accounting for 46.96%, an increase of over 12 percentage points compared to 2021.
China Chengxin International stated in its 2025 credit rating report that Jinjiang Urban Investment, as Jinjiang’s key urban development entity, maintains a close relationship with the Jinjiang municipal government. Its credit level is expected to remain stable in the next 12 to 18 months, but attention is needed regarding the continued growth of short-term debt and certain repayment pressures.
A representative from Jinjiang Urban Investment responded to Caixin, stating that the agreement with Jinjiang Charity was originally made because it was “mutually beneficial”: the charity sought to preserve and grow its funds, while the urban investment company obtained flexible funds at a relatively low cost.
Regarding the starting time of this financial relationship, the representative did not disclose it. However, they acknowledged the National Audit Office’s classification of the funds as “borrowing,” stating, “Since the Audit Office has pointed out that this portion is in violation, we will definitely rectify it as soon as possible. We will strive to repay this part of the funds in a legal and compliant manner within the next two weeks.”
Charity’s “Gray Investments”
Although charitable organizations are prohibited from providing loans under the guise of investments, they are not banned from conducting investment activities.
The 2004 “Regulations on the Administration of Foundations” removed the restriction that foundations must not operate or manage enterprises, instead stipulating that foundations should “realize the preservation and appreciation of funds according to the principles of legality, safety, and effectiveness.” However, the regulations did not specify detailed guidelines for public welfare foundations participating in investments, leaving the boundaries between public welfare and business blurred and fostering various “gray investments.”
As early as 2011, Southern Weekly reported on the “tricks” in the commercial operations of the Song Qingling Foundation of Henan Province (hereinafter “Henan Song Foundation”), claiming it allocated large sums for lending, engaged in illegal fundraising, and handed public welfare funds to employee-owned affiliated companies for operation, including real estate investments that transformed public welfare projects into luxury homes. At the time, the Henan Song Foundation told Caixin that all actions were “innovative steps to pave the way for sustainable development of public welfare organizations.” Yet, many experts and scholars considered their fundraising activities to be skirting the edges of legality.
The 2016 “Charity Law of the People’s Republic of China” and the aforementioned “Interim Measures for the Management of Charitable Organizations’ Investment Activities for Preserving and Increasing Value” partially filled legal gaps, but such activities still persist in some areas. In addition to hidden debts in urban investment, several recent investment failures have exposed the gray chain of charity fundraising and “capital preservation and growth.”
In September 2023, Ke Shanxiao, a former staff member of the China Charities Aid Foundation for Children (hereinafter “Children’s Charity”), embezzled tens of millions of yuan in donations meant for families of seriously ill children, causing an uproar in the charity field. This fraud scandal not only involved illegally siphoned “matching donations” but also exposed the charity industry’s gray economy of using advertising traffic for “money-making” schemes.
In November of the same year, Southern Weekly revealed that the Henan Provincial Foundation for the Development of Elderly Cultural Undertakings (hereinafter “Elderly Foundation”) attracted billions of yuan from “depositors,” channeling it into real estate projects through entrusted investments. As project construction faltered, the foundation accumulated debts of over 100 million yuan, leaving it unable to repay, and depositors could not retrieve their “deposits.”
Senior public welfare practitioner Xue Fei told Caixin that Jinjiang Charity is not the only organization lending to urban investment or real estate companies that has triggered risks. Due to incomplete laws and certain unspoken reasons, many such cases remain in regulatory blind spots. Some organizations have been reported or exposed, but those not yet publicly revealed may still have similar issues. Besides loans, investments, and “absorbing deposits,” some may be involved in even more clandestine rent-seeking activities. “In the administrative penalty records publicly disclosed by the Ministry of Civil Affairs, some organizations, apart from their names, have almost nothing to do with public welfare or charity—they are merely exploiting loopholes for profit.”
Other observers have noted that when charity organizations play legal edge games under the guise of “investment,” the problem is not just the illegality of the behavior but also the potential risks to charity assets, ultimately harming beneficiaries’ interests and eroding public trust.