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Xinhua Insight: China's "red hat" associations learn to fend for themselves

Updated: 11 11 , 2016 14:42
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BEIJING, Nov. 10 -- More than 70 of 250 trustees have left the China Institute of Internal Audit. Under a new reform, they had to choose between their government posts and trustee positions, and they chose the former.

It is just one of the new changes to take place at the non-profit organization, which was previously affiliated with the National Audit Office (NAO). From now on, the institute will learn to support itself financially.

Thursday was the deadline for the separation reform, which began last year, for a first group of 148 nationwide industry associations and chambers that had been affiliated with or directed by different ministries such as agriculture, industry and state-owned assets. The pilot reform makes them independent of these ministries in terms of personnel, finance, assets and business.

Due to their official associations, such agencies are known as "red hat" intermediaries. Many of them provide positions for present or retired senior officials.

The China Institute of Internal Audit is among the 148 associations, and the only one connected to the NAO.

"We have basically completed the reform," said Shen Liqiang, vice secretary general of the institute, who resigned from his post as deputy head of a research body under the NAO.

The reform bans government employees from holding posts in such associations. Some left the institute due to their government posts. A few gave up their government jobs and chose to stay at the institute.

Seven branches of the institute were closed due to their failure to meet the reform requirements, and only two branches remain.


In July 2015, the central government released a plan to eliminate the affiliations between industry agencies and government departments to boost the former's vitality and service role.

The reform is in full swing at the provincial and municipal levels.

Kong Xiaohong, secretary general of an animation industry association in central China's Zhengzhou City, used to be influential among local animation firms, mainly due to his other powerful title in the city's culture bureau.

"In the past, as the bureau's division head, I had some power as to how to distribute the government industry support fund of 50 million yuan (7.4 million U.S. dollars) each year. These animation companies had to do as I told them," said Kong.

He resigned from his government post as head of the industrial development division at the Zhengzhou Municipal Bureau of Culture, Radio, TV, Press and Publication in May last year, and now retains his sole title as the organization's secretary general.

"Now, I have to rely on improving service for companies," said Kong.

After the reform, the government no longer provided the animation association the annual support fund. As a result, 20 members have dropped out of the association.

But other members have fared well.

With the help of the association, Soyoo Culture Development Co., Ltd has expanded its business from animation to children's education and is planning to go public.

Cui Guangbo, chairman of Soyoo, said that in the past, the company eyed the government support fund and joined the association, doing a lot to cater to the government, but with little consideration for the market.

Cui said he attributes the company's new development to the guidance of the association in finding market-oriented development models following the reform.

One year after the reform was adopted in Zhengzhou, 60 percent of the city's 56 associations have improved services and boosted their vitality remarkably, said Wei Yihong, an official in charge of civil organizations with the Zhengzhou Civil Affairs Bureau.

Elsewhere, the Civil Affairs Bureau of the southwestern Sichuan province demanded the first group of 62 provincial associations finish their separation from administrative units by the end of November.

In the northwestern Ningxia Hui Autonomous Region, 27 social organizations have closed and 121 government officials left associations as part of a special campaign to address "red hat" agencies, said the regional civil affairs bureau on Monday.

"The reform is part of the country's intensive efforts to deepen overall reforms since 2012," said Xu Yaotong, a professor with the Chinese Academy of Governance. "It is aimed at forming a clear relationship between the government and enterprises and preventing corruption."

Some agencies, if they are unnecessary, should be closed, he added.

The second group of 144 nationwide associations and chambers are scheduled to finish the reform in July 2017, according to the Ministry of Civil Affairs.


Without a connection to the ministries, survival is not easy for these agencies after their "red hats" are removed.

The China Institute of Internal Audit is an example.

"We will probably face difficulties, such as the shortage of personnel, shrinking business and less local support in the short run," said Shen.

"We need to change our mindset and come up with new ideas to expand the market and adapt to competition," he added.

The institute continues to enjoy some financial support from the NAO during the transition until the end of 2017. After that, it will be totally self-reliant.

The vice secretary general said the institute should provide more quality services to its members, which is a new challenge. He also hopes the government will buy services from the institute.

"We expect the government to empower us in participating in industrial policy-making and management," said Zhang Hongbo, secretary general of the China Chamber of Commerce for Motorcycle, which has also completed the reform.

The chamber, set up in 2006, was previously affiliated with the Commerce Ministry. It has 120 member companies, which jointly account for 90 percent of the country's motorcycle output. The separation reform was a bit easier for the chamber, as it had been independent in terms of finance and personnel prior to the reform.

The country's motorcycle industry has been greatly impacted by the growing popularity of electric bicycles in recent years and faces falling sales, which affects the chamber's revenue from member fees, said Zhang, also deputy general manger of Jinan Qingqi Motorcycle Co., Ltd. in Shandong Province.

"The reform is new and difficult for many. I hope the government will follow up with separated associations and provide guidance and exchange platforms, such as training, to enhance our abilities and influence in our respective industries," said Zhang.

Shen said he still has confidence in the future of the institute after the separation. "As a professional organization, we have a lot of things to do."

"In the past, we felt no pressure. But now we must learn to survive and adapt ourselves to market competition. Otherwise, we will be tossed away," he said.

By Xinhua writers Li Laifang, Qin Yazhou

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