Are Social Organizations Ready?

Outlook Weekly
August 19

Around 500,000 social organizations in China are facing unprecedented development opportunities as government and institutional reforms lend them more functions. However, how these groups deal with such added responsibility remains to be seen.

On the one hand, those attached to the state mostly operate with low efficiency and little vitality. On the other hand, some are developing at a slow speed for lack of social support and a fair, competitive environment. A shortage of funds and talent is another common dilemma.

A meeting of the State Council on July 31 issued guidelines for the government to purchase public services from social organizations. It specified that local authorities should go through a strict budget and audit procedure in doing so, publish relative information and establish a mechanism to supervise and assess progress.

The State Council has also vowed to detach social organizations from administrative departments, in a bid to create a fairer environment and room for development among social organizations. Before these measures are put in place, trials and experiments might throw light on how social organization reform should be carried out in general.

Designated Hotels

The Beijing News
August 27

When China's Ministry of Finance carried out the designated hotel system in 2006, it was regarded as a measure for combating corruption. It was also meant to cut administrative costs through government purchases, while strengthening management and supervision of business trips. However, with time, some designated facilities have become seedbeds of misconduct.

Some hotels have even stimulated consumption derived from handling public affairs. Four- and five-star facilities are not rare on the designated hotel list, with contract prices surpassing reimbursement standards as regulated by the government. In addition, some designated facilities are located in resorts and scenic spots, providing various luxurious entertainment services, which directly push up the cost of business trips and meetings. What's worse, some designated hotels directly assist corruption by providing fake invoices to cover their tracks.

One reason for the problem is the lack of proper supervision. As a result, hotels benefit wildly. Therefore, authorities should regularly check up on and sever connections with facilities that serve corruption. Also, management of business trip costs and public affair reimbursement should be strengthened, with bills regularly made public to ensure transparency.

Ticket Refund and Fee

Changjiang Daily
August 27

China Railway Corp. announced that it will adjust the policy on ticket refunds and rescheduling from September 1. The new regulation will allow passengers to conveniently return train fares at any railway station across the country.

However, passengers will also be charged 5 percent of the ticket value if they return their tickets 48 hours before departure; 10 percent between 48 and 24 hours; and 20 percent within 24 hours. This would actually increase the overall ticket fee.

Under the previous policy, implemented on September 25, 2011, passengers were charged 5 percent of the ticket price. In this regard, the new regulation is a setback.

When a passenger buys a ticket, he establishes a contractual relationship with the railway corporation. Returning a ticket thus means annulling such a contract, which indicates the railway corporation has the right to demand compensation. Accordingly, a ticket refund and rescheduling fee should provide such compensation.

But the railway corporation has designated this fee to labor and material costs incurred during rail transport. It is a compulsory fee that passengers will have to accept. Therefore, whether it is rational requires legal discussion.

In China, rail transportation involves a monopoly industry. Thus, its fee standards are to some extent compulsory, with passengers having no choice. The government will have to eventually ensure the fairness ticket prices based on public feedback.

Online Financing Services Challenge Banks

China Newsweek
August 26

Alibaba Group Holding Ltd., China's largest online shopping platform, launched a financial service this spring called Yu'ebao, which has struck fear into the traditional finance sector. Accordingly, customers are able to access financial services and make online purchases.

With the popularity of social websites, interpersonal exchange has become more frequent and equal, forming a solid basis for online finance, which has flourished.

However, development of online financial services in the United States has proved tough going. Dong Wenbiao, Board Chairman of China Minsheng Banking Corp. Ltd., pointed out that such services might hit a glass ceiling, as some financial products still need to be transacted offline.

Still, online financial services will deal a blow to the traditional finance sector. Low-profit and unprofessional services will be outsourced while core financial products are grasped in the hands of top banks, among which large-scale merging and restructuring will occur.