The Impact of Political Connections on Donations to Chinese NGOs

Abstract

ABSTRACTIn this study, we explore the returns to political connections in non-corporate contexts within China, a country transitioning from a planned to market economy. Using China as an empirical case study, we investigate two separate, but related, hypotheses on the financial benefits of political connections for a sample of 1,435 Chinese foundations from 2005–2011. This extends Western donation determinants literature to a Chinese context and political guanxi (social relationships where individuals or organizations exchange future favors or gifts) research to non-corporate contexts. Our empirical results show that there is no relationship between the presence of state employees on an NGO's staff (a measure of political guanxi) and private donations. However, there is a small but positive relationship between the amount of government funding an NGO receives (a signal of legitimacy) and private donations. These findings suggest that, in post-communist countries such as China, donors may not be seeking future favors from their contributions and instead are interested in developing a robust civil society with legitimate, high-quality NGOs. Additionally, the similarity between Western donation determinants research findings and Chinese donation determinants, in this article, requires future comparative studies of both how and why donors make decisions.