Charities feel pinch as interest rate cuts put projects at risk

PUBLISHED : Monday, 12 July, 1999, 12:00am
UPDATED : Monday, 12 July, 1999, 12:00am

Charities which rely on interest from their investments to finance operations are feeling the pinch from interest-rate cuts used by the Government to boost the economy.

Since 1996, deposit rates have been slashed seven times to spur domestic consumption, reduce the debt burden of state-owned enterprises and narrow the interest-rate gap between Chinese and foreign banks.

The Beijing Youth Daily said some charities had fallen victim to the rate cuts.

Mainland regulations also forbid them from investing in risky markets such as stocks and property.

For example, Aixin Foundation - a programme which helps children of laid-off workers to attend school and is jointly run by Project Hope and the China Charity Council - may have to dig into its fund reserves to continue operating. Council deputy director Zhang Hanxing admitted the funding situation was acute and that some programmes administered by the council might have difficulty continuing.

The council even had trouble paying its staff.

A foundation set up by scientists and educationists in Beijing was also in financial difficulty.

When it was set up in 1996, it earned more than one million yuan (HK$930,000) in annual interest. But the revenue had shrunk so much it had been forced to appeal to benefactors for more funding, the paper said.

Although charities are allowed to purchase state bonds, the investment is unpopular because of long payback periods and low returns.

The newspaper said the impact of the interest-rate cuts on charities should not be under-estimated because their programmes were often crucial to the livelihoods of some low-income families.