Red Cross admits illegally renting out warehouse space in Beijing district

Warehouse paid for entirely with central government funds was rented to a company, which then sublet space to others

PUBLISHED : Wednesday, 20 August, 2014, 6:34pm
UPDATED : Wednesday, 20 August, 2014, 6:47pm

The Red Cross Society of China, which has been in a financial crisis for a few years and in public relations trouble, is accused of having violated the law by leasing a large warehouse in Beijing municipality for profit for the past two years, the news portal reports.

The charity’s executive vice-president, Zhao Baige, said they put the warehouse, which is usually used to store disaster-relief materials but was empty, into commercial use because they needed funding to pay staff.

The warehouse, with a total floor space of 62,157 square metres in Shunyi district, was built in September 2008 after the deadly Sichuan earthquake. The entire 117 million yuan (HK$147 million) construction cost came from the central government.

Zhao said since the central government’s subsidies to the Red Cross fall roughly one-third short of storage costs, the organisation took advantage of this idle storage to make money so that staff can get paid.

The QQ report, based on a fourth-month-long undercover investigation, said there were no quilts, tents, buckets or other disaster-relief materials in storage. Instead, many workers dressed in uniforms bearing logistics companies’ names moved boxes containing electric products.

The Red Cross and a company named the Beijing Zhongxun Yuhua Commercial Management Company signed two agreements in 2012. One was a “strategic cooperation agreement” that allowed Zhongxun Yuhua to lease storage space in the warehouse, and it then sublet the space to logistics companies, including the international courier company DHL, the report said. However, the agreement said that logistics for the Red Cross always had priority.

Although neither side had to pay any fees, the second agreement said Zhongxun Yuhua promised to donate 900,000 yuan every year, with the money first going to pay for storage and operational costs.

An industry insider said Zhongxun Yuhua charged the other logistics companies a combined total of 4.5 million yuan per year in rent.

Zhao admitted that the Red Cross violated regulations in leasing out the warehouse, but emphasised that “only part of it was leased”.

“Strictly speaking, it [the storage space] is the state’s asset, and it is the Ministry of Finance that has the authority to allow us to lease it,” she was quoted by QQ as saying.

Zhao also said the charitys executive board that decided to lease the warehouse.

“So many people work in this place. If we hadn’t done this, we couldn’t possibly have paid their salaries. It’s also a waste to have such a large storage left idle,” she said, adding that many other local Red Cross branches have done the same thing.

Public trust in the Red Cross, China’s largest charity, was shattered when a young woman named Guo Meimei falsely claimed in 2011 to be an executive of a Red Cross subsidiary and showed off her lavish lifestyle. Since then, the Red Cross has been trying to be more transparent. It launched a website to show each donation and make its records public.

Guo was detained last month for illegal soccer gambling in connection with the World Cup and confessed on China Central Television that she had lied about her affiliation with Red Cross out of vanity. Although a Red Cross senior executive told reporters that the police investigation of Guo cleared the charity of any wrongdoing, it is still struggling to rebuild its public image.