Despite China’s massive population and growing wealth, it is one of the few places where philanthropists are still finding it hard to build, promote, and sustain charitable organizations. A recent report produced by the Chinese Academy of Social Sciences found that overall donations to Mainland China dropped by 18 percent from 2010 to 2011—decreasing from 103.2 billion yuan to 84.5 billion. This loss of about $3 billion USD in charitable aid is caused by a potent combination of lack of resources, public distrust, poor communications with the government, and in many cases a lack of official recognition.

In order for China to support critical advances in civil society, human rights, and economic and environmental sustainability, this must change. And recent efforts spearheaded by the Chinese Government suggest that it will.

Beginning in March 2012, the Chinese Government has signaled that it is open to an increased role for private, corporate, and institutional giving. The government is working to register more organizations, and seems to fully recognize the benefits of a transparent and effective philanthropic sector at work.

A recent Christian Science Monitor article reported that Minister of Civil Affairs Li Liquo said, “China still needs to cultivate the nation's awareness of philanthropy and set up a more complete system to develop the cause.”

The government also supported China’s first-ever charitable fair, which was held in Shenzhen in July of this year. At the gathering of hundreds of non-governmental organizations, civil society groups, foundations, and philanthropists, a number of reports were released. Government officials announced that they will produce ratings of registered charitable organizations to help people make better decisions about how to donate to charities during disasters.

It isn’t just the government that is moving ahead. Weibo, the Chinese micro-blogging site with more than 250 million users, launched Gongyi—a charity platform where people can follow their favorite causes and donate to them online. Since 2006, there have also been several nonprofit incubators set up in China; the most well known, Enpai, received support from the Ford Foundation and is helping organizations register, get media attention, build strategic plans, and train staff.

In light of all of this, it seems like the time is now for venture philanthropists and strategic foundations to take a hard look at opportunities for building effective charitable organizations in China—but it isn’t easy. I recently worked with two major philanthropic organizations in China that work in very distinct fields. Over the course of several months, our teams talked to dozens of government officials, issue experts, and donors (both big and small) to better understand the key attributes that contribute to effective giving programs. It became clear that philanthropists, foundations, and nonprofits must consider a unique set of guidelines when exploring opportunities to use philanthropy as a means for impact in China. Three guidelines emerged from these conversations:

The government is a key partner in establishing an organization through registration and governance; it is also a critical ally in advancing your goals and strategies. Build relationships with government officials by using your expertise to support your mutual interests. Look at how your priorities align (or don’t) with the government’s Five Year Plan. This doesn’t mean becoming a mouthpiece or losing your own vision; it means using related goals of the most powerful institution of the country to advance your own. As one foundation representative we interviewed said, “China is the perfect place to leverage major impact because of the amount of resources now available and the ability of government leaders to make change happen rapidly across the country.”

Be transparent about your goals, and ensure that they benefit the people of China—not an outside agenda. Despite the rising use of tools such as mobile giving, individual fundraising pages, and fundraising events, there is still distrust and suspicion about how charities use their money and what their real agenda is in the country. This is especially true of organizations with ties and funding from outside of China and of China’s more than 1,100 charity federations (organizations under the direct supervision of the government). Building in transparency from the beginning is very important; this could include publishing grant documents, listing donors, and reporting regularly to public (via the media, blogs, or text communications) about where and how the money is being spent.

Use philanthropy to share information, not just collect and deliver money. Many people we interviewed, including government officials, suggested that organizations should think about public strategies to promote specific issues or priorities—particularly through public information campaigns on the local level. “Public opinion and constituency mobilization matters in China—TV, newspapers, microblogs. Data doesn't sell itself,” said one China-based representative of a major foundation. One government official we spoke to said, “Public opinion does matter. The government wants to show it is working. [Organizations] should consider articles and talking about problems in China, and then work with government to solve them.”

These three guidelines offer philanthropists some of the basic ideas they need to start to build effective programs in a country that is just now beginning to welcome and encourage philanthropic work. The greatest impact, however, can be achieved by seeking to understand China—it’s culture, history and politics—and using this knowledge to inform your goals and your relationships with the people who help you achieve them.