GAO-04-445R Democracy-Related Programs (China) 

February 27, 2004 

The Honorable Henry J. Hyde 

Chairman 

The Honorable Tom Lantos 

Ranking Minority Member 

Committee on International Relations 

House of Representatives 

Subject: Foreign Assistance: U.S. Funding for Democracy-Related Programs 

(China) 

In fiscal year 1999, Congress began authorizing the provision of U.S. foreign 

assistance funds to support programs aimed at strengthening democracy in 

China,1

 and, in fiscal year 2002, it began appropriating specific amounts for such 

programs.2

 However, the provision of foreign assistance funds to programs 

focusing on China continues to be controversial due to concern about some of the 

Chinese government’s human rights practices and certain of its economic, 

political, and security policies. In your request to us and in subsequent meetings 

with your staff, you expressed concern about the lack of a complete picture of 

U.S. funding for democracy-related programs focused on China. 

In response to your concern, we determined how much funding the U.S. 

government has provided for programs intended to strengthen democracy in 

China for fiscal years 1999 to 2003, in total and by year, and identified the agencies 

responsible for administering the funds, as well as the intended purposes of the 

programs they support. While we focused primarily on bilateral programs, we 

also briefly describe democracy-related efforts of multilateral institutions that the 

United States helps support. Information on these programs is provided in 

appendix I. 

To address our objective, we reviewed and discussed relevant program 

documentation and funding information with cognizant officials administering 

democracy-related programs focused on China—primarily at the Departments of 

State and Labor and the National Endowment for Democracy. Also, we met with 

cognizant officials and reviewed documentation for democracy-related programs 

in China under the United Nations, the Asian Development Bank, and the World

 

1

Pub. L. No. 105-277, § 527. 

2

Pub. L. No. 107-115, § 526. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-04-445R Democracy-Related Programs (China) 

Bank. (See the scope and methodology section for a more complete discussion of 

our approach.) 

Results in Brief 

In fiscal years 1999 to 2003, the United States provided more than $39 million in 

bilateral support for programs intended to strengthen democracy in China, with 

average annual funding levels increasing from about $2.3 million in 1999 and 2000 

to about $14.4 million in 2002 and 2003. State provided about 45 percent of the 

total funds (nearly $18 million), primarily to support programs to enhance the rule 

of law. The National Endowment for Democracy provided about 38 percent of the 

total (more than $15 million) for programs aimed at a variety of purposes, such as 

strengthening labor rights and reforming electoral systems. Labor provided the 

remaining 17 percent ($6.4 million) to enhance protection of internationally 

recognized workers’ rights. 

Background 

Advancing democracy is an important overall theme in U.S. foreign policy—for 

example, the Strategic Plan 2004-2009 issued by the Department of State and the 

U.S. Agency for International Development identifies democracy, security, and 

prosperity around the world as the three key underlying concerns for U.S. foreign 

operations. Democracy programs have become a prominent element in U.S 

relations with many developing and transition countries.3

 

Beginning with fiscal year 1999, Congress began authorizing the use of Economic 

Support Funds4

 to support China-focused democracy programs, so long as the 

funds went to nongovernmental organizations located outside China.5

 In addition, 

in the October 2000 law that approved the normalization of U.S.-China trade 

relations, Congress authorized the Departments of State, Labor, and Commerce to 

initiate rule of law programs in China.6 In appropriations language for fiscal 

 

3

Transition countries are those working to convert their societies from the command and control 

model typical of communist states to a market-oriented model. 

4

Economic Support Funds are dedicated to promoting economic and political stability in 

strategically important regions. 

5

In the wake of the Chinese government’s 1989 crackdown on demonstrators in Tiananmen Square, 

Congress adopted a number of restrictions on U.S. economic relations with China. Among other 

things, Title IX of the Foreign Relations Authorization Act of 1990 (Pub. L. No. 101-246, 104 Stat. 

80) suspended obligations of foreign assistance funds for new activities of the Trade and 

Development Program, and issuance of Overseas Private Investment Corporation guarantees or 

other support for investments in China. Also, until recently, annual Foreign Operations 

Appropriations Acts prohibited indirect assistance to China—for example, Pub. L. No. 105-118, § 

523. 

6

Commerce provided us with a list of workshops, seminars and other types of training conducted 

in response to this directive, but agency officials could not provide an estimate of the cost of these 

activities. 
Page 3 GAO-04-445R Democracy-Related Programs (China) 

2002,7 Congress dropped the limitation that grants from Economic Support Funds 

could be provided only to organizations located outside China and directed that 

“not less than” a specific amount ($10 million) be made available for programs 

aimed at supporting democracy, human rights, and the rule of law in China. For 

fiscal year 2003, Congress appropriated not less than an additional $15 million for 

such programs. In appropriations acts and accompanying congressional 

committee reports, Congress directed that certain amounts of these funds be used 

to expand State and National Endowment for Democracy8

 grants.9

U.S. Democracy-Related Assistance Has Totaled about $39 Million 

As shown in table 1, during fiscal years 1999 to 2003, the United States provided 

more than $39 million for democracy-related programs focused on China, with 

average annual funding levels increasing from approximately $2.3 million in fiscal 

years 1999 and 2000 to about $14.4 million in 2002 and 2003. These funds have 

been provided primarily as grants through State, the National Endowment for 

Democracy,10 and the Department of Labor.11

 

 

7

Pub. L. No. 107-115, § 526. 

8

The National Endowment for Democracy is a nongovernmental organization that seeks to 

advance democracy around the world, primarily through a wide variety of grants to other 

nongovernmental organizations. In its annual report for 2002, the Endowment reported activities 

in more than 80 countries. Although independently managed, it receives most of its funding 

through annual noncountry specific appropriations by the U.S. government. These appropriations, 

which are separate from Economic Support Fund appropriations, amounted to $42 million in fiscal 

year 2003, up from an average of about $32 million per year over the previous 2 years. 

9

As we completed our work, Congress approved and the President signed an omnibus 

appropriations act for fiscal year 2004 that provided an additional $13.5 million for such programs, 

with all of the funds designated for State and Endowment grants. 

10Amounts provided through State and Endowment grant programs in fiscal 2002 and 2003 were 

less than the $25 million in Economic Support Fund appropriations described in the background 

section of this report because: 

• The appropriations acts specified that “not to exceed” $6 million of the total could be made 

available for programs to preserve cultural traditions and promote sustainable development 

and environmental conservation in Tibetan communities in China, and State responded by 

allocating $5.7 million to such programs; 

• The Endowment retains about 15 percent of the funds it receives to pay its administrative 

costs; 

• Amounts appropriated for fiscal year 2003 were subsequently reduced by a 0.65 percent 

rescission; and 

• As of the end of fiscal year 2003 State and the Endowment retained a combined unobligated 

balance of about $3.25 million in monies for China grants. 

11Labor funds came from that agency’s appropriations, rather than Economic Support Funds. 
Page 4 GAO-04-445R Democracy-Related Programs (China) 

Table 1: U.S. Assistance for China Democracy-Related Programs by Fiscal Year 

(Dollars in thousands)

Fiscal year 

Agency/bureau 1999 2000 2001 2002 2003 Total 

Department of Statea

• Bureau for Democracy, 

Human Rights, and Labor 

Grants 

• Bureau for East Asia and 

Pacific Affairs Grants 

• Bureau for International 

Narcotics and Law 

Enforcement Affairs

Total State 

$2,135 

 489 

$ 2,624 

 $3,827b

 2,300 

 

 476 

 6,603 

 $5,306 

 3,155 

 

 8,461 

$9,133

 7,590

 965

 17,688 

National Endowment for 

Democracy $1,887 $2,662 3,096 

 

 3,144 

 

 4,228 15,017 

Department of Labor, Bureau 

for International Labor Affairs 

 

 6,400 

 

 6,400 

Total $1,887 $2,662 $5,720 $16,147 $12,689 $39,105 

Source: Prepared by GAO with data from the Departments of State and Labor and the National Endowment for Democracy. 

a

To avoid double counting and to more accurately show the level of funds being provided to project implementers, State 

Bureau for Democracy, Human Rights, and Labor funds transferred to the Endowment and allocated to projects are 

included in the annual totals for the Endowment. 

b

Includes $75,000 provided by State’s Bureau of Oceans and International Environmental and Scientific Affairs.

Department of State

As shown in table 1, in fiscal years 1999 to 2003, State administered about 

$17.7 million, or more than 45 percent, of total U.S. funding for programs intended 

to strengthen democracy in China. Most of this was provided as grants to 

nongovernmental organizations, with the largest share awarded through the 

Bureau for Democracy, Human Rights, and Labor beginning in fiscal year 2002. 

Overall, State’s assistance has gone predominantly to programs to enhance the 

rule of law—an area where China’s government has acknowledged need for 

improvement and has actively sought assistance from the donor community. 

In 2002 and 2003 the Bureau for Democracy, Human Rights, and Labor approved 

nearly $9.1 million in China-focused grants through the Bureau’s Human Rights 

and Democracy Fund.12 According to State, grants made through this fund are 

intended to “uphold democratic institutions, promote human rights, and build civil 

society in countries and regions of the world that are geo-strategically critical to 

the U.S.” State classifies approximately half of the assistance provided through 

the fund over the last 2 years as legal reform programs intended to address, 

 

12In 2003, the Bureau also awarded $50,000 to the U.S. embassy in Beijing for a project to support 

media reform. This award was made through the Bureau’s annual diplomatic post competition for 

democracy-related grants. 
Page 5 GAO-04-445R Democracy-Related Programs (China) 

among other things, China’s need for improved court proceedings, increased 

professionalism among lawyers and judges, and enhanced capacity for providing 

legal services to the disadvantaged. Several of State’s grants support work to be 

undertaken in cooperation with Chinese government entities and/or with 

academics, consulting firms and nongovernmental organizations in China. For 

example, one project includes support for working with the Supreme People’s 

Court, the National People’s Congress and other counterparts to promote criminal 

defense reforms in China; another project funds a partnership between an 

American university and a legal reform consulting firm operating in China to help 

develop China’s system for providing legal aid in rural communities. 

Other rule of law efforts were funded through the Bureau for East Asia and 

Pacific Affairs, which granted about $7 million to the Temple University School of 

Law to support legal education activities in China.13 This Bureau also provided 

$175,000 to the U.S. Embassy in Beijing for a small grants program focused on 

enhancing the rule of law;14 and, in fiscal year 2001, it provided $385,000 to the 

American Bar Association to strengthen the legal framework for and civil society 

participation in protecting China’s environment.15 In addition, the Bureau for 

International Narcotics and Law Enforcement Affairs provided $965,000 for a 

resident legal adviser in the U.S. Embassy in Beijing for a 2-year term, ending in 

August 2004.16 The advisor’s mission is to engage with Chinese counterparts to 

stimulate justice sector reforms through (for example) bilateral discussions and 

programs focusing on substantive and procedural criminal and civil law topics. 

National Endowment for Democracy

During fiscal years 1999 to 2003, the Endowment awarded more than $15 million 

in grants aimed at enhancing democracy in China—about 38 percent of total U.S.-

government funded support for democracy-related programs during this period. 

Because appropriations to the Endowment did not preclude it from making grants 

focusing on China, it was able to make grants for such purposes prior to fiscal 

year 1999. For example, the Endowment reported granting about $2.5 million for 

China programs and projects during fiscal year 1998. Endowment officials noted 

 

13The U.S. Agency for International Development manages the support provided to Temple 

University, and it has also participated in selecting recipients of grant support through the Human 

Rights and Democracy Fund. 

14Funds for the small grants program were from State’s appropriations for public diplomacy, rather 

than Economic Support Funds. 

15This project subsequently received $650,000 in additional support through the Human Rights and 

Democracy Fund and (as noted in table 1) the Bureau of Oceans and International Environmental 

and Scientific Affairs. 

16Funds for the legal adviser did not come from Economic Support Funds, but rather from 

appropriations to support the operations of this Bureau. As of December 2003, State reported 

funding 21 resident legal advisers in embassies around the world. While funded by State, the 

Department of Justice’s Office of Overseas Prosecutorial Development Assistance and Training 

selects the advisers and provides administrative support. 
Page 6 GAO-04-445R Democracy-Related Programs (China) 

that these grants were made using the organization’s “core” appropriations, which 

are noncountry specific. Since fiscal year 1999, the Endowment has continued to 

grant more than $2 million per year (on average) for China-related programs from 

its annual core appropriations. In addition, however, State has transferred nearly 

$8 million to the Endowment for China-specific grants and, beginning in 2001, the 

Endowment has used these funds to increase its total grant volume for Chinafocused projects by about $808,000 per year, on average. Endowment officials 

stated that these additional funds have not dramatically changed the orientation 

or character of Endowment support for programs in China. While noting that the 

Endowment’s highest priorities for China are human rights and the free flow of 

information, these officials observed that the Endowment supports activities in a 

variety of areas, including human rights (documentation and advocacy) and 

independent media, as well as labor rights, electoral and legal reform, policy 

analysis by independent think tanks, and promotion of free markets.17

Department of Labor 

In fiscal year 2002, the Department of Labor’s Bureau for International Labor 

Affairs awarded a total of $6.4 million to nongovernmental organizations to help 

improve the content and application of labor laws and regulations and enhance 

mine safety, with the latter effort to include measures to strengthen enforcement 

of worker safety laws and regulations. As noted with regard to State’s grants, 

Department of Labor grants have focused on areas where the Chinese government 

has acknowledged a need for improved practices and has sought foreign 

assistance. 

Agency Comments

Officials at the Departments of State, Labor, Justice, and Treasury; the U.S. 

Agency for International Development; the National Endowment for Democracy; 

the International Labour Organization; the United Nations Development Program; 

and the United Nations High Commissioner for Human Rights provided oral 

comments on a draft of this report. Overall, they found the report to be an 

accurate description of the agencies’ programs. In addition, these officials 

provided technical comments that we have incorporated into this report, as 

appropriate. 

Scope and Methodology 

To determine how much funding the U.S. government has provided for 

democracy-related programs in China during fiscal years 1999 to 2003, and to 

identify the agencies responsible for administering the funds and the intended 

purposes of the programs they support, we reviewed relevant program 

 

17The Endowment has devoted a portion of each year’s grant program to supporting projects 

promoting human rights and democracy in Tibetan areas of China. For example, in fiscal year 

2002, the Endowment awarded seven such grants, totaling about $223,000. 
Page 7 GAO-04-445R Democracy-Related Programs (China) 

documentation and met with cognizant officials at the Departments of Commerce, 

Labor, and State; the National Endowment for Democracy; and the U.S. Agency 

for International Development. We also met with officials at several major 

grantees, including the Temple University School of Law and the American Bar 

Association. We asked the organizations how much funding they had provided 

based on their definitions of democracy-related programs. 

To develop similar information about democracy-related programs undertaken by 

multilateral organizations, we reviewed program documentation and met with 

cognizant officials from the United Nations, the Asian Development Bank, and the 

World Bank. We obtained publicly available data for programs that these 

organizations identified as strengthening democracy, human rights, and/or the 

rule of law. 

The funding data contained in this report were provided by agency officials at our 

request. While U.S. agencies and grantees provided annual funding information, 

the multilateral organizations we contacted provided us with life-of-program 

funding data. Thus, we are reporting budget data for multilateral organizations in 

this format. Since State and the Endowment made multiple grants, we consulted 

with officials from both organizations about the methodology they employed to 

maintain and report information on their grant awards. Based on our discussions 

with U.S. and multilateral organization officials and our examination of the 

documentation we were provided, we concluded that the data we obtained were 

sufficiently reliable for the purposes of this engagement. However, because of 

differences in the definition of democracy-related programs, the data may not be 

directly comparable between the U.S. agencies and multilateral organizations.18

We conducted our work from August 2003 through February 2004 in accordance 

with generally accepted government auditing standards. 

- - - - - 

We are sending copies of this report to interested congressional committees; the 

Secretaries of Commerce, Justice, Labor, State, and Treasury; and the 

Administrator of the U.S. Agency for International Development. We will also 

make copies available to others upon request. In addition, this report will be 

available at no charge on the GAO Web site at http://www.gao.gov. 

 

18Data are also not directly comparable because the U.S. government and the multilateral 

organizations discussed in this report define their fiscal years differently. For example, while the 

U.S. government fiscal year ends on Sept. 30, the United Nations’ fiscal year ends on June 30. 
Page 8 GAO-04-445R Democracy-Related Programs (China) 

If you or your staff have any questions about this report, please contact me at 

(202) 512-4128 or at FordJ@gao.gov. Janey Cohen, Simin Ho, Al Huntington, 

Michael McAtee, and Richard Seldin made key contributions to this report. 

Jess T. Ford, Director 

International Affairs and Trade 

Enclosure
Enclosure 

Page 9 GAO-04-445R Democracy-Related Programs (China) 

Democracy-Related Assistance to China Provided by Multilateral 

Organizations Supported in Part by the United States 

Three United Nations’ (UN) organizations—the UN High Commissioner for 

Human Rights, the International Labour Organization, and the UN Development 

Program—support programs in China that are explicitly aimed at strengthening 

democracy, human rights, and/or the rule of law. The Asian Development Bank 

and the World Bank also support programs aimed at relevant purposes, such as 

strengthening the legal system, although the Banks’ articles of agreement preclude 

interference in the political affairs of any member country. In total, these 

agencies identified more than $82 million in relevant funding for projects initiated 

in or continuing from 1999. U.S. support accounts for about 22 percent of the 

budgets of UN organizations, about 16 percent of the budget of the Asian 

Development Bank, and about 18 percent of the budget of the World Bank. 

United Nations Organizations

The UN High Commissioner for Human Rights and the International Labour 

Organization have negotiated Memoranda of Understanding with the Chinese 

government through which these organizations provide technical support for 

China’s ratification and implementation of international human rights and labor 

treaties. For 2002 to 2003, the High Commissioner budgeted $951,820 to provide 

such support. Officials at the International Labour Organization identified a total 

of about $8.7 million in 1997 to 2004 funding for activities related to promoting 

respect for labor rights in China–as well as creating greater opportunities for 

employment and enhancing social protection for workers. Of this amount, about 

$2.9 million represents funds provided from the organization’s own budget—the 

remainder was provided by individual donor countries or organizations.19

 

Organization officials could not separate those portions of their programs aimed 

at enhancing labor rights from those devoted to other purposes. The UN 

Development Program has laid out strategies on promoting human rights, rule of 

law and democracy in China, and the organization’s budget for related activities in 

that country from 1996 through 2007 is about $38.3 million. These funds support a 

variety of activities, including programs aimed at reforming electoral systems and 

training participants in the legal system on international best practices in criminal 

law. Out of the total amount, the UN Development Program is funding about $7.2 

million while the remainder is being provided by bilateral donors and the 

Government of China. 

Multilateral Development Banks

Both the Asian Development Bank and the World Bank have identified improving 

the functioning of China’s markets as a major point of emphasis in their country 

assistance strategies, and both cite promotion of the rule of law and improved 

 

19These were Japan, Switzerland, the United Kingdom, Denmark, the Netherlands, and the Joint UN 

Program on HIV/AIDS. 
Enclosure 

Page 10 GAO-04-445R Democracy-Related Programs (China) 

governance as important concerns. For the period 1999 to 2006 the Asian 

Development Bank reports budgeting about $35.5 million for technical assistance 

to China on legal systems and governance. These funds support a variety of 

efforts, including programs aimed at building a stronger legal and regulatory 

framework and efficient judicial system, supporting financial and fiscal reform, 

improving local public administration capacity in less developed provinces, and 

broadening public participation in decision-making, particularly among the poor. 

World Bank officials could not provide specific funding information, but 

commented that the institution has focused its technical assistance efforts on 

areas where it has expertise, such as corporate governance, enterprise reform, 

fiscal policy reform, land reform and tenure, and water rights. These officials said 

that, in areas where the Bank has relatively little expertise, such as criminal law 

reform, it defers efforts to other donors such as the European Union, the United 

States, and France. 

(320221) 
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