Like most segments of China's economy, the nonprofit sector has grown at a heady pace over the past few years, expanding from roughly 6,000 registered groups in 1999 to about 150,000 in 2005.¹ While this growth is remarkable, weak management skills and a lack of resources are making it hard for nonprofits to meet the rising demand for their services. Multinational corporations in China can help by targeting their donations to improve the organizational performance of nonprofits and by offering training and expert counseling. At the same time, China's nonprofits must create an infrastructure to strengthen the sector, in part by channeling corporate aid more effectively.

Nonprofit organizations were almost nonexistent in China before the onset of economic reforms, in the 1980s. As the sector grew, corporate philanthropy focused on funding primary education, programs to alleviate poverty (such as microfinancing for farmers), and health initiatives. These efforts helped nonprofits to acquire physical assets, such as school buildings and clinics, but programs and physical assets alone are not enough to support a nonprofit's long-term development. To achieve the most impact, corporate philanthropy must combine more flexible financial support with a hands-on effort to teach nonprofits the skills critical to running...