The Revelation of the Zheng Sheng Association Incident in Hong Kong

On the 18th of January, the Hong Kong police accused the directors of the Christian Zheng Sheng Association (CZSA) of misappropriating more than $45 million in donations raised for the Zheng Sheng College (CZC), arresting four people and placing three on a wanted list, including the president of the college, Mr. Chan Siu-cheuk, and the founder of the Association, Mr. Lam Hee-shing. When the news broke, the whole Hong Kong was shocked. Based on the information in the public register, it is difficult to judge and analyze whether the donations received by the Association have not been used for the operation of the college; it is also difficult to judge the relationship between the assets of the British subsidiary and the fund-raising. There are also different voices claiming that this incident is a misunderstanding. When interviewed by the media, the College’s supervisor, Mr. Chui Hong Sheung, said that the Association had lent money to CZC for its operation in the past, and that the school owed CZSA $40 million, and therefore needed to raise funds, and said that CZC would continue to operate, and would not be shut down because of “gossip”.

Zheng Sheng College has always had a sunny image and is highly recognized in the Hong Kong community. It is regarded as having contributed a lot to the society and is one of the Christian charitable organizations that have received more support from the community. Today’s high-profile announcement by the government raises concerns about whether the incident is related to the Communist Party’s ongoing efforts to suppress religious activities.

The Cause of the Storm

According to the introduction of Christian Zheng Sheng Association, CZSA was founded in 1985 as a Christian-run charitable organization to help drug abusers (teenagers and adult men and women) to recover from drug addiction and to counsel them to get a new life. In 1998, CZSA opened the Zheng Sheng College to provide formal education programs for young drug abusers who are in school, so that they can resume their studies and reintegrate into society through alternative education. Students of Zheng Sheng College are required to live in the isolated Chi Ma Wan Peninsula on Lantau Island, Hong Kong on a voluntary basis, living a simple and highly managed life under the supervision of a counselor, in order to rehabilitate themselves from drug addiction and to build a positive outlook on life. During this time, education is provided according to individual interests.

During the two and a half years of their stay, drug addicted youth can not only continue their studies and obtain a school degree without interruption, but they can also acquire a skill that will enable them to continue to take the college entrance exams to enter high school or college, or to find a suitable job in the community. The common denominator is that not all of them are Christian, but rather, they pause at the turning point in their lives to focus on their own needs and to provide these young people with an opportunity to make a fresh start.

Over the past 25 years, not only have CZC students completed secondary school, but some have gone on to university and become professionals. Some have also achieved international awards in sports and other training programs. Therefore, CZC is regarded by the community as an organization that provides care and development opportunities for young people with problems.

However, all along, the Government, be it the Education Bureau, the Social Welfare Bureau, or the Drug Addiction Treatment and Correctional Services Department, has not directly subsidized CZC or CZSA in terms of funding. Participants have to pay nearly HK$10,000 a month in tuition fees and living expenses to become students of CZC. Many students have been relying on the government’s Comprehensive Social Security Assistance (CSSA) to pay part of the tuition fees, while CZSA has been soliciting donations from outside sources to provide the subsidy. However, this time, CZSA, which has always been committed to doing good deeds, is in trouble.

Complaints lead to prosecutions

In late 2023, the police announced that they had received a report that the Christian Zheng Sheng Association was suspected of committing fraud, involving $50 million dollars. Looking up the information, the CZSA and the Zheng Sheng College were accused of having unclear accounts as early as 2009, and it was even alleged by the media that the CZSA had misappropriated money from the College to invest in overseas assets, and that the CZSA had operated a travel agency in the Mainland, which was suspected of operating a pornographic entertainment venue. The Independent Commission Against Corruption (ICAC) intervened in the investigation that year, but six months later, it informed CZSA in writing that the investigation was officially terminated, that no corruption or irregularities had been found and that it had publicly apologized to CZSA.

Immediately after the police issued the arrest and general editing order, many netizens said that Zheng Sheng Association had a previous conviction in 2009 and committed the crime again this time. However, the half-year investigation and public apology made by the ICAC in 2009 precisely demonstrated that the ICAC did not only fail to find sufficient evidence to prosecute, because the ICAC absolutely does not need to apologize for failing to find sufficient evidence to prosecute, but also apologized for causing the innocent to be questioned by the society. It can be said that the investigation in 2009 is precisely an affirmation of Zheng Sheng College.

This time, the allegation was that the Association had solicited donations in 2002 on the grounds that CZSA was in financial difficulties, but less than 10% of the donations were allocated to CZC, and more than HK$50 million of the donations were transferred overseas, even to the directors’ joint personal accounts, thus accusing the seven directors of making false statements and conspiring to defraud.

In the press conference, the police failed to explain that CZC was not the whole of CZSA’s work, and that the donations obtained by CZC were sufficient to maintain the number of students in CZC, which had been drastically reduced as a result of the Covid-19 pandemic. Therefore, after collecting donations, CZC has sufficient funds to operate. Moreover, CZSA has also made a high-profile announcement that it will promote the service of Hong Kong immigrants in the UK and start the work of its branch.

It is understood that the four male directors of CZSA arrested include Lee Wing-hung (77), secondary school principal Lau Chun-wah (50), Cheng Tin-lok (34) and Tong Tak-chung (69), while the three wanted directors include CZSA president Chan Siu-cheuk (63), CZSA founder and former CZC supervisor Lam Hei-shing (69) and retired secondary school principal Chan Yau-chi (62). It is understood that Chan is now in the United Kingdom and Lam is in the United States – the first time in 39 years that he has been absent from a New Year’s Eve dinner and Parents’ Day. Instead, he chose to deliver a speech via a pre-produced video, urging students to “just be normal and continue to study hard” and not to be affected by the Zheng Sheng incident.

The grey area that is difficult to bypass

The incident has stirred up a lot of controversy. Some netizens think it is a political persecution, while others accuse CZSA of having confusing accounts. Tax-exempt charitable organizations commonly known as “88 licensees”, especially Christian organizations, may be worried about the possibility of breaking the law by transferring funds overseas to develop new ministries. Mr. Ng Kin-yuen, who has acted as a voluntary legal advisor to a number of labour and charitable organizations, firstly emphasized that the ministry or financial arrangement of any 88-licensee organization must be decided in accordance with its articles of association submitted to the Inland Revenue Department at the time of its establishment. From a practical point of view, as many Hong Kong people have emigrated to other countries in recent years, individual churches and organizations may consider developing overseas ministries to support Hong Kong believers overseas, and in the process may have to transfer funds raised in Hong Kong to overseas countries. If the constitution of a Christian organization does not mention overseas ministries and it launches such ministries without amending the constitution, it may have violated the constitution and the Inland Revenue Department may revoke its tax exemption status.

The controversy over the Zheng Sheng incident also lies in the inflow of the organization’s funds into private accounts and the possible discrepancy between the purpose of fundraising and the actual use of the donations. Mr. Ng pointed out that when any 88-licensed organization draws up its articles of association, it has to stipulate that no profits can be transferred to the personal accounts of the organization’s members and directors as required by the Inland Revenue Department (IRD) in order to be eligible for tax exemption. Of course, if an individual director makes an advance for reasons such as financial difficulties of the organization, the organization may reimburse the director by way of reimbursement on the basis of formal instruments such as minutes of meetings. However, under normal circumstances, the organization should not transfer funds to the personal accounts of non-salaried staff.

The CZC has been relying on funding from the “Zheng Sheng Association” for its operation. However, the police investigation claimed that the funding for the CZSA during the period of time in question recorded an abnormal drop in funding, which was very different from what was claimed in the fund-raising activities. However, as mentioned earlier, due to the epidemic and social changes during this period, not many young students enrolled in Zheng Sheng College (perhaps they had gone out on the street or had been arrested on charges of violating the national security law), and the school’s expenditure had also dropped drastically. Is it because of these reasons that the CZSA received $45 million in donations in 2020, but the donations allocated to CZC only accounted for less than 10% of the total donations? The police investigation also found that between 2020 and 2023, there were more than 300 fund transfers from some of the donation accounts of “Zheng Sheng Association”, including transfers to more than 10 bank accounts under “Zheng Sheng Association”, as well as three private joint bank accounts jointly held by the directors of “Zheng Sheng Association” and the President of “Zheng Sheng College”, and the fund transfers included the purchase and sale of assets without disclosing the details of the remittance of funds to the public in the meantime. If CZSA is developing its work in the UK, it would be reasonable for it to transfer a large amount of funds. Of course, whether the process is legal or not is subject to the outcome of the police investigation.

The high-profile announcement made by the Hong Kong police at the beginning of the investigation gives the impression that the governance of Hong Kong today is different from the long-standing assumption of civil society that unless there is sufficient reason to suspect, there is a possibility of innocence before any complaint is lodged.

Increasing scrutiny, clear signals from the government

While it is true that the accounts of the CZSA have yet to be further investigated, the direct arrests and arrest warrants for those involved have been a major distraction – and have caused an increasingly silent Hong Kong community to worry about the risk of breaching national security laws if the organization transfers funds overseas. As an international city, it is normal for Hong Kong enterprises to have capital transactions with overseas enterprises and organizations. Whether or not national security laws will be violated is related to what is done and whether or not the motives and behaviors will jeopardize national security, rather than the exchange of money. Of course, if an organization wants to have more autonomy in the future, it should try to avoid relying too much on government resources and rely more on funding from churches or believers. What’s more, when it comes to “national security,” the red line is fluid – it can be tightened today and loosened at other times, and it is completely out of the control of these organizations. Instead of worrying about what is beyond their control, churches and organizations should just stick to their guns and do what they are supposed to do.

It is worth noting that the Hong Kong Government has amended the Inland Revenue Department Guidelines in September 2021 in relation to the implementation of the national security law, so that the Inland Revenue Department will no longer recognize an organization as a charitable organization if it supports, promotes or engages in activities that are not conducive to national security and will revoke the tax exemption status granted under section 88 of the Inland Revenue Ordinance. The outbreak of the Zheng Sheng Association incident at this time is undoubtedly a signal for the government to further strengthen its supervision and restrictions on charitable organizations in the long run. Since Beijing promulgated the Law on the Administration of Foreign Non-Governmental Organizations (NGO) in 2016, the activities of foreign NGOs in mainland China have been severely restricted. Some analysts have long said that this is a draconian law, which makes the space for civil society in mainland China even narrower. Now that this trend has spread to Hong Kong, the dream of re-establishing a civil society in Hong Kong has been shattered once again.

What is being done in Hong Kong now is exactly the same as what was done in the Mainland, that is, we are worried about the development and growth of civil society organizations in the community. The reason is that the development and growth of civil society organizations will inevitably lead to the formation of various kinds of rights and interests organizations, which may break away from the control of the Communist Party, and may also lead to the formation of independent democratic parties and groupings. This is obviously the last thing Beijing wants to see. Therefore, the targeting of the CZSA this time is a signal to other similar organizations that those who are already involved will find it even more difficult to get funding support from the government, and that those who try to raise funds on their own will most likely be financially ruined, while those who are not yet involved will be reluctant to intervene due to political sensitivities, and thus the space for civil society in Hong Kong will become increasingly narrow and will eventually wither.

Religious activities being suppressed?

It has also been noted that CZSA is the first time after 2019 that the government is concerned about high-profile investigations into suspected illegal activities of religious and social service organizations after dealing with politically related illegal activities. Is this a harbinger of the government’s intention to tighten its control over religious and social organizations, which have traditionally not been subject to much control by the Hong Kong government? All along, China has been closely monitoring all religious activities, and since 1997, many people have been concerned about whether Hong Kong residents can still maintain their freedom of religion and freedom to serve the community in the past. Today’s incident of the Zheng Sheng Association has made people who are concerned about the development of Hong Kong society worry that this may be the beginning of a change in the government’s regulatory attitude. I believe that as the CZSA case continues to unfold, a clearer conclusion may soon be reached.

Author /Editorial Sameway

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