A dispute over unpaid rent has propelled Beijing’s Yanan Angel Children’s Hospital—China’s first private non-profit children’s hospital—into a wider debate about the limits of charitable medicine in China. What many in the public thought of as a “charity hospital” turns out to be a legally distinct medical enterprise whose operating costs, market pressures and regulatory constraints are tightly bound to rules that prevent direct cross-subsidies from philanthropic funds.
Launched from a high-profile charitable impulse—the Yanan Angel Fund was founded in 2006 by the actor Li Yapeng and singer Faye Wong to pay for cleft lip and palate surgeries—the hospital opened in 2012 to provide continuity of care that the fund’s backers said conventional hospitals were not delivering. The fund reports it has supported more than 15,300 free operations, and the hospital claims about 11,000 of those were carried out on-site. Yet the hospital has accrued more than RMB 26 million in unpaid rent, exposing a structural mismatch between philanthropic intent and heavy-asset clinical operations.
Chinese law separates charitable organisations (under the civil affairs system) from medical institutions (under the health authorities). Both can run public-good projects, but hospitals must balance patient-care obligations with the commercial realities of staff salaries, equipment depreciation and facility costs. Donations to public fundraising projects are legally restricted to specified uses and cannot be tapped freely to cover a hospital’s general operating expenses.
That legal separation has produced what practitioners call a “two-skin” problem: the visible, emotive work of a charity and the invisible, commercial ledger of a hospital can sit under the same brand while remaining financially and legally separate. For Yanan, the fund’s donor money is earmarked for patients’ surgical costs; it cannot legally be used to pay the hospital’s rent or cover its payroll. Public confusion over that boundary has intensified scrutiny of both entities and highlighted wider governance and disclosure gaps.
The Yanan case is not an outlier in Chinese charitable medicine. Some long-standing initiatives have adopted a light-asset model: the Smile Action project, for example, has operated for decades by partnering with existing hospitals, borrowing theatre space and relying on volunteer surgeons and donated equipment to keep per-patient costs low. By contrast, a self-owned, fully fitted hospital carries heavy fixed costs and must generate routine revenue to survive—an especially precarious task amid tighter medical insurance controls and post-pandemic demand shifts.
Experts point to three intertwined causes: constrained donor funds that are legally limited to discrete medical interventions; insufficient “self-financing” mechanisms inside hospital operations; and weak institutional bridges between funders and providers. When a charity creates or affiliates with a service-delivery entity, Chinese regulations require strict separation of governance, finance and supervision to avoid conflicts of interest. That can protect donors but also makes operational rescue or integrated financial support difficult.
The implications go beyond one hospital. Philanthropic health spending accounts for a substantial share of China’s charitable flows—roughly one-third last year—and plays a visible role in filling gaps left by insurance and public provision. But the sustainability of that support depends on clear rules, better disclosure and hybrid models that avoid ossifying either into unsustainable heavy assets or precarious ad-hoc partnerships.
Policy proposals emerging from practitioners and regulators include clearer cross-departmental guidance for charity-backed medical entities, better disclosure obligations for both funds and hospitals, and incentives for “light-asset” cooperation models. More fundamentally, experts argue, charity should be positioned as a supplement to state-led insurance and social protection, not a backstop for institutional shortcomings in hospital financing.
For donors and the public, the practical lesson is sober: charisma, celebrity and cause branding can raise money and awareness, but they do not substitute for the financial engineering needed to run a modern hospital. Absent regulatory reforms that permit legally transparent, accountable and flexible funding flows between charitable funds and service providers, more goodwill risks becoming stranded amid rent bills, unpaid wages and reputational damage.