Chinese people have cherished sympathy and concern for others as basic virtues for a long time. More than 2,000 years ago, the sage, Mencius said: Show love and care for others, and be loved by them.

Likewise, the practice of charity has a long history in China. There have been records of relief funds and organized donations for residents who suffered in natural disasters as early as the Han Dynasty (206 BC220 AD). In the late 1800s and early 1900s, with the introduction of modern charity programs, various NGOs, both domestic and foreign, have joined hands with the State, raising charity to a new level. Charity has become a foundation stone of China's social security since then, playing a key role in the country's economic and social development.

However, in late June, the Red Cross Society of China (RCSC) was involved in a major scandal, in which a young woman named Guo Meimei claimed to be living a luxurious life because of her connections to an RCSC-affiliated company. Suspicions that the RCSC was using donations to support the luxurious lives of its workers quickly spread over the Internet.

The RCSC failed to prove its innocence, as it was unable to explain clearly how it managed its donations. Its reputation plummeted to an all time low. Although the organization has now made an attempt to publicize related information online, it is still being criticized for being confusing and untrustworthy.

The accusations of RCSC corruption have been disastrous for charity programs in China. People's enthusiasm for donating has lessened dramatically, as they believe they were deceived and their concern for others abused. According to recent reports, the RCSC branch in Shenzhen, Guangdong province, received only 100 yuan ($155) of donations in July. Even when RCSC workers sent money to the families of victims of the July 23 high-speed railway accident in Wenzhou, Zhejiang province, they got much sarcasm and satire from the public.

In fact, ever since the 2008 Wenchuan earthquake, there have been doubts about the RCSC's use of donations. The Guo Meimei incident was just the last straw. It has shown the poor management and lack of transparency in China's charity industry, which is now in dire need of reform.

With the State dominating its affairs, the charity industry in China has already become a monopoly industry, which, like all others of its kind, is becoming increasingly rigid and resistant to reform, thus blocking its own way forward. Having lost the trust of the people, the industry has to rely on State support for its survival, for instance forcing those whose salaries come from public finances to donate. That is, of course, strange and distorted in any modern country.

Here are some proposals to reform China's charity system:

First, further legislate to regulate charity management. A national law to regulate charity programs should be introduced. Of course, the law should be detailed enough to regulate all parties involved in charity work.

At the same time, as the primary organization of domestic charity, the RCSC's role must be strengthened. Any profit-seeking actions of the RCSC and its branches or subsidiary organizations must be immediately stopped and prohibited in the future, so as to prevent any possibility that the RCSC's name can be linked with any illegal business actions.

Second, the supervision of charity funds needs to be strengthened, and their use made transparent to the public. This will require a modern auditing system, and the publicizing of accounts, so as to avoid corruption or the waste of donations. If any illegal activities are discovered the State should intervene and punish those responsible. In other words, those who illegally use donated money must pay for their misdeeds.

Last, but by no means least, more charity organizations should be encouraged. Monopolies always bring problems. NGOs, especially those wholly independent of government control, have long been excluded from the charity industry in China. They should be encouraged to play a greater role.

Charities rely on the public for support. Only by making the charity management system more transparent and open to the public can they win the trust needed; and that should be the guiding principle of charity reform in China.

The author is a Beijing-based commentator.