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This paper explores the contestation among the secular states, local population, and the popular religions in the context of the first half of twentieth century China. By focusing on the case of Daoyuan and its charity wing, the World Red Swastika Society (WRSS), it demonstrates that relief activities by the popular religious group successfully filled the power vacuum created by the weak secular state. Helping the needy under Japanese occupation later became a common rational given for accusing someone of being a pro-Japanese collaborator. In fact, the new religion and its charity wing were extremely cautious to remain politically neutral. It was true that some Japanese ideologues argued that Japan should take advantage of Chinese philanthropic organizations for the sake of Japan’s China policy and for East Asian co-prosperity. In practice, there is little evidence showing that the new religion and its charity wing had any particular interest in making a special connection with Japanese forces. Rather, Japanese officials in the occupied area held strong doubts about the Daoyuan religious identity, and its possible connection with the Chinese Nationalist government. Japanese authorities allowed charity organizations’ involvement in local social policies to sustain public security and local order. Thus, the accusation against the new religion for being a collaborator was made in the post-war Chinese state that wanted to control civil philanthropic organizations for politico-economic reasons, and from the local population that was in conflict with these religious organizations due to a variety of their own interests. Some of the leaders of the WRSS especially those in the city of Qingdao, held optimistic views about the expanding their congregations after the war. However, the opposite soon proved to be true. The WRSS was forced to follow its own interests in order to survive in the midst of completely new post-war conditions. However, its interests were sometimes incompatible with the people where in need of help. As demonstrated in this article, a housing dispute case between the Qingdao WRSS and some poor tenants shows ironic aspects of the WRSS’s charitable activities. Moreover, the WRSS was gradually losing it initiative as a local welfare provider as the Chinese state returned to the area.