My paper explores the factor that may explain why the Chinese state has encouraged since 1992 the provision of social services by Buddhist merit societies (gongdehui) and philanthropic associations (cishan zuzhi), in the context of policies on religious affairs that are often restrictive. This paper looks more specifically into the significance of social services delivery by Buddhist associations that have been gradually expanding throughout China. Although other religions deliver such services, Buddhism has received more state support and endured less limitation than the others. Albeit limited early on to the delivery of services to isolated and vulnerable populations such as orphans, 'left-behind elderly' without children, and victims of natural disaster, Buddhist assistance to the state’s social policies has expanded to more large-scale welfare projects and it has become institutionalized in foundation for fund-raising. This development is intriguing considering the general context of constraints imposed on religions, and sustained efforts to diminish their visibility in the public sphere, to the point where their activities outside of places of worship are forbidden, and in the case of Buddhism, their religious nature is downplayed as ‘culture’ or ‘tradition’. The argument of the paper is that the call to institutionalized religious actors such as Buddhist merit societies and philanthropic associations reflects deeper strategies enacted by the state for economic development since 1978, and the limited room this has left for the expansion of a more generous welfare regime. This approach, which has served the economy well for over three decades, is facing increasing social pressures and contradiction. The rapid ageing of China's population, its skewed sex ratio, the gap between rural and urban residents, and the extreme vulnerability of its migrant workers altogether present the state with a number of challenges to its capacity to deliver social services. In a global context where religious institutions, as traditional providers of social services, are called upon in many societies to assist the state, this possibility for the Chinese state remain politically difficult because of the ideological commitments of the ruling Communist Party and its ideology premised on the withering away of religion under socialism. The endorsement in recent years of an older, early twentieth-century, reform movements within Chinese Buddhism by the state-recognized Buddhist Association of China, however, has helped the state address this issue and solve this contradiction. The state can sponsor Buddhism as a provider of social services as long as it downplays its religious nature. To what extent lay devotee and clerics accept this quid pro quo is likely to remain a point of contention, as long as the line prevail in the Communist Party that religions must first serve the state. The sources used for this paper come from material collected over years of fieldwork in China, reports from Buddhist philanthropic societies, as well as proceedings from debates about the role of religion in serving the public interest (gongyi shiye) between Chinese scholars, religious personnel, state officials from different levels, and Communist Party cadres.