The Economic Impact of Government Policy on China’s Private Higher Education Sector 9813367997, 9789813367999

Table of contents :
Preface
Contents
List of Figures
List of Tables
1 Background
Introduction
Government Involvement
Approach to This Study
The Structure of This Book Is as Follows
References
2 Review of Past Literature
Introduction
Regulation in General
The Development of Private Higher Education
The Higher Education Sector of China
The Regulation of International Higher Education
Chinese Private Higher Education Regulation
Conclusion
References
3 The Chinese Economy
Introduction
Background
A History of Reform of the Chinese Economy
An Economy Transformed
Foreign Trade and Investment
Provincial Divergence
The Growth Drivers
Chinese Human Capital
Conclusion
References
4 Education Background
Introduction
Chinese School Education
Chinese Higher Education
Chinese Private Higher Education
Regulation and Planning of Chinese Higher Education
Foreign Investment in Higher Education
Conclusion
References
5 Higher Education Research
Introduction
Methodologies
Quantitative
Data
Limitations of the Data
Qualitative
Sampling
Data Collection Method: In-depth Interviews
Interview Questions
Summary
References
6 Quantitative Analysis
Introduction
Data and Variables
Results and Discussion (Eq. 6.1)
Results and Discussion (Eq. 6.2)
Summary
Conclusion
References
7 Qualitative Analysis
Introduction
The Cases
Data Evaluation and Analysis
Summary of Results
Conclusion
References
8 Conclusion
Introduction
Focus of Study
Summary of Findings
Contribution
Future Research
References
Appendix A Interviews
Interview Guide with Open-Ended Questions for Private Institutional Senior Managers
Interview Guide with Open-Ended Questions for Specialists Outside of Education Institutions
Appendix B Statistical Data

Citation preview

Xiaoying Ma

The Economic Impact of Government Policy on China’s Private Higher Education Sector

The Economic Impact of Government Policy on China’s Private Higher Education Sector

Xiaoying Ma

The Economic Impact of Government Policy on China’s Private Higher Education Sector

Xiaoying Ma North China Electric Power University Beijing, China

ISBN 978-981-33-6799-9 ISBN 978-981-33-6800-2 (eBook) https://doi.org/10.1007/978-981-33-6800-2 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

“The Economic Impact of Government Policy on China’s Private Higher Education Sector” is my second book in the series on the country and area study of China. This follows Book 1 “China’s Electricity Industry: Past, Present and Future”, published in 2020. The purpose of “The Economic Impact of Government Policy on China’s Private Higher Education Sector”, as a country study, is to build on the work previously undertaken by the author as part of a Ph.D. thesis on the nature of the higher education sector in China. This past work looked at the growth of the private higher education sector in China and analysed some of the key drivers of this growth and impediments to it. The most obvious factors promoting expansion were the growth in per capita incomes, higher levels of participation in secondary school education, the strong growth in demand for graduates and the inability of the public sector to keep pace with demand. All of these factors intermingled with the involvement of government regulation. This regulation, however, is not uniform across all of China given the different provincial government departments of education that are also involved in dealing with private higher education institutions. In particular the past work, therefore, looked at the way in which the Chinese government’s regulatory framework (both national and provincial) influenced the development of the sector and the way in which it operates, especially the private higher education component of that sector. The analysis undertaken found that there is a link between regulation and the private higher education sector growth and a link between the funding of the government sector. The more intense regulation was, and the more funds provided to the state sector, the less scope there was for the private sector to expand. The growth of the private sector, therefore, did not just depend upon rising demand for higher education overall, but also to a fair degree of tolerance on the part of government. Much of this work, in subsequent years, has been supported by the further changes that have been undertaken in the Chinese higher education sector. Over the years the growth of the Chinese higher education sector has stabilised, as has the private segment of this sector. Beijing, China

Dr. Xiaoying Ma

v

Contents

1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government Involvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Approach to This Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Structure of This Book Is as Follows . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 4 6 6

2 Review of Past Literature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulation in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Development of Private Higher Education . . . . . . . . . . . . . . . . . . . . . . . The Higher Education Sector of China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Regulation of International Higher Education . . . . . . . . . . . . . . . . . . . . Chinese Private Higher Education Regulation . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 9 10 15 19 22 24 25 26

3 The Chinese Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A History of Reform of the Chinese Economy . . . . . . . . . . . . . . . . . . . . . . . An Economy Transformed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provincial Divergence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Growth Drivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chinese Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31 31 31 36 41 48 51 51 55 56 56

4 Education Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chinese School Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chinese Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59 59 60 64 vii

viii

Contents

Chinese Private Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regulation and Planning of Chinese Higher Education . . . . . . . . . . . . . . . . Foreign Investment in Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69 76 81 86 87

5 Higher Education Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 Quantitative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Limitations of the Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 Qualitative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Data Collection Method: In-depth Interviews . . . . . . . . . . . . . . . . . . . . . 99 Interview Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 6 Quantitative Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Data and Variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Results and Discussion (Eq. 6.1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Results and Discussion (Eq. 6.2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

103 103 104 106 109 112 114 115

7 Qualitative Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Data Evaluation and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary of Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

117 117 118 119 125 126 127

8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Focus of Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary of Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

129 129 129 130 131 132 132

Appendix A: Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Appendix B: Statistical Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

List of Figures

Fig. 4.1

Fig. 4.2 Fig. 4.3

Fig. 4.4

Gross enrolment rate in higher education in China 1990–2013, 18–22 age group. Source China, Ministry of Education, Education statistics for … . . . . . . . . . . . . . . . . . . . . . School population and enrolments in China, 1999–2018. Source UNESCO, Institute of Statistics (1999–2018) . . . . . . . . . . Growth of enrolment numbers in regular institutions of higher education in China, 1979–2015. Source China (2003–2019), Education statistics . . . . . . . . . . . . . . . . . . . . . . . . . . Structure of regulation of higher education in China. Source China (2003–2019), Education statistics . . . . . . . . . . . . . . . . . . . . .

60 63

65 77

ix

List of Tables

Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 4.1 Table 4.2 Table 4.3 Table 4.4 Table 4.5 Table 4.6 Table 4.7 Table 5.1 Table 5.2 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 6.6 Table B1

Macroeconomic data of China and other countries, 2018 . . . . . . GDP and exports growth for China, average annual percentage, 1980 to 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . GDP Per capita of China (constant 2010 international $), 1980 to 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign direct investment in China (US$ million), 1979 to 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provincial level macroeconomic data for China, 2017 . . . . . . . . . Net enrolment rate; secondary and tertiary education in selected countries, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of regular higher education institutions and enrolled students in China, 1952–2013 . . . . . . . . . . . . . . . . . . . . . Number of higher education institution in China, 2018 . . . . . . . . Enrolments by discipline in regular institutions of higher education in China, 1995, 2007, 2018 . . . . . . . . . . . . . . . . . . . . . . Student numbers in regular higher education institutions in China 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private higher education shares of total higher education in selected countries, percentage, 2000–2009 . . . . . . . . . . . . . . . . Public and private higher education enrolments in China, 1999–2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of dependent and independent variables for two regression equations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Descriptive statistics, China and Chinese higher education, 2003–2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Descriptive statistics of Eq. 6.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . Regression results of Eq. 6.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regression results with individual independent variables . . . . . . Descriptive statistics of Eq. 6.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . Regression results of Eq. 6.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Regression results with individual independent variables . . . . . . Statistical data China, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33 35 35 50 52 66 68 70 72 73 73 74 92 95 106 107 108 110 111 112 164 xi

xii

Table B2 Table B3 Table B4 Table B5 Table B6 Table B7

List of Tables

Statistical data China, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistical data China, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistical data China, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistical data China, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Statistical data China, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consumer Price Index 2000 = 1.000, China, 1991–2008 . . . . . .

166 168 170 172 174 176

Chapter 1

Background

Introduction The purpose of this book is to look at the growth of the private higher education sector in China and to analyse some of the key drivers of this growth and impediments to it. In particular the book will look at the way in which the Chinese government’s regulatory framework (both national and provincial) has influenced the development of the sector and the way in which it operates; especially the private higher education component of that sector. Over the past twenty years there has been considerable growth of China’s higher education sector. This growth has meant that by 2018 there were 44.9 million students enrolled in tertiary education in China (public and private, full time and part time) making it the world’s largest higher education sector (UNESCO, Institute for Statistics). Traditionally higher education in China was funded, and delivered by state owned higher education institutions. In more recent years an increasing contribution has been made by private institutions (both Chinese and foreign). Today, over 1400 foreign higher education institutions have been approved by various education authorities in China to operate in that country (China, Ministry of Education, Education Statistics in 2018). As Chinese higher education is being increasingly deregulated internally, the Ministry of Education is permitting foreign providers to operate more, and these institutions are becoming increasingly important to the delivery of higher education programmes in China. At the same time that the quantity of graduates in China has grown substantially so too has arisen the issue of quality. Along with the rapid growth in the size of the higher education sector and the number of graduates in China there have been expressed in some quarters some concerns about the quality and employability of graduates. A shortage of well-trained graduates could hinder the growth of the Chinese economy and prevent it from developing more sophisticated industries, according to a report by consultants McKinsey (McKinsey 2008). Obviously expansion of numbers is simply © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_1

1

2

1 Background

not enough to ensure that the Chinese economy’s growing demand for graduates is met. The quality of graduates is also important. The Chinese Government’s approach to regulating higher education (both private and public) plays an important role in maintaining standards and in enabling the higher education to expand while at the same time maintaining educational standards. Employment opportunities for graduates of the Chinese higher education sector are not uniform across all disciplines, or across all regions of the country. In particular there arose an over-supply of graduates in some areas alongside of shortages in others (Organisation of Economic Cooperation and Development 2018). The strong growth in business graduates for instance has meant that many have found it difficult to find employment and so many are now undertaking post-graduate work. Strong economic growth into the future will probably mean that demand for educated professionals and technicians will grow, but this does not guarantee employment opportunities for all graduates. Further growth of the higher education sector and high levels of unemployed graduates will lead to more intensified scrutiny of quality standards and regulation of the sector. Investigating the quality standards of the private sector, in particular, will be a key area of policy interest. As a significant part of the growth in recent years of the Chinese higher education sector has been in the private sector, and by foreign institutions, attention should be given to the manner in which this sector is regulated by the government and the manner in which private, foreign owned, institutions are managed. The main aim of this book, therefore, is to improve our understanding of the contribution made by this component of the sector to the growth of China’s higher education and the impact that government regulation has had on its development.

Government Involvement The present Chinese Government first gave legal recognition to private education in the 1982 constitution. The intent of this legislation in reference to private education, however, was to a large degree vague. Although in this legislation private education was allowed to exist, the constitution left the sector vulnerable to ambiguities and bureaucratic impediments. The private education law, promulgated on December 28, 2002, is China’s first national legislation that related specifically to private education, including higher education. The law’s main theme was to provide a legal framework which facilitated private sector expansion. The third and most recent piece of legislation that is relevant to the private higher education sector was released in March 2003 and offered further clarification on the prior regulation. The major features of this legislation included the stipulation that foreign institutions must partner with Chinese institutions; partnerships, must not seek profit as their objective; as well as a range of other measures. A general acceptance of the validity of Chinese private higher education occurred at this time because it was felt, and is still felt, that government institutions and public funding, would be insufficient to provide for an expansion of a significant number

Government Involvement

3

of graduates to meet China’s economic growth plans. Despite the desire to facilitate growth of the private higher education there still was a view that it should be closely regulated by government authorities. The economic justification for regulation of private businesses (including education) is generally that it may help to overcome some sort of ‘market failure’, which can lead to sub-optimal outcomes. Education is fundamentally a privately consumed service, but may be considered a quasi-public good if a significant amount of benefits or costs (externalities) flow from its production or consumption such that they affect third parties. The third parties, who benefit from these externalities, will have an incentive not to contribute to the maintenance of education provision but instead will ‘free ride’ off it. If the purchasers of education and training, or the producers, cannot capture all of the benefits from their spending then there is a reduced incentive on their part to provide and consume. In the past the possible existence of positive externalities that flow from education has been used to justify the subsidisation of both government and private providers of higher education (Maglen 1995; Gemmell 1997). Besides the existence of externalities another possible source of market failure may arise from information asymmetry; that is where most consumers have little ability to reliably gauge the quality of a particular product or service. If this is the case, it may then be possible that the resulting resource allocation is less efficient than if consumers are fully informed. It is possible that information asymmetries are relevant when looking at the regulation of higher education markets. If consumers are sufficiently ill-informed then it might adversely affect resource allocation. For students to make rational choices about which qualification they would like to enrol and study in it would be thought necessary for them to have sufficient information about the quality of the alternative courses available to them. Often in markets: ‘incentives for the disclosure and acquisition of information are far from perfect’ and often lead to an underdevelopment or distortion of markets (Akerlof 1970; Stiglitz 2002; Baldwin et al. 2011). A number of writers have put forward this view in relation to the provision of private higher education (Pusser and Daone 2001; Breneman et al. 2000; Winston 1999; Hansmann 1981). With large scale growth taking place in the provision of private higher education (non-profit and for-profit) in China, public policy makers have become interested in reforming or imposing, regulatory measures that affect private higher education institutions. In recent years there has been a great deal published in a number of countries on the changes that have occurred to higher education. To a large degree this work has concentrated on either the increasing commercialization of public and non-profit private higher education institutions (see for instance Jarvis 2001; Kirp 2003; Marginson and Considine 2000; Bok 2004; Stevens 2004) and on the growth of private higher education (see for instance Altbach 1999; Kelly 2001; Levy 2002; Kinser 2009; Ruch 2001). What is, perhaps, neglected is the study of the regulatory responses to the growth of private higher education (not so true in the case of the United States; see for instance Education Commission of the States & Brimah 2000). This is unfortunate as the study of the government regulation of private

4

1 Background

higher education can tell us a lot about a range of educational issues. One issue in particular that then is relevant is the policy implications for the Chinese Government.

Approach to This Study This book will concentrate on the nature of government regulation and its impact on the growth and basic structure of private higher education in China. Public policy in higher education comes in a variety of forms but the main purpose of this research will be to concentrate on the government regulation of the behavior of private, foreign, higher education institutions. Although regulation is just one part of public policy approaches regarding higher education, its nature and intent is important in its impact on the development of private higher education and can also tell us quite a lot about the general attitude of government toward the development of this sector. In particular the nature of regulation and its impact can tell us a lot about whether public policy makers want to encourage the growth of private higher education, direct it into the development of niches areas or, indeed, inhibit its growth all together. Typically regulation involves the supervision and control of the activities of private individuals and companies by government. Governments can undertake this sort of activity for a range of reasons. They might, for instance, be trying to promote a greater level of efficiency of the productive units in an economy, they may trying to promote a fairer distribution of income, be trying to promote greater levels of health or safety, or finally might just be responding to pressures to protect the income of vested interests. Regulation may be imposed simply by enacting laws and leaving their supervision to the normal processes of the law or alternatively by setting up special regulatory agencies, or by encouraging self-regulation by recognizing and in some cases delegating powers to voluntary bodies. In showing what the impact of government regulation has, the following main issues will be addressed. 1. The first is the nature of the regulation that exists. Do government authorities regulate the behavior of private higher education institutions and if so is it ‘competitively neutral’ compared to the regulation of public higher education institutions? Are there any regulatory barriers to entry, which preclude or make it difficult for private higher education institutions to operate? In looking at these questions it should be possible to see just what the impact regulation has on the structure of private higher education. Salerno (2004) used Levy’s (1986) categorization of alternative public/private mixes in higher education to show the impact of public subsidy on private higher education. Zumeta (1996) used a similar categorization of public/private mixes to create a framework to help understand state higher education polices in the United States. Perhaps the same or similar approaches could be used to illustrate the impact of regulation, and apparent attitude of government to private higher education in China. In approaching this issue it is possible to look at the

Approach to This Study

5

approaches used by Salerno (2004), Levy (1986), and Zumeta (1996) as well as studies by Kinser (2009) and Education Commission of the States & Brimah (2000) and Brimah (2000) on the regulation of higher education in the United States. 2. The second issue involves the relationship between the regulation of private higher education providers and that of the regulation of government providers. In recent times a considerable amount of work has been undertaken to evaluate the various approaches taken to regulate quality assessments of public universities in developed countries (Dill et al. 1996; Dill 2000). Over the past ten years governments have fostered competition in higher education by the adoption of quasi-market and market based policy instruments. This has been generally achieved by giving public higher education institutions greater institutional autonomy, while at the same time subjecting them to regulatory regimes of quality assurance (see for instance Dill 1997, 2000; Dill and Soo 2005; Mora 2001; Huisman and Currie 2004). This quality assurance is of growing importance to policy makers and other stakeholders (Dill et al. 1996; Dill 2000). Although the motivations for imposing this form of regulatory regime on public and private higher education institutions is not necessarily the same, to some degree this research would be an extension of the analysis already undertaken on public universities accountability regimes. In the case of quality assurance regimes for public universities the general aim is to make universities accountable for the public funds that they spend. This may be true in the case of private higher education but often is also undertaken in order to provide students an assurance that they are receiving what they are paying for. This book will, therefore, look and see to what degree quality assurance style regulation assists students overcome any information imperfections that they may experience. The importance of quality assurance regulation seek and whether it provides barriers to the development of private higher education institutions will be determined Apart from regulation a number of other factors are boosting the growth of the private higher education sector in China. The most obvious factors are the growth in per capita incomes, higher levels of participation in secondary school education, the strong growth in demand for graduates and the inability of the public sector to keep pace with demand. All of these factors intermingle with the involvement of government regulation. This regulation, however, is not uniform across all of China given the different provincial government departments of education that are also involved in dealing with private higher education institutions. Once the key drivers of the growth of private higher education are identified, including the impact of regulation, it will be possible to identify the implications for the Chinese Government in terms of policy development, and for private sector investors. By knowing the impact of regulation on the behavior of private higher education, the Chinese Government may be able to evaluate if this impact is the desired one or if new or reform policies are needed. It will also be possible to provide decision making information to potential education providers in areas for further expansion or consolidation.

6

1 Background

The Structure of This Book Is as Follows In the following chapter a review of literature is provided. The literature in this field does not provide a strong and thorough analysis of the impact of government regulation on the growth and development of private higher education in China. Instead there is a broader work on the impact of government regulation on higher education (public and private) in other countries, and literature on the growth of private higher education, both overseas and in China. The review of this research, therefore, will concentrate on private higher education in China and the regulation of private higher education globally. The absence of work in this field makes the research conducted as part of this work unique. In the next chapter a description of the private higher education sector in China, its growth and development in recent years and the higher education more generally will be provided. This will be followed by the forth chapter will also contains some context on the growth of the Chinese economy in recent years and the growth in demand for higher education graduates. This chapter aims to provide some important background context to the main work of this study. In the following chapter the main methodology and data sources are provided. The methodology is in two parts: a statistical analysis of the course of growth of the private higher education sector in China and a series of interviews with higher education management. By undertaking both a quantitative and qualitative analysis of the impact of regulation in Chinese higher education it will be possible to gain a deeper understanding into the impact of regulation than a more limited study. The following two chapters will provide details of the results of the two methods of analysis (Quantitative and Qualitative analyses). In the final chapter a summary will be provided and some conclusions will be made, both for policy makers and private investors. On the basis of the conclusions, the chapter will also discuss some potential areas of future research.

References Akerlof, G. A. (1970). The market for ‘lemons’: Quality, uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488–500. Altbach, P. G. (Ed.). (1999). Private Prometheus: Private higher education and development in the 21st century. Westport, CT: Greenwood Press. Baldwin, R., Cave, M., & Lodge, M. (2011). Oxford handbook of regulation. Oxford: Oxford University Press. Bok, D. (2004). Universities in the marketplace. Princeton and Oxford: Princeton University Press. Breneman, D. W., Pusser, B., & Turner, S. E. (2000). The contemporary provision of for-profit higher education (working paper). www.curry.edschool.virginia.edu. Brimah, T. (2000). Higher education: Are for-profit institutions treated differently?. Washington, DC: Education Commission of the United States. China, Ministry of Education, Education statistics in 2018, Beijing. Dill, D. D. (1997). Higher education markets and public policy. Higher Education Policy, 10(3/4), 167–185.

References

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Dill, D. D. (2000). Capacity building as an instrument of institutional reform: Improving the quality of higher education through academic audits in the UK, New Zealand, Sweden and Hong Kong. Journal of Comparative Policy Analysis, 2(2), 211. Dill, D. D., Massy, W. F., Williams, P. R., & Cook, C. M. (1996, September/October). Accreditation and academic quality assurance. Change, 28(5), 16–24. Dill, D. D., & Soo, Maarja. (2005). Academic quality, league tables and public policy: A crossnational analysis of university ranking systems. Higher Education, 49, 495–533. Education Commission of the States and Brimah T. (2000). Survey analysis: State statutes and regulation government the operation of degree-granting for-profit institutions of higher education. Denver: ECS. Gemmell, N. (1997). Externalities to higher education: A review of new growth literature. Report to the National Committee of Inquiry into Higher Education, National Committee of Inquiry into Higher Education, London. Hansmann, H. (1981). The rationale for exempting nonprofit organizations from corporate income taxation. Yale Law Journal, 91, 54–100. Huisman, J., & Currie, J. (2004). Accountability in higher education: Bridge over troubled water? Higher Education, 48, 529–551. Jarvis, P. (2001). Universities and corporate universities: The higher learning industry in global society. London: Kogan Page. Kelly, K. F. (2001). Meeting needs and making profits: The rise of for-profit degree-granting institutions. ECS issue paper, Denver, Education Commission of the States. Kinser, K. (2009). How the for-profit sector contributes to access in US higher education. Enrollment Management Journal, 3(4), 23–44. Kirp, D. L. (2003). Shakespeare, Einstein and the bottom line: The marketing of higher education. Cambridge, MA: Harvard University Press. Levy, D. C. (2002, April). Unanticipated development: Perspectives on private higher education’s emerging roles (PROPHE Working Paper No. 1), Albany NY. Levy, D. C. (1986). Higher education and the state in Latin America: Private challenges to public dominance. Chicago: University of Chicago Press. Maglen, l. R. (1995). The role of education and training in the economy. Australian Economic Review, 2nd Quarter, 128–147. Marginson, S., & Considine, M. (2000). The enterprise university: Power, governance and reinvention in Australia. Cambridge, Melbourne: Cambridge University Press. McKinsey also Farrell, D., & Grant, A. (2008). Addressing China’s looming talent shortage. McKinsey & Company, Shanghai. Mora, Jose-Gines. (2001). Governance and management in the new university. Tertiary Education and Management, 7(2), 95–110. Organisation for Economic Cooperation and Development. (2008). Education at a glance 2018. Paris: OECD. Pusser, B., & Daone, D. J. (2001). Public purpose and private enterprise: The contemporary organization of postsecondary education. Change, 33(5), 19–22. Ruch, R. S. (2001). Higher Ed, Inc.: The rise of the for-profit university. Baltimore: John Hopkins University Press. Salerno, C. (2004). Public money and private providers: Funding channels and national patterns in four countries. Higher Education, 48, 1–30. Stevens, R. (2004). University to uni: The politics of higher education in England since 1944. London: Politico’s. Stiglitz, J. E. (2002). Information and the change in the paradigm in economics. American Economic Review, 92(3), 460–501. UNESCO, Institute for Statistics, www.uis.unesco.org/, Montreal. Winston, G. C. (1999). Subsidies, hierarchy and Peers: The awkward economics of higher education. Journal of Economic Perspectives, 13(1), 13–26.

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1 Background

Zumeta, W. (1996). Meeting the demand for higher education without breaking the Bank: A framework for the design of state higher education policies for an era of increasing demand. Journal of Higher Education, 67(4), 367–425.

Chapter 2

Review of Past Literature

Introduction The relationship between the state and private sector activity more broadly is one that has been analysed by economists and other policy researchers extensively over the past two hundred years (Viscusi et al. 2000; Stigler 1971; Tullock et al. 2002). The literature in the field of study that is the focus of this study does not have any heavy concentration on analysis of the impact of government regulation on the growth and development of private higher education sector in China. This means that there is considerable scope for new research in this field to make important contributions to knowledge. It does mean, however, that there is little in the way of past literature that relates specifically to the topic. Instead what we find is that there is work more broadly on the impact of government regulation on higher education (public and private) in other countries, and a literature on the growth of private higher education, both overseas and in China. What is has not been undertaken is any work on the relation between the Chinese Government and the private higher education sector. This provides considerable scope for important and original work This literature review of past research, therefore, concentrates on the development of private higher education in China and the regulation of private higher education globally. As well it looks at some of the more important work on analysis of the effects of economic regulation. In each case the research undertaken in the past is closely associated with changes in the development of the higher education sector and policy changes. In describing the past literature, therefore, the basic structure of developments and policy change is also provided to give context. In light of these points the literature review in this Chapter is divided into the following parts: • a review, very generally, of approaches to regulation by economists, • a review of the literature on international private higher education (United States, South America, Japan, Africa); © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_2

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• a review of the literature on the growth of Chinese higher education; • a review of the literature on regulation of international higher education (United States, South America); and • a review of the literature on regulation of Chinese private higher education. The literature in each section has some points of interest to the work provided

Regulation in General In terms of regulation the use of systematic empirical analysis of the effects of regulation has a long history and it would be impossible to provide an exhaustive list of all work undertaken. In modern times, from the point of view of economics, one of the most important pieces of work was that by Stigler and Friedland’s (1962), which sought to measure the effects of state commission regulation of franchised electric utilities in the United States (Stigler and Friedland 1962). A second paper published at the same time by Averch and Johnson about the actions of a firm when facing regulated returns and the creation of a so-called ‘Averch-Johnson’ effect was also of importance (Averch and Johnson 1962). Since 1962 there has been an enormous amount of study undertaken by economists on the impact of regulation. This work was heavily influenced by the notions of rent seeking behaviour, the politicisation of policy formulation and application and an overall more sceptical view of the efficiency of regulation at combating market failures (Kahn 1971; Tullock et al. 2002). A number of areas of economic activity such as the utilities (electricity, gas, rail and telecommunications) and the finance sector have especially received a great deal of attention from academic economists (see Priest 1993; Baldwin et al. 2011; Kahn 2001). Compared to this work on the impact of regulation in a range of other fields the literature on the impact of regulation on higher education is far less extensive. One important first piece of work was by Harnerger (1971) who first used applied economics as a theoretical basis on which to conduct cost-benefit analysis of the impact of regulation based on the work by researchers in the 1960s. In undertaking work on regulation and its impact a clear definition of this concept is required. In economics the term regulation has a variety of meanings: 1. The first definition is that it involves specific directions - rules administered by a government agency to restrict economic activity by such this as prohibition, the determination of prices, fixing of output levels, establishment of product standards, types and conditions under which new firms can enter the market (Posner 1974; Baldwin et al. 2011) and 2. The second and broader definition is that it involves any intervention in the economy either by direct control or by financial inducements, which may cause individuals or groups to pursue their interests in ways they might not have chosen otherwise. This means that it might involve such things as taxes and subsidies

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of all sorts, as well as explicit legislative and administrational controls (Posner 1974). In the case of this study, however, there will be a concentration on regulation as it applies under the first definition; that is where it involves specific directions. In applying regulation the key resource of the government is the power to coerce. Regulation is the use of this power for the purpose of restricting the decisions of firms or individuals. The state is the one organisation where membership is both universal and compulsory—except to the degree that individuals or firms can immigrate or avoid regulation (Stigler 1971; Posner 1974; Kahn 2001; Baldwin et al. 2011). Public policy, therefore, is not a voluntary action for many people and in many circumstances. We can contrast this with the voluntary exchanges of market transactions, which reflect the preferences of individuals. In a market economy governments fulfil three main allocative purposes (Stiglitz 1989): 1. Government acts as a referee or umpire in the day-to-day affairs of the market system (may enforce rules for fair trading, corporations and contract law). 2. Government acts as a replacement of the market system. It may directly allocate resources and see that goods and services are produced that the market is unwilling to supply. 3. Government acts to redistribute income from some individuals to others (Stiglitz 1989). In the more narrow sense regulation can have several elements: 1. Public statutes, standards or statements of expectations. 2. A process of registration or licensing to approve and to permit the operation of a service, usually by a named organization or person. 3. A process of inspection or other form of ensuring standard compliance, including reporting and management of non-compliance with these standards: where there is continued non-compliance, and 4. A process of de-licensing whereby that organization or person is judged to be operating unsafely, and is ordered to stop operating at the expense of acting unlawfully (Stiglitz 1989). In the Chinese case these activities of government intervention can take place at any of the three levels of government—central, provincial or local. Taken together individuals and firms can often find themselves very extensively constrained by government regulation. The development and techniques of regulation has long been the subject of academic research. Two basic schools of thought have emerged on regulatory policy, namely, positive theories of regulation and normative theories of regulation (Buchanan and Musgrave 2001). Positive theories of regulation examine why regulation occurs. These theories of regulation include theories of market power, interest group theories that describe stakeholders’ interests in regulation, and theories of government opportunism that describe why restrictions on government discretion may be necessary for the sector to

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provide efficient services for customers. In general, the conclusions of these theories are that regulation occurs because (1) the government is interested in overcoming information asymmetries with the operator and in aligning the operator’s interest with the government’s interest, (2) customers desire protection from market power when competition is non-existent or ineffective, (3) operators desire protection from rivals, or (4) operators desire protection from government opportunism. Normative theories of regulation generally conclude that regulators should encourage competition where feasible, minimize the costs of information asymmetries by obtaining information and providing operators with incentives to improve their performance, provide for price structures that improve economic efficiency, and establish regulatory processes that provide for regulation under the law and independence, transparency, predictability, legitimacy, and credibility for the regulatory system (Stiglitz 1989). In a market economy- resources are mainly allocated according to the market mechanism (the forces of supply and demand). This market mechanism determines what is produced, how much is produced and at what price. Economists often emphasise the benefits of competitive markets at bringing about an efficient allocation of resources. On the whole, they argue, that there are welfare advantages to having competitive markets compared to the dominance of markets by oligopolies or monopolies (Pindyck and Rubinfeld 2009). If voluntary transactions create wealth then anything that disturbs this process— such as a government regulation—must potentially destroy wealth. In general, therefore, the case for a market system in determining the allocation of resources is based on the acceptance of the precept that it leads to the most efficient allocation of resources (Buchanan and Musgrave 2001). If markets were always effective at allocating resources to their most efficient use then analysing the economic impact of public policy would be a relatively simple undertaking. In these circumstances any government intervention that influenced transactions between willing parties would be considered to be wealth destroying. Economists, however, also identify circumstances in which markets may fail to bring about the most optimal distribution of resources and most technical efficient means of production. In these circumstances it is possible that there may be some justification for government intervention. Identifying these so-called ‘market failures or imperfections’ does not necessarily mean that government intervention will make things better. In most circumstances a judgment must be made about whether government policies make things better or worse. The existence of market failures and imperfections do however make the practice of judging the economic impact of government intervention more complicated (Baldwin et al. 2011). Economic arguments for government intervention revolve around overcoming some perceived market failure or imperfection (Bator 1958; Buchanan and Musgrave 2001; Stiglitz 2000). These include such things as the following: • Externalities—an externality is a cost or benefit that arises from any activity, which does not accrue to the person or organisation carrying out the activity. An example of external benefits or economies for instance is effects of an activity,

Regulation in General

•

•

•

• •

13

which are pleasant or profitable for other people who cannot be charged for them. If people, for instance, benefit from the education undertaken by other people then these might be referred to as positive externalities; Pure public good—A pure public good is a good or service, which if they are produced at all are open to use by all members of society. Examples include defence, law and order, and public parks. As no one can be excluded from using them they cannot be provided for private profit (this is the so-called free rider problem). Individuals and organisations for altruistic motives provide pure public goods - in some circumstances -. Individuals often contribute to the creation of public facilities. More often they are provided by government bodies and are paid for from taxation. They are said to be non-exclusive and non-rival in their use in that people cannot be excluded from consuming them and any single persons enjoyment of the good or service does not come at the expense of others using it (it does not rival them) (Samuelson 1954). Pure public goods are not common in education as education is mainly consumed as a private good. Public education programmes on public health issues might be an example; Merit goods—These are goods or services whose consumption is believed to confer benefits on individuals greater than those reflected in consumer’s own preferences. A basic elementary education is often regarded as a merit good. Something that all people should possess regardless of their personal preferences. Natural monopoly—This is where an industry embodies such large economies of scale such that the efficient level of production for one firm satisfies the entire market demand. In this circumstance the largest firm can enjoy the lowest possible average unit costs and drive any rival out of business. Often this is the case in network industries (such as electricity, gas, water and sewerage distribution) where capital costs are very high and marginal costs are very low; Anti-competitive behaviour—In markets where oligopolies are dominant, it is possible that these firms will collude in order to establish monopoly type conditions in markets (might occur in small education markets for instance); and Information and transactions costs—persons or firms might have insufficient information to make decisions that optimise the allocation of resources (Stiglitz 2001; Akerlof 1970). Public education programmes are often designed to overcome some of these problems.

In the case of education markets it is generally the last of these that is used to justify government regulation of private education providers. If government regulation is going to enhance economic efficiency then it seems obvious that there needs to be market failure or imperfection that is preventing the market from achieving an optimal allocation of resources and the achievement of technical efficiency. However the existence of market failures and imperfections on their own are not enough to justify government intervention. Conceivably it might be argued that nearly all markets have some element of failure or imperfection, even if it is only a lack of information on the part of a section of producers and consumers. Government regulation is only justified on economic grounds if a number of conditions are met. First of all the market failure/imperfection has to be of

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sufficient importance to create a substantial divergence from the optimal outcome. Secondly the government intervention has to be effective at overcoming this market failure/imperfection. Finally the costs of government intervention have to be less than the costs of the market failure/imperfection. In most cases one or more of these conditions are not met. Often, for instance, government intervention is ineffective at overcoming the market failure/imperfection or the cost of government intervention is so high that it would be better simply to tolerate the market failure or imperfection. Ineffective government intervention or costly government intervention is often referred to as ‘government failure’ (Buchanan 1988; Krugman 1983; Tullock et al. 2002; Shleifer 1998). Government failure can be defined, as being the case where the allocation of resources brought about by government does not reflect the value of the benefits and costs involved. Government failure has a number of causes. To begin with government intervention involves the making of decisions by politicians and bureaucrats on behalf of others. These have a tendency to be made with less care and awareness of what the beneficiaries might actually want. There might for instance be a bureaucratic bias towards some form of action or alternatively avoidance and evasion problems as well as imperfect information on the part of government officials. A further important source of government failure is the absence of the discipline of voluntary exchange. That is the competition that is embodied in markets creates incentives to achieve efficient outcomes that are often absent from public provision. Finally there might be a bias in the political process. That is interest groups may use their influence on the political process to achieve outcomes that are desirable to themselves and not necessarily conducive to an efficient allocation of resources (Niskanen 1994). Before the 1960s the generally held view of regulation by economists was that it was intended to protect the public from the operation of inefficient and inequitable markets. Economic markets were considered extremely fragile and apt to operate inefficiently or inequitably. Government regulation was regarded as being largely costless. The general perception, therefore, was that government regulation evolved, not by accident or wilful decisions by corrupt politicians but in response to public needs and to recognised inefficient or inequitable market practices (market failures and imperfections) (Musgrave 1959). Government policies were thought to be designed to increase social welfare. The role of economists was to seek the likely consequences of these policies. Gradually this ‘public interest model’ attracted criticism. The actual performance of regulatory schemes rarely matched the ideal theoretical model and the poor performance of regulatory intervention led to the development of the previously mentioned concept of government failure. One aspect of this scrutiny was the development of the ‘private interest theories of government regulation’. 1. The first version of private interest theory is the Capture theory: this is the view that government regulation is usually lobbied for by an industry and designed for its benefit. Alternatively government intervention might be implemented initially

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to constrain an industry but eventually it is ‘captured’ by the industry and works in its favour. One problem with this theory is its inability to explain government intervention where there are conflicting interest groups. In these circumstances it is not possible for rival groups to both capture government regulation (Posner 1974). 2. The second version is the economic theory of regulation (Stigler 1971). This approach admits the possibility of capture, but views economic regulation as serving the private interests of politically effective groups. According to this view regulation is provided in response to the demands of interest groups struggling amongst themselves to maximise the incomes of their members. The theory is based on two propositions. The first is that governments can exercise coercive power to give special advantages to various groups. The second is that the expression of this power in economic matters is a product subject to the laws of supply and demand. This power is provided to those who value it most highly. Voters are in effect consumers of government regulation and express their demands by voting and lobbying (both consumer and producer groups). It is assumed people support policies in their own self-interest. The politicians and bureaucrats who make up government supply government regulation. The political process often works badly in translating preferences into outcomes. Groups with low costs of organising and no free rider problem will be successful in influencing the political process than groups with higher costs of organising. Policies yielding great benefits to a small concentrated group and losses to a widely dispersed group are likely to be successful. Examples of this would be tariffs on imported motorcars, which benefit a highly concentrated workforce at the expense of the motoring public (Niskanen 1994). These theories helped to develop the notion of ‘rent seeking’. Rent seeking is the spending of time and money by people not on the production and sale of goods and services but rather on trying to get government to change rules so to make their businesses more profitable (Krueger 1974). Bearing all these notions of regulation in mind it is now possible to turn to the regulation of the higher education sector.

The Development of Private Higher Education Although private higher education has a long history in many countries, it has since the 1980s experienced especially strong growth in a number of countries. In some cases this has occurred in countries with a long history of private higher education such as the United States, Japan and the Philippines (Levy 1986c; Nagasawa 2005; Kelly 2001; Tooley 1999). In other cases growth has occurred in a number of countries where private higher education is a more recent phenomenon (such as the Eastern European countries, India, Africa and China). The responses of governments around the world to this growth have been varied, and in a number of cases attracted some degree of analysis from researchers. In some

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cases governments have attempted to prevent, or limit, the growth of the private sector in favour of government owned institutions. In some cases they have attempted to direct in a particular direction (for instance to filling in the gaps in the state education system) or influence its character (say for instance by opposing for-profit institutions). In other cases governments have acted to facilitate the growth of the private sector. In either case researchers have become involved in analysing the shape and character of this growth of the private higher education sector (Levy 2006). In reviewing the literature, what is noticeable is that that most of the research which has been carried out to date, is concentrated on a small number of countries, most of which have substantial private higher education sectors (Slantcheva and Levy 2007). These include countries such as the United States, Japan, South Korea and Latin America, all of which have a long history in the operation of private higher education institutions (Uribe 2010; Bernasconi 2004; Kinser and Levy 2005; Levy 1986a; Yonezawa 2003). In addition there is a more limited amount of research that has been undertaken on private higher education in countries such as India and Turkey; where the origins of private higher education have been more recent. In a number of cases it is the problems associated with the maintenance of minimal academic standards in private higher education institutions that has initiated this research (Altbach 2005; Geiger 1986; Levy 1986b). In the case of the United States the private higher education sector has a very long history beginning with the founding of Harvard College in 1636. This was followed later by the establishment of Yale, and subsequently a range of other colleges (in each case it is notable that colonial legislatures played an important part in the colleges’ founding (Brickman 1972). The United States is an unusual country in that its higher education development saw the establishment of large private higher education institutions before that of public sector development; something that is common in only a few other countries. This initial growth of the private higher education sector in the United States emerged beyond the expectations, or clear design of government policy (Levy 2009). This aspect of private sector development is not that unusual in the modern world in that very often growth of the sector has occurred in a variety of countries without any major government policy initiative. The growth of private higher education in the modern world differed somewhat from the early American example in that it often took place with the involvement of profit seeking entrepreneurs, whereas early American development was based on the work of public spirited, non-profit orientated (often religious) groups. This modern entrepreneurial approach first became prominent in Latin America in the 1950s, and subsequently developed in fits and starts in other countries as well (Levy 1986a). At the time the private sector emerged it created somewhat of a shock for governments in that private higher education institutions were often founded by profit seeking entrepreneurs. In some cases governments accepted an active facilitation role, but in a number of cases the response on the part of governments was to block its development, in favour of more statist approaches. In Mexico, for instance, the government promoted a huge expansion in its public higher education sector, leaving the private sector only minor areas of reactive involvement.

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In the rare case of Brazil the government took a different approach, and instead of restricting the growth of private institutions, it promoted it. In doing so the government limited the growth of the public sector, which helped to make the private sector a major and significant part of the country’s higher education sector (Levy 2006). In the 1990s some African governments were also caught unprepared by the growth of the private higher education sector. As demand for higher education grew a number of African governments found themselves unable to meet this demand financially, which made growth of the private sector unavoidable (for instance Gabon, Benin, the Congo, Ethiopia and Tanzania). The situation was similar in a number of post-Communist East European countries (Latvia, Romania, and Poland). Despite this growth of the private sector in Eastern Europe and Africa it generally did not involve a conscious decision on the part of governments to design, or direct this private sector expansion. Instead the response of governments was to be reactive to private sector developments (Levy 2002b). The situation in Asian countries has been more varied. In India, for example, the situation was similar to the African and Eastern European cases where the government was generally unprepared for the explosion and growth of private higher education and was, therefore, generally reactive (Levy 2008, 2009). In other cases, such as in Malaysia and Taiwan China, the tendency has been for the government to encourage the growth of private sector in order to enable growth to occur without public finances becoming overburdened. In cases like India, where although the gross enrolment ratio in higher education is only 10%, strong population growth and rising is driving demand for higher education which in turn is creating a gap between demand and supply in this sector (Agarwal 2006). In order to fill this gap, private, foreign programmes and partnerships have been brought to this country in a great amount, which is also true in other developing countries (Paul 2009). Regardless of the attitudes of public policy makers to the growth of the private higher education sector, this growth has occurred across a range of different countries. In doing so it has attracted a growing level of attention from a small group of researchers (Altbach 1999; Levy 2002a, 2005, 2006). This research into the growth of private higher education has also taken note of the role of international capital and student movements between countries. In some cases the globalisation of education markets has been a key driver of the growth of private higher education. Paul (2009) in writing on this phenomenon has stated that ‘internationalisation’ in higher education is now universally recognized in developing countries as being beneficially to assisting the development of the higher education sector. For many years both professionals and students from developing countries have gone abroad to teach, research and study in overseas institutions. Learning and researching materials in other languages and in other countries has been an indispensable source to resources for this sector’s development. In more recent times international investment in private higher education has also become important. International investment in higher education is in many cases accepted legally by a number of countries. New institutions, therefore, or joint ventures, which offer educational programmes, have

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been created to help to meet the rapid growth in demand for higher education. The private sector has played a major role in this trend. Levy, in writing extensively on the development of the private higher education sector, has commented that private higher education is often distinctive in key ways. He analyses this distinctiveness in respect of several variables, including the following; the mission/function of institutions, finance and governance (Levy 1986a, 1986b, 1987, 1991, 1992). The mission/function of institutions refers to their efforts to connect private higher education to the labour market, but finance and governance can show us its impact on private higher education. Contrasting the differences between public and private higher education sectors, Levy argues that the mission of private institutions is quite often tuned to specific classification rather than to diverse, general and broad ones as the public institutions are. This tends make the student clientele from private one tend to be quite selective, and more restricted to a few disciplines. He also noticed that private higher education tends to depend on private tuition fees as well as other private financial sources much more than that of which their public counterparts do. It is partly determined by mission and its resourcedependence due to being lack of alternatives. Cases like Latin America, South Africa, China, and some other countries. Levy suggests that the new private higher education is usually more commercial and labour market oriented (Levy 2002a, 2002b, 2003a, 2003b, 2004, 2006). There appears, therefore, that there is a fundamental link between private higher education and the commercial imperatives of the labour market (Levy 1986a, pp. 100– 108, 210–280). In his analysis of the function of Latin American private higher education, Levy notes; ‘In fields of study the two sectors show divergent patterns, with the private sector much more business-related oriented and especially toward inexpensive fields’ (Levy 1986a, p. 259). Quite a few of the studies in different countries make similar generalizations in that they report that most private institutions often concentrate on a few popular fields of study provision with strong links to job prospects (Banya 2001; Burke and Al-Waked 1997; Eisemon 1992; Giesecke 1999; Gulosino 2003; Huong and Fry 2002; Kelly 2001; Mabizela 2004; Nagy-Darvas and Darvas 1999; Roane 2000). This is in contrast to the public sector which in some cases has been identified as having decreased quality, out-of-dated curricula and impractical program provisions (Levy 1986a; Kruss 2004; Mok and Wat 1998). In China, this private-public contrast is said by some to be the main reason why some students admitted to secondary-tier public institutions opt instead to attend prestigious private institutions. Some employers recruit graduates mainly from a few private institutions instead of from their public counterparts for similar reasons. As part of this link between the labour market and private higher education development some researchers have found that the new private higher education institutions undertake major efforts to build relationships with employers to facilitate the employment of its graduates. In the United States, for instance, in order to facilitate graduate job placement, the for-profit two-year institutions often build relationships with employers, whereas government owned community colleges rely more on their public and accreditation status (Deil-Amen and Rosenbaum 2004). This is also true in other countries, where researchers have found that new private higher education

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institutions take such relationship-building and job-preparation measures as being important ways in which they can raise their reputations (Kinser 2007; Kinser and Levy 2005; Slantcheva and Levy 2007; Suspitsin 2007). Despite the sheer necessity of governments in many parts of the world to accept growth of the private sector for financial reasons this growth has not been without controversy. The growth of the private higher education sector has in many cases been accompanied by frequent and heated debates over the quality of provision provided by private sector institutions and the employability of its graduates. In the future a more intense level of research will in all likelihood be undertaken on this aspect of private higher education.

The Higher Education Sector of China In the historical Chinese case higher education originated on the basis of the establishment of state universities rather than private higher education institutions. There is, therefore, a tendency for the past literature to concentrate more on the former than the latter. Although there were private higher education institutions before the founding of new China in 1949 the state sector predominated. During the years 1896 to 1949, higher education in China adopted a Western model, and despite suffering heavily in the War against the Japanese Invasion between 1937 and 1945, and in the civil war between 1946 and 1949, it constituted a well-established sector in 1949 (Cao and Levy 2005; Cai and Yan 2011). With the Communist Party of China takeover in 1949, however, the connection between this sector and the Western world was severed and emphasis shifted to following the model of the former Soviet Union. This involved the outlawing of private higher education and the reorganisation of universities and disciplines. At this time the common, comprehensive universities were changed into single disciplinary universities, such as universities of literature and the arts, universities of engineering, medical colleges, agricultural colleges, railway institutes, education and so on. This followed the model that then existed in the Soviet Union. Since 1979, with the ascent of Deng Xiaoping’s open-door policy, the higher education sector has shifted back closer to the former model adopted from the Western world. Since then the public sector has tended to move away from the Soviet model and have tended to adopt more comprehensive models: Each reorganized university or institute offered many more majors in specific curricula than were available under the Western model. For example, the discipline of mechanical engineering was typically transformed into sub discipline to permit general mechanical engineering students to major in machine tools, casting, welding, or forging, while thermal power engineering majors could specialize in boilers, turbines, internal combustion engines, compressors, or refrigeration machinery. These far-reaching changes eliminated any real comprehensive university in China for nearly five decades. The current reorganization of higher education, initiated in the late 1990s, involves a return to a truly comprehensive university. The long term

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tendency, therefore, has been for Chinese universities to grow larger and more diverse, a tendency that has involved a number of mergers or institutions. For example: In September 1998, Zhejiang University combined three other universities— Hangzhou, Zhejiang Agricultural, and Zhejiang Medical Universities—becoming one of the largest and most comprehensive institutions of higher education in the country. The second largest merger in the country was that of Beijing University and Beijing Medical University. In April 2000, a merger of Xi’an Jiaotong University, Xi’an Medical University, and Shaanxi Institute of Finance and Economics (formerly administered by the Ministry of Education, the Ministry of Public Health, and the People’s Bank of China) was announced as the new Xi’an Jiaotong University. Other mergers include the restructured Huazhong University of Science and Technology and Central South, Fudan, Jilin, Shandong, Sichuan, Southeast, Tongji, Tsinghua, Zhongshan, and Wuhan Universities. In addition to these most prominent examples, a series of smaller scale mergers took place across the country. Besides the creation of more diverse universities increased concerns arose in recent years about the need to raise standards at Chinese universities to those in the rest of the world. In 1998, the Chinese president Jiang Zemin announced that the Chinese government would attempt to develop some of China’s universities into world’s top-class institutions over the next couple of decades. Other changes that occurred over the period include the expansion of participations rates at secondary and tertiary education levels and further changes to university funding. For four decades following the 1949 revolution college students did not have to pay for their tuition. Since the late 1980s and early 1990s, this situation was deemed incompatible with the growth of a market economy, and Chinese colleges and universities began to charge tuition and fees to students. At the beginning of the reform period, students paid a small fee, but by the end of the 1990s, all college students had to pay substantial sums for their education. In addition scholarships and grants have become available to help students, especially those from low-income and poor families in the countryside, even though it only covers a small percentage of students. In terms of fees the national government’s Minister of Education and the provincial bureaus of education have joint responsibility for the setting of tuition and other fee levels. Despite the increasing sums invested by the Chinese government in higher education levels are still not quite equivalent to those in most other countries. The average level of expenditure on education around the world is 4.9% of GDP, of which, the average level accounts for 5.1% in developed countries, and 4.1% in developing countries. In China this figure was only 3.5% in 2010 and has been fairly stable since then (Fleisher et al. 2010). Administration of higher education in China has been highly centralized for many years. The national government’s Ministry of Education is the supreme educational administrative body in China. Apart from administering some leading universities, the Ministry is also responsible for implementing laws related to education, regulations, guidelines, policies, nationwide programs and initiatives, and international

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educational cooperation and exchange. In recent years one major change in governance has been the introduction of a ‘two-level education provision system,’ in which the central government (the Ministry of Education) shares responsibility for educational governance with regional governments (the provincial bureaus of education). The provincial bureaus of education have been assigned greater responsibilities and now directly administer most common local universities and colleges. The role of these administering bodies in more recent years has become more complex with the growth of private higher education in China: In the case of China the rapid growth in the economy and incomes in that country over the past twenty years, coupled with a sharply rising level of high school participation and lagging supply of places in state universities and colleges in China led to a surge in the numbers of Chinese students seeking educational places’ from private institutions home and abroad. (Ma and Abbott 2006)

In the last few years there has been a very substantial investment in Chinese higher education by both state authorities and private entrepreneurs and the growth of these numbers of Chinese students seeking an education in the private sector. While in recent years some research has been undertaken in the area of higher education in China, most concerns public higher education, rather than that of private higher education. In addition the research that has been conducted to date mainly relates to such topics as the impact on the labour market and human resources, as well as the general accountability of institutions. Some research has commented in passing on the impact of regulation on the growth and development of the public higher education in China, but few mentioned the impact of regulation on the field of private higher education in China. In related literature the point is often made that the new private higher education sector is attempting to absorb excess demand in the higher education market. This is often considered the main reason for the appearance of the new private higher education sector in many countries (Castro and Navarro 1999; Galbraith 2003; Kwong 1997; Levy 2006; Mabizela 2004). It is generally classified as being non-elite and demand-absorbing (Levy 1986a). Levy in examining the dramatic development of private higher education in intensive cases including Mexico, Brazil and Chile, identified a number of ‘waves’ of private higher education development. In the first wave Catholic/Religious colleges were established and in the second Elite private institutions, which were established to meet the demand of multiple culture or religions and better quality or status respectively (Levy 1986a, p. 27). Demand-absorbing private institutions generally came later and accommodated excess demand left unfilled by the public, the private religious and elite sub-sectors (Levy 1986a, p. 60). In the Chinese case the latter has been most important in response to a ‘public failure’ to meet the soaring demand in higher education due to the increasing population of secondary education graduates and the growing economy of China’s society (Cao and Levy 2005; Kwong 1997; Mok 1997). Generally it is regarded as the second choice for high school graduates to enter private higher education institutions in China, in case they cannot be admitted by the public ones. Normally the former type of institution enrols academically less competent cohorts of students (Cao 2007).

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What little research that has been conducted on private higher education in past confirms the existence of the distinctive nature of the new private higher education sector, especially in terms its relation to the job market and as demand absorbing institutions (Cao 2007). In addition the sector tends to concentrate on fields of study, such as education, social sciences as well as certain types of technology or engineering. This is also true in countries of which private higher education sectors are heavily demand-absorbing. In the private higher education sector in China there have been a number of attempts to link the sector more closely to the labour market in order to maintain the same or even higher employment rate than their public counterparts. These efforts include such things as: the establishment of special committees to work on labour market surveys and the field of study provision, the arrangement of employment service at the institutional level and the program site, the employment and invitation of related professionals to contact employers for advice on courses, programs and the employment opportunities, the collection and dissemination of information on job vacancy, the building of the network of co-operate bases, and the establishment of the labour and talent exchange markets on campus. The research by Cao (2007) has looked at some aspects of these links between private institutions and the labour market. Given the important links between the private higher education sector, and its links with the labour market is comes as no real surprise that the small amount of research that has been conducted on this sector has concentrated on this aspect of private higher education. As the relationship between the sector and the government is a fairly neglected one to date, it is necessary to look to overseas examples of research to understand the potential research that could be undertaken on this aspect of Chinese higher education.

The Regulation of International Higher Education As previously mentioned Levy in his research employed the notion of three major waves of private higher education: Catholic, elite, and demand-absorbing. These categories are based on observations he made of the growth of private higher education in Latin America, but are notions that have been used as part of the analysis of growth of private higher education in other countries, subsequently, as well. The first wave involved the growth of dissatisfaction in the role played by the State in higher education, which in turn led to the emergence of private Catholic universities in Latin America. Originally Catholic universities targeted religious services through disciplines such as theology and canonical law. Often linked to this growth of religious based education, but organically separate, from this process, was the formation of a group of privileged, secular and depoliticized universities, which offered particular programs in business-oriented fields and limited access. The final wave emerged to meet the rising demand for higher education by providing alternatives to religious and elite study, accordingly demand-absorbing institutions appeared, yet

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concerning more about quantity rather than quality. Levy (1986b) stated that the three provided education that was: ‘different’ (Catholic and cultural institutions), ‘better’ (elite institutions), and ‘more’ (demand-absorbing institutions) education services (Pachuashvili 2006). After analysing the motivation for the establishment of private higher education the question arose of how it can be distinguished from public education. In answering this question, Levy made three major classifications: finance, governance, and function to distinguish private higher education systems from public ones in Latin America during the 1960s, 1970s and 1980s. Levy explained that an institution is part of the public sector if it is under the control of the state and private under the control of non-state personnel in terms of governance. Regarding finance the distinction was determined to be less clear. The private-public distinction in terms of finance tends to be less sharp than that in terms of governance and thus more difficult to give a clear-cut distinction. The governance distinction is a dichotomous one, which has some legal designations. The finance model, in contrary, relies more on the ‘degree’ of dependency: how much the institutions depend upon government-or non-government funding (Mora 2001). Private higher education has expanded to such an extent that it is getting increasing attention in the area of research worldwide (Altbach 2005; Levy 2006). It attracts roughly one third of the total global enrolment in higher education (Levy 2009) and has emerged, re-emerged or even dominated higher education industry in some countries, yet it is still under an on-going policy regarding the permission to operation in others. The expansion of private higher education is seldom anticipated and few planned by government policies in some countries (Levy 2002b). Policies and regulations regarding the facilitating of its expansion have not been imposed until its importance is recognized by the governments. Thereafter, funding patterns, quality assurance and standardization are chosen as the government control instruments. In terms of public policies and structural change, Gomitzka states that policy is defined as an object of political choice or a public goal statement with or without the instruments used to succeed it (Gomitzka 1999). Political economic policies, accordingly, can be regarded as any public statements that contain market economic elements. Forces like globalization, privatization and isomorphism work to shape the transformation of private higher education throughout the world (Fisher et al. 2004; Ntshoe 2004). In the United States, the state and local governments provide directly the funds for public higher education with their private counterparts depending more on student tuition (Geiger 1986). Consequently, state-owned higher education institutions are more controlled by the state due to the source of funding (Levy 2009; Marginson 2006). In Japan, the government’s aspiration for Japanese universities to become worldclass competitive results in ‘competition-based project funds’ for public and private universities to compete over research funds and ‘The Toyama plan’ introducing a competition principle via governmental financial allocation based on results from external evaluators (Yonezawa 2003). Isomorphism may thus happen when both

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Japanese private and public higher education are under the same governmental requirements. Private universities may also mimic some features that their public counterparts do and succeed, in order to increase their global competitiveness. Likewise, the Japanese government’s policy on pay-by-performance has urged public universities to adapt business-like management strategies often seen in the private sector so that they become less bureaucratic and more efficient. Levy analyses cases in Latin America with three different patterns regarding finance. A homogeneous pattern is that the public sector depended directly on the state such as Chile, while the private sector sponsored itself initially but later banked mainly upon the state. Contrary to this, a dichotomously distinctive pattern is that the private sector depends almost exclusively on private income sources such as cases in Mexico and large part of Latin America, while the public one draws its revenues almost singly from state funds. Yet a qualified distinctive pattern is that the state funds for graduate education, research, and facilities, particularly to Catholic universities, but not for the private sector for its undergraduate education’s basic annual expenses such as case in Brazil which implies a purposive selectivity of state financial support (Levy 1986a). Financial source varies in different types of private higher education institutions. In developed countries it may vary according to institutions’ age, as that of in Japan (Levy 1992). Generally speaking, almost all non-elite private higher education institutions in developing countries rely on tuition fee, such as the Latin American Catholic part, most relies greatly on tuition fees, different from this, Elite ones depend mainly on foundation and corporate donations, Few are completely supported by foundation or endowment revenue with charging little tuition fees (Geiger 1986; Levy 1986b, 1992).

Chinese Private Higher Education Regulation The rapid growth of the economy of China and the increasing demand for higher educated graduates in recent years helped to transform higher education in China from a state dominated to a market oriented system. This was accompanied by the Chinese Government’s partial deregulation of the system. Most researchers agree that official recognition of the private sector and legal reform played an important role in the emergence of the private higher education system. So, therefore, some researchers have made note of the official recognition of the private sector as being important to its development, without perhaps analysing the role of government in any depth. Private higher education in China is only a recent phenomenon, after its disappearance in the year 1952. Most researchers accept the notion that the reappearance of private higher education in China is a direct result of the emerging market economy (Cao 2007). Although the Chinese Government accepted the re-emergence of a private higher education sector they did not expect, or plan, the initial explosion in private higher education in China. This notion of and unplanned, unexpected

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‘explosion’ in private higher education is common in the work by Levy (2009). Regulation of an emerging private higher education sector is often, therefore delayed (Levy 2006). There are a few factors that encouraged the re-emergence of the private higher education sector in China. It increased mostly without government subsidy and so therefore the achievement of public trust was a critical part of its development. This lack of trust and the attempts to achieve a level of trust have been noted by some researchers (Cao 2008). Furthermore, its growing competition has been seen as a threat to public counterparts, therefore it was rarely entirely accepted by the latter. In addition to this, its accountability to the general public at times has lacked transparency. Moreover, the for-profit motivation of many new private institutions, and low academic standards increased the concern about it by the government. All of these factors have led to some researchers noting these deficiencies on the part of the private higher education sector (Levy 2009). The Chinese government started to recognize the importance of the private higher education sector in the 1982 constitution, after its disappearance in 1952. Since 1982 it has been vulnerable to the ambiguities and bureaucratic threats from the Government. The Chinese Government started to officially admit the significance of the private higher education from December 28 of 2002 with the promulgation of—the private education law - China’s first national legislation covering the private higher education sector. This law aims to provide a legal framework to facilitate private growth, due to the demand for higher education that has increased so critically that it could not be met by the existing public universities. Accordingly, the Chinese government, in 1982, permitted the private sector to operate with a restriction to offer only associates’ degrees, and shortly thereafter, extended permission (with rigid control measures) for them to offer bachelors’ degree programs. These changes and the role they played have been noted by a number of researchers (Boonprasert 2002; Kulachol 1995; Watson 1991). Regulation of private provision was at times so rigid that it allowed less room for the sector to penetrate into higher education than that of the public sector. The public sector, therefore, is still around 80% of the total share of higher education enrolments; a dominance that is recognised by most researchers (Cao 2008; Levy 2009). In depth study of the private higher education in China is still limited and although some important work has been undertaken by scholars such as Cao and Levy work on the relationship between the Chinese government and the sector is still very under developed.

Conclusion By undertaking a review of the literature on the approaches to regulation by economists, on the growth and development of higher education (public and private, international and that of in China), and on its regulation, we can see that there is little in the way of past literature that relates specifically to the topic of this study, which makes the research of this work more worthy of doing it.

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The past literature conducted on this topic is varied although not necessarily specific to the topic. On the one hand there is a vast array of material in the past on a range of aspects that touch on the core theme of this work, but on the other hand there is very little that is of direct relevance. There is, for instance, an extensive literature on the impact of regulation on business generally, and on various aspects of higher education development and policy. In addition there is a growing literature on the development of private higher education across a range of different countries (especially the United States and South America). There is even some literature on the development of Chinese higher education. There is, however, only a very small literature on Chinese private higher education and virtually nothing on the relationship of this sector to public policy and regulation. There is, therefore, considerable scope to add to the existing work completed on Chinese higher education in this field. In order to analyse the impact of public policy on China’s private higher education sector, we need to start from China’s education background.

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Mok, Ka-Ho, & Wat, King-Yee. (1998). Merging of the Public and Private Boundary: Education and the Market Place in China. International Journal of Educational Development, 18(3), 255–267. Mora, J.-G. (2001). Governance and management in the new university. Tertiary Education and Management, 7(2), 95–110. Musgrave, R. A. (1959). The theory of public finance. New York: McGraw-Hill. Nagasawa, M. (2005, Summer). Gender stratification in Japanese private higher education. International Higher Education. Nagy-Darvas, Judit, & Darvas, Peter. (1999). Private higher education in Hungary: The market influences the university. In P. G. Altbach (Ed.), Private prometheus: Private higher education and development in the 21st century. Westport: Greenwood Press. Niskanen, W. A. (1994). Bureaucracy and public economics. Cheltenham: Edward Elgar. Ntshoe, I. M. (2004). Higher education and training policy and practice in South Africa’ impacts of global privatization, quasi-marketization and new managerialism. International Journal of Educational Development, 24, 137–154. Pachuashvili, M. (2006). The politics of education choice: Explaining the diversity in postcommunist higher education policy choices. Conference paper, First annual doctoral conference, April, Central European University, Hungry. Paul, S. (2009). Internationalisation of higher education: Strategic implications. Economic and Political Weekly, 44(9), 26–41. Pindyck, R. S., & Rubinfeld, D. L. (2009). Microeconomics (7th ed.). Upper Saddle River: Prentice Hall. Posner, R. (1974). Theories of economic regulation. Bell Journal of Management Science, 5, 335– 355. Priest, G. L. (1993). The origins of utility regulation and the theories of regulation debate. Journal of Law and Economics, 36, 289–323. Roane, W. (2000). Impediments to private higher education in Uruguay. International Higher Education. Samuelson, P. (1954). The pure theory of public expenditure. Review of Economics and Statistics, 36(4), 387–389. Shleifer, A. (1998). State versus private ownership. Journal of Economic Perspectives, 12(4), 133– 150. Slantcheva, S., & Levy, D. (Eds.). (2007). The search for legitimacy: Private higher education in central and eastern Europe. New York: Palgrave Macmillan. Stigler, G. J. (1971). The theory of economic regulation. Bell Journal of Economics and Management Science, 2, 3. Stigler, G. J., & Friedland, C. (1962). What can regulators regulate—The case of electricity. Journal of law and economics, 5, 1–16. Stiglitz, J. E. (1989). On the economic of the state. In A. Heertje (Ed.), The economic role of the state. Oxford, UK and Cambridge, MA: Basil Blackwell. Stiglitz, J. E. (2000). Economics of the public sector (3rd ed.). New York: W. W. Norton. Stiglitz, J. E. (2001). Information and the change in the paradigm in economics. American Economic Review, 92(3), 460–501. Suspitsin, D. (2007). Between the state and the market: Sources of sponsorship and legitimacy in Russian nonstate higher education. In S. Slantcheva, D. C. Levy (Eds.), Private higher education in post-communist Europe. Issues in Higher Education. New York: Palgrave Macmillan. Tooley, J. (1999). The global education industry: Lessons from private education in developing countries. London, IEA Education and training unit, and IFC, World Bank. Tullock, G., Seldon, A., & Brady, G. L. (2002). Government failure: A primer in public choice. Washington: Cato Institute. Uribe, L. (2010). The decline of Colombian private higher education. International Higher Education, 61, 12–13.

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Viscusi, W. K., Vernon, J. M., & Harrington, J. E. (2000). Economics or regulation and antitrust (3rd ed.). Cambridge, MA: MIT Press. Watson, K. (1991). ‘Thailand’. In P. Altbach (Ed.), International higher education: An encyclopedia. New York, Garland Publishing. Yonezawa, A. (2003). Making “world-class universities”: Japan’s experiment. Higher Education Policy and Management, 5(2), 9–23.

Chapter 3

The Chinese Economy

Introduction Before being able to understand the nature of the growth of higher education in China in recent years it is necessary to know something about the context in which it has occurred. In the Chinese case this growth in higher education has occurred during a period of enormous growth and transformation of the Chinese economy. Over a period of almost thirty years the Chinese economy has been transformed absolutely and standards of living rose by an astonishing degree (Brandt et al. 2005). The reform of the Chinese economy over forty years involved a substantial opening up of the Chinese economy as well as a growing diversity of companies within China. All together this helped to create and enormous demand for a variety of different labour market skills. This in turn led to a massive growth in demand for the expansion of the education sector; including higher education. The purpose of this chapter is, therefore, to provide a general background to the nature of the Chinese economy and the public policy framework in which it operates. The chapter is structured as follows. In the next section a general background on the character of the Chinese economy is provided. This is followed by an historical section, a section on the main types of enterprises in China, a section on the role of foreign direct investment in China, the main drivers of economic growth and the importance of human capital and education. In the final section some conclusions are made.

Background In July 2018 China’s population was estimated to be 1.393 billion, making it the largest country in the world. In 2018 it was estimated that close to 27% of its population was engaged in agriculture compared to over 28% in industry and 45% in © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_3

31

32

3 The Chinese Economy

services (World Bank 2019). Despite this still heavy concentration of labour in agriculture this sector only produces around 10% of the country’s GDP compared to 46% for industry and 43% for the services sector (Table 3.1; Central Intelligence Agency 2019; World Bank 2019). The agricultural sector in China, therefore, is far diminished in importance compared to in the past and plays a role mainly as a source of labour for the manufacturing sector. Instead China’s major industries include such things as mining and ore processing, iron and steel manufacture, aluminium smelting, coal, machinery, textiles, clothing, footwear, armaments, cement, chemicals, fertilizers, electronics, automotive transport vehicles, telecommunications, and computers. China’s major exports are concentrated in computers, electrical machinery, textiles, clothing and footwear, iron and steel and a range of other manufactured products. The United States is the country’s largest export market (around 20%), followed by Japan, Korea, and Germany. As well as being one of the world’s largest exporters China is one of the world’s most important attractors of foreign direct investment. In 2018 net inflows of foreign direct investment in China were 203 billion US$ second only to that of the United States (at 195 US dollars) (World Bank 2019). A substantial part of this overseas investment in China is directed to the export orientated, manufacturing sectors that see many foreign countries investing in manufacturing facilities in China. The past twenty years of Chinese history has seen a very substantial degree of economic growth over a sustained period. From Table 3.2 it can be seen that growth of real GDP has been relatively high, underwritten as it has been by a strong growth in manufactured exports. In more recent years, despite the downturn in manufacturing exports brought on by the global financial crisis, growth has been maintained by renewed levels of government investment in infrastructure. The growth and predominance of this export, orientated manufacturing sector has meant that there has been in China in the recent past a substantial growth in demand for engineering and related technical qualifications in the higher education sector. Likewise the rapid growth of Chinese cities has meant that there has been a substantial demand for graduates in civil, transportation and communications engineering. Overall there has been a substantial increase in the standard of living in China with the average, per capita income of the Chinese multiplying a number of times over (see Table 3.3). In terms of understanding the forces that have encouraged the growth in demand for higher education in China it is possible to compare the nature of the Chinese economy and society to that of other countries. Table 3.1 provides macroeconomic level data for both China and a range of other countries; both developed and developing. First of all it is possible to compare China’s average level of growth and income levels with that of other countries. In 2019 it was estimated that China had an average per capita GDP of $9470. This makes it a country with an average level of income per capita, higher than countries such as India ($2020) and Indonesia ($3840), but lower than countries such as Malaysia ($10,460) and Turkey ($10,380). China’s population has a median age (at 36) which is higher than that of many developing countries, although lower than that of most developed countries (see for instance for the United States and the United Kingdom). As well, although, the proportion of China’s GDP

4050

5670

4720

9140

44,860

9470

6190

35,308

Azerbaijan

Belarus

Belize

Brazil

Canada

China

Colombia

European Union

9180

Mexico

40,820

10,460

Malaysia

New Zealand

7830

Kazakhstan

41,340

3840

Indonesia

Japan

2020

50,310

India

Hong Kong

5860

53,190

Australia

Fiji

4060

Algeria

GDP per capita PPP

204

1223

354,

170

4970

1042

2726

362,

5

18,756

330

13,608

1712

1868

2

59,

46

1432

180

GDP (US$ billion)

4,885,500

126,190,788

31,528,585

18,276,499

126,529,100

267,663,435

1,352,617,328

7,451,000

883,483

513,213,363

49,648,685

1,392,730,000

37,058,856

209,469,333

383,071

9,485,386

9,942,334

24,992,369

42,228,429

Population

3.4

1.9

1.1

1.4

6.2

13.0

11.1

15.0

−0.2 1.3

30.5

43.9

0.2

39.4

4.2

16.4

26.8

1.5

9.4

1.1

1.0

0.8

0.7

0.2

1.5

0.5

1.4

0.8

17.6

10.6

−0.1 1.9

36.1

2.6

9.3

Agriculture (%)

0.9

1.6

2.0

Population Growth (%)

Table 3.1 Macroeconomic data of China and other countries, 2018

20.4

26.0

27.3

21.3

24.5

22.0

24.7

11.8

13.1

23.9

19.4

28.6

19.5

20.4

14.6

30.8

14.4

19.4

30.7

Industry (%)

73.5

61.2

61.8

63.7

72.2

47.7

31.8

88.0

47.7

72.2

64.

45.1

79.1

70.3

67.9

58.7

49.6

78.1

60.1

Services (%)

41

26.8

39.7

51.1

38.6

51.3

25.6

Distribution of family income (Gini)

(continued)

2.8

2.0

4.7

4.1

0.8

5.2

7.0

3.0

5.0

2.0

2.7

6.6

1.9

1.1

3.0

3.0

1.4

2.8

2.1

Growth real GDP (%)

Background 33

Turkey

62,850

United Kingdom

United States

20,494

2825

130

40

766

39

504

368

364

1657

239

330

222

65

GDP (US$ billion)

327,167,434

66,488,991

44,622,516

5,850,908

82,319,724

11,565,204

69,428,524

57,779,622

5,638,676

144,478,050

19,473,936

106,651,922

31,989,256

4,176,873

Population

Source World Bank (2019), World development indicators

2660

41,340

Ukraine

6740

3500

10,380

Tunisia

Turkmenistan

6610

58,770

Singapore

Thailand

10,230

Russian Federation

5750

11,290

Romania

South Africa

6530

3830

Philippines

14,370

Peru

Panama

GDP per capita PPP

Table 3.1 (continued)

0.6

1.4

1.1

15.3

−0.5 0.6

22.8

19.2

15.0

30.7

5.2

0.5

1.6

1.5

1.1

0.3

1.4

0.5

5.8

22.6

−0.6 0.0

25.2

27.5

14.3

Agriculture (%)

1.4

1.7

1.7

Population Growth (%)

19.4

18.1

24.3

33.7

26.3

32.8

23.5

23.2

16.6

26.9

30.1

18.3

15.6

18.6

Industry (%)

79.4

80.8

60.5

43.6

54.8

52.2

46.0

71.7

83.0

67.2

47.5

56.6

57.1

67.1

Services (%)

33.2

25.5

42.9

32.8

36

37.7

35.9

44.4

43.4

50.8

Distribution of family income (Gini)

2.9

1.4

3.3

6.2

2.6

2.5

4.1

0.8

3.1

2.3

4.1

6.2

4.0

3.7

Growth real GDP (%)

34 3 The Chinese Economy

Background

35

Table 3.2 GDP and exports growth for China, average annual percentage, 1980 to 2018 Year

1980–1984 1985–1989 1990–1994 1995–1999 2000–2004 2005–2009 2019–2018

Real GDP

9.6

9.9

10.9

9.1

9.2

11.4

7.9

Exports 5.2

1.2

13.9

13.1

5.5

13.1

5.5

Source World Bank (2019), World development indicators

Table 3.3 GDP Per capita of China (constant 2010 international $), 1980 to 2018

1980

524

1985

814

1990

1522

1995

2557

2000

3690

2005

5703

2009

8627

2015

13,535

2018

16,187

Source World Bank (2019), World development indicators

that is generated by the agricultural sector is similar in proportion to that of other developing countries (at just over 10%) the proportion from the industrial sector is high and services sector correspondingly low. Compared too many other countries it is the services sector of China that is relatively under developed. The bulk of services in China are concentrated in retailing, transportation and communications and as yet such things as design, marketing, logistics and financial and management services are still under developed. It is in the latter fields that it is expected that the greatest demand for graduates will come in the near future (Organisation for Economic Cooperation and Development 2018). Strong growth in the economy and incomes has meant that there has been increasing numbers of people who wish to study at the higher education level. Strong growth in the economy also creates strong demand for graduates. At the same time the strong shift of the population into the industrial sector has meant that there has been a strong demand for engineering and related skills (see Table 4.4). The growth of the services sector in the future will probably tend to extend this demand for higher education graduates further but also will encourage a change in the composition of higher education towards business, IT and related qualifications. The strong growth in incomes in China and demand for graduates means that it is expanding in size at a more rapid rate than in most developing countries. This has raised some concerns about the quality and employability of graduates. A shortage of well-trained graduates could hinder the growth of the Chinese economy and prevent it from developing more sophisticated industries, according to a report by consultants McKinsey. According to McKinsey, China produces about 600,000 new engineers

36

3 The Chinese Economy

every year, nine times as many as the United States; however, of the pool of 1.6 m young engineers in the country, only about 160,000 have the practical and language skills to work for a multinational according to the report. This means that despite strong growth in the number of graduates there is a general lack of practical skills and poor English-speaking amongst graduates which the report states will make it hard for China to develop service-based industries. Compared to many countries, therefore, the Chinese higher education sector faces some difficulties associated with too rapid expansion (McKinsey 2008). It is in this context of rising participation rates, higher income levels and stronger demand for graduates that the private higher education sector in China has emerged. At the same time the rapid growth of both the higher education sector in general and the private higher education sector has meant that the government has had to respond by fine-tuning its regulatory approach to the sector. In understanding the impact of regulation on the growth of private higher education it is important to have a clear understanding of the manner that the overall higher education sector expanded in China in recent years. In order to do that it is important to see how the attitudes of policy makers towards the private sector, more generally, have changed over the past thirty years. The structure and character of the Chinese economy and its relationship to the government sector is very much a product of past trends.

A History of Reform of the Chinese Economy The Communist Party of China came to power in the revolution of 1949. In 1949 China’s economy suffered from the debilitating effects of decades of conflict. At the end of the war with Japan in 1945, Soviet troops had dismantled about half the machinery in the country’s major industrial areas of the northeast and shipped it to the Soviet Union. Transportation, communication, and power systems had been destroyed or had deteriorated because of lack of maintenance. Agriculture was disrupted, and food production was far below its pre-war level (Chow 1993). The chief goal of the government in the years 1949 to 1952 was simply to restore the economy to normal conditions. This did, however, involve a substantial degree of state interventionism. The banking system was nationalized and centralized under the People’s Bank of China. Commerce was regulated by the establishment of state trading companies, which competed with private traders in purchasing goods from producers and selling them to consumers or enterprises. Large scale privately owned enterprises were gradually brought under government control. In agriculture a major change in landownership was carried out. Under a nationwide land reform programme, titles to about 45% of the arable land were redistributed from landlords and more prosperous farmers to the 60–70% of farm families that previously owned little or no land. Once land reform was completed in an area, farmers were encouraged to cooperate in some phases of production through the formation of small mutual aid teams of six or seven households each.

A History of Reform of the Chinese Economy

37

Once the Communist Party has consolidated its grip on power it could begin to attempt to transform the Chinese economy to match its vision of state control. China’s post-revolution economic policies can be divided into three distinct phases. Between 1952 and 1965 the state led planning and push towards industrialization with a strong emphasis on building up the heavy industrial sector of the economy. Between 1965 and 1978 economic development was disrupted by the Cultural Revolution which impeded economic development to a substantial degree. After 1978 market orientated reforms occurred, initially in a small sector of the economy but progressively spreading to a successively larger part of the economy. Chinese economic development over the longer term, therefore, has been characterised by a number of changes in emphasis. The most important being the post 1978 change in orientation from a Communist style drive to one that is more market based and open to international trade (Chow 1993). Throughout the post revolution period the Chinese Government has formulated its overall attitudes to development in the form of five year plans. These successive plans have tended to emphasis different characteristics of development. These five years plans are as follows: First five year plan (1953–1957); this plan involved an intensive programme of industrial growth and socialization based on the Soviet economic model, of state ownership in the modern sector, large collective units in agriculture, and centralised economic planning. The main objective was a high rate of economic growth, with primary emphasis on industrial development at the expense of agriculture and particular concentration on heavy industry and capital-intensive technology. Soviet planners helped their Chinese counterparts formulate the plan and large numbers of Soviet engineers, technicians, and scientists assisted in developing and installing new heavy industrial facilities, including many entire plants and pieces of equipment purchased from the Soviet Union. Government control over industry was increased during this period by applying financial pressures and inducements to convince owners of private, modern firms to sell them to the state or convert them into joint public-private enterprises under state control. Key industries, including iron and steel manufacturing, coal mining, cement production, electricity generation, and machine building were greatly expanded and were put on a firm, modern technological footing. Substantial investments were also made in education including the establishment of a number of higher education institutions mainly with specialised functions in particular industries, with emphasis on engineering and sciences (following the Soviet model). Agriculture also underwent extensive organizational changes. The authorities encouraged farmers to organize increasingly large and socialized collective units. The collectivization process began slowly but accelerated in 1955 and 1956. Agricultural output increased substantially, despite a lack of investment in the sector (Roberts 1999). Second Five-Year Plan (1958–1962)—this plan involved further investment in heavy industry and the extension of government ownership but also involved a decentralisation of control. Before the end of the First Five-Year Plan, the growing imbalance between industrial and agricultural growth, dissatisfaction with inefficiency, and

38

3 The Chinese Economy

lack of flexibility in the decision-making process convinced the nation’s leaders that the highly centralized, industry-biased Soviet model was not appropriate for China. In 1957 the government adopted measures to shift a great deal of the authority for economic decision making to the provincial-level, county, and local administrations. In 1958 the Second Five-Year Plan (1958–1962), which was intended to continue the policies of the first plan, was abandoned and in its place the leadership adopted an approach that relied on spontaneous efforts by the entire population to produce a dramatic ‘great leap’ in production for all sectors of the economy at once. Further reorganization of agriculture was regarded as the key to the endeavor to leap suddenly to a higher stage of productivity. Most of the farm population was organized into communes between April and September of 1958, however it very soon became apparent that in most cases the communes were too unwieldy to carry out successfully all the managerial and administrative functions that were assigned to them. Nonetheless, the commune system was retained and continued to be the basic form of organization in the agricultural sector until the early 1980s. The result of the Great Leap Forward was a severe economic crisis. In 1959, 1960, and 1961, adverse weather conditions, improperly constructed water control projects, and other misallocations of resources that had occurred during the overly centralized communization movement resulted in disastrous declines in agricultural output. Widespread famine occurred, especially in rural areas. The excessive strain on equipment and workers, the effects of the agricultural crisis, the lack of economic coordination, and, in the 1960s, the withdrawal of Soviet assistance, a consequence of the Soviet-Sino split— caused industrial output to plummet. Faced with economic collapse in the early 1960s, the government sharply revised the immediate goals of the economy and devised a new set of economic policies to replace those of the Great Leap Forward. Priority was given to restoring agricultural output and expanding it at a rate that would meet the needs of the growing population. In industry, a few key enterprises were returned to central state control, but control over most enterprises remained in the hands of provincial-level and local governments. This decentralization that had taken place in 1957 and 1958 was reaffirmed and strengthened in the 1961–1965 period. During the 1961–1965 readjustment and recovery period, economic stability was restored, and by 1966 production in both agriculture and industry surpassed the peak levels of the Great Leap Forward period. In the higher education sector the Soviet-style, specialised universities were retained and were to survive into the 1990s. Third-Five Year Plan (1966–1970)—With the worsening of Soviet-Chinese relations there grew a growing emphasis growing reliance on self-reliance. The Third Plan took place at a time of general political upheaval. This manifested itself in the form of the Cultural Revolution. The Cultural Revolution was primarily a political upheaval and did not produce major changes in official economic policies or the basic economic model. Nonetheless, its influence was felt throughout urban society, and it profoundly affected the modern sector of the economy. Agricultural production stagnated, but in general the rural areas experienced less turmoil than the cities. Production was reduced in the modern industrial sectors in a number of ways. The effect was a substantial decline in industrial production in 1967. A degree of order was restored by the army in late 1967 and 1968, and the industrial sector returned to

A History of Reform of the Chinese Economy

39

a fairly high rate of growth in 1969. Probably the most serious and long-lasting effect on the economy was the creation of a severe shortage of highly educated personnel caused by the closing of the universities. China’s ability to develop new technology and absorb imported technology would be limited for years by the hiatus in higher education (Roberts 1999). Fourth Five Year Plan (1971–1975)—the Fourth Plan embodied a further enhancement of industry and agriculture, still under state control and collective ownership. To a large degree it simply made up for the disruption of the years of the Cultural Revolution and did not involve any major changes to the China economy. Fifth Five-Year Plan (1976–1980)—the fifth plan envisaged a further emphasis on investment in infrastructure but it was largely superseded by the beginning of the reform period which began in 1979 (Schoppa 2000). The first five plans were mainly aimed at building up China’s infrastructure and upgrading the agricultural and industrial base. Subsequently the main emphasis has been with developing economic reforms to improve China’s international competitiveness. At the milestone Third Plenum of the National Party Congress’s 11th Central Committee, which opened on December 22, 1978, the party leaders decided to undertake a programme of gradual, but fundamental reform of the economic system. This Committee introduced the first steps on the road to reform. They concluded that the previous version of the centrally planned economy had failed to produce efficient economic growth and had caused China to fall far behind, not only the industrialised nations of the West, but also the new industrial powers of Asia such as Japan, South Korea, Singapore, as well as Taiwan and Hong Kong China. The purpose of the reform program was not to abandon to political control, but to consolidate it by substantially increasing the role of market mechanisms in the system and by reducing government planning and direct control. The first halfdecade from the end of 1978 saw policy changes in the economy in the direction of the greater use of markets and free enterprise in the countryside. The new policies were designed to strengthen the authority of managers and economic decision makers of industrial units at the expense of party officials, stressed material incentives for workers, and called for expansion of the research and education systems. Foreign trade was increased, and exchanges of students and ‘foreign experts’ with developed countries were encouraged. This new policy initiative was capped at the Fifth National People’s Congress in February and March 1978, when Hua Guofeng presented the draft of an ambitious ten-year plan for the 1976–1985 period. The plan called for high rates of growth in both industry and agriculture and included 120 construction projects that would require massive and expensive imports of foreign technology. Since 1978, the Chinese economy has undergone a major transformation. It has moved decisively away from the old centrally planned command economy and, after twenty years of systemic reforms, has become a semi-market economy. Reforms have progressively introduced (albeit with setbacks at times) two major changes in the economic system: transfer of decision-making powers to the producers, and introduction, to varying degrees, of the laws and institutions of the market. Debates on economic development have moved far beyond the narrow ideological parameters

40

3 The Chinese Economy

of the 1970s and 1980s. Big issues are now not so much ideological as logistical. The crisis in Beijing in 1989 led to further changes in Chinese development, but did not alter the overall policy of reform and modernization. By 1981 the reformers has gained control decisively and began to create the Sixth Five Year Plan. Sixth Five-Year Plan (1981–1985)—this was the first plan which incorporated the market based economic reform. Agricultural production was stimulated by giving official encouragement to farmers to establish free markets in urban areas, as well as in the countryside, and by allowing some families to operate as ‘specialized households,’ devoting their efforts to producing a scarce commodity or service on a profit-making basis. In industry, the main policy innovations involved increasing the autonomy of enterprise managers, a reduced emphasis on planning quotas, allowing enterprises to produce goods outside the plan for sale on the market, and permitting enterprises to experiment with the use of bonuses to reward higher productivity. The government also tested a fundamental change in financial procedures with a limited number of state-owned units: rather than remitting all of their profits to the state, as was normally done, these enterprises were allowed to pay a tax on their profits and retain the balance for reinvestment and distribution to workers as bonuses. More ambitiously Special Economic Zones were created after 1979 in the coastal provinces which were largely market orientated and allowed for, and attracted considerable foreign investment in manufacturing. The reform programme initially favoured treatment to the coastal regions and the Special Economic Zones. Later in 1985 and 1988 additional economic zones were added. These zones received tax exemptions and incentives and encouraged foreign investment in joint ventures. The special zones were important in the initial phase of reform but later many of the conditions under which they operated were extended to the rest of the country (Schoppa 2000). Seventh Five Year Plan (1986–1990)—the Seventh Plan continued the economic reforms and consolidated and extended them. Substantial investment was undertaken the Special Zones and other coastal regions in infrastructure and further encouragement were given to exports. Eighth Five Year Plan (1991–1995)—the Eight Plan continued the main emphasis of the Seventh. Ninth Five Year Plan (1996–2000)—the Ninth Plan saw further emphasis on the creation of a modern enterprise system. Tenth Five year Plan (2001–2005)—the Tenth Plan involved structural adjustments major state owned businesses to improve international competitiveness, and involved further construction of infrastructure, and investment in central and western provinces rather than in the coastal regions. Eleventh Five-Year Plan (2006–2010)—the next Five Year Plan involved more regional development initiatives in the central and western provinces as well as the promotion of science and education, and further reforms. This plan was to largely superseded by the measures that were eventually undertaken in response to the Global Economic crisis after 2008 (Arayama and Miyoshi 2004; Brandt et al. 2005). Twelve Five-Year Plan (2011–2015)—This plan was representative of China’s efforts to rebalance its economy, shifting emphasis from investment towards

A History of Reform of the Chinese Economy

41

consumption and development from urban and coastal areas toward rural and inland areas—initially by developing small cities and greenfield districts to absorb coastal migration. Thirteenth Five-Year Plan (2016–2010)—the final plan was aimed at moving the Chinese economy up in the value chain by abandoning old heavy industry and building up bases of modern information-intensive infrastructure. In response to the Global Financial Crisis the Chinese Government launched its Economic Stimulus Plan to specifically deal with the Global financial crisis of 2008– 2009. The crisis meant that there was a reduction in global demand for China’s manufactured export goods. This in turn led to a reduction in economic growth. In order to maintain growth levels at pre-crisis levels the government undertook a range of measures. These measures included increasing the stock of affordable housing, easing credit restrictions for mortgage and small and medium sized enterprises, lowering taxes such as those on real estate sales and commodities, and more state investment into infrastructure development, such as the rail network, roads and ports. Together these measures were successful at maintaining growth levels but only but accumulating substantial levels of government debt. Even taking into account the problems associated with the downturn in manufacturing exports at the end of the 2000s the reform period has proved to be one of substantial development.

An Economy Transformed The post-1979 economic reforms have had a dramatic effect on the size of the Chinese economy. By 2010 the Chinese economy had become the second largest in the world and one of the world’s largest exporters. The magnitude of foreign investment and trade also increased considerably. Foreign direct investment increased from an average of about US$2 billion per year during the 1980s to more than US$200 billion in the 1990s (Da Costa and Carroll 2001; Chuang and Hsu 2004). This foreign direct investment was largely directed to the export-orientated manufacturing industries. As a consequence both foreign investment and exports are clustered within the same provinces mainly the coastal ones. Looking forward to the future there is an expectation that the Chinese economy will continue to grow. The World Bank forecasts that by 2020 the Chinese economy will overtake that of the United States as the world’s largest, although it is also true that China’s leaders will have to grapple with a host of future problems before this potential can be realized. These problems include the growing regional and income inequalities that have been created since 1979, the persistence of unemployment in some parts of the country, official corruption and the consequent loss of public faith in government institutions, and the need to find alternatives to the enterprise-based health care and welfare systems. The latter problem will be particularly acute as the Chinese population is aging steadily and by 2020 a substantial part of the population will be over 65.

42

3 The Chinese Economy

The Chinese economy today is made up of a range of different types of enterprises which all, mainly, derive their origins from the early reform years. These enterprises tend to be either, in origin, having grown out of the small scale enterprise that were formed from rural communes and villages, from the larger scale state owned enterprises or originated as individual owned companies. Many of these different types of firms subsequently entered into joint arrangements with foreign companies and in recent times foreign companies have operated as sole enterprises as restrictions on their operations have eased (Chuang and Hsu 2004). One interesting aspect of the economic reforms in China has been the degree to which they initiated a burst of individual entrepreneurship. This manifested itself if the form of a proliferation of township and village enterprises which in turn created a remarkable transformation of the Chinese rural economy. Indeed, it was surprising even to the architects of China’s reforms, including Deng Xiaoping himself, who is reported to have remarked that they ‘appeared out of nowhere’. Their importance to China’s economy is shown by the fact that in 1996 township and village enterprises accounted for 35% of total industrial output (Xinhua News Agency 1997). In addition they have maintained an annual, average growth rate of more than 20% over the past two decades, compared with the overall industrial growth rate of 13%. By the end of 1996, they employed 135 million people and around 29% of China’s total rural labour force (Cai et al. 2002). The term town and village enterprise first came into use in 1984 to describe commune and brigade enterprises, but has since then been applied to all collectivelyowned enterprises in rural areas (Fan et al. 1996). They are, therefore, distinguished from state owned enterprises not only in that they are generally far smaller, but also in that they are subordinated to a different and lower level of government. Nevertheless, while these enterprises can be regarded as part of China’s ‘public sector’, there is often confusion about their actual ownership status. As Walder (1995) points out, because they face strong market competition, and have a degree of institutional autonomy some scholars also refer to them as ‘substantially private’ or ‘semiprivate’. The term ‘hidden privatisation’ has also been used by some scholars, implying that at least some of these enterprises conceal major private interests. Operating under tighter financial constraints and market pressures than state enterprises, town and villages enterprises have been a good example of the commercial success under market conditions of the Chinese reforms. They do not depend on state subsidies for their survival when faced with financial difficulties and have a strong incentive to respond to consumer demands (Brandt et al. 2005). One of the main reasons for the success of these enterprises is the lower cost structures that they have. Wages in rural areas are considerably lower than in the cities, where most state enterprises are located. In addition these enterprises generally do not provide the kind of social welfare benefits, that state enterprises have to provide. It has been estimated that this kind of social overhead cost accounts for about 40% of the difference in profitability between state enterprises and these types of enterprises (Cai et al. 2002). Despite their success, town and village enterprises also face many problems, which have already begun to hinder their progress. Because of their small size and

An Economy Transformed

43

limited access to capital, they are not able to invest in research and development, leaving them vulnerable to competition from wholly foreign-owned or joint venture companies. China’s state-owned banks have also been less willing to extend loans to the township and village enterprises. They have also been constrained by their ambiguous property rights; whereby they theoretically owned by their employees as a collective, there are no individual property rights for the workers. As a result, they often act as employees rather than as owners, ‘seeking to increase their salaries rather than cut costs and maximize company profit’ (Yatsko 1997). About 5000 of these enterprises had been so successful that they have already grown into medium-sized or large enterprises, some by taking over state enterprises. As they grow in size and market share, they are likely to be deprived of preferential treatment for tax purposes, which could have a significant impact on their performance (Da Costa and Carroll 2001). Reforms have undoubtedly brought major economic benefits to rural China, but have also created problems and tensions. As incomes rose, millions of peasants built new homes and moved to neighbouring towns and cities to buy consumer durables, thus fuelling the growth of the industrial sector. Urban Chinese also enjoyed the benefits of rural reforms in the form of the improved supply, better quality and greater variety of agricultural products. Even so, rising rural incomes, both real and perceived, generated some resentment amongst urban Chinese, who had hitherto enjoyed a relatively more comfortable lifestyles than peasants. After more than a decade of income increases, however, Chinese peasant incomes began to stagnate in the late 1980s. Indeed, in 1989 peasant income dropped by 1.6% before picking up only slightly in 1990. For five years until 1994 it grew by just 4.3%. A national conference on agriculture in 1994 called for urgent measures to boost peasant incomes. The State Statistical Bureau claimed that average per capita peasant income reached ¥1990 Renminbi (approximately US$229) in 1996, up 8% from 1995. Economists at the Chinese Academy of Social Sciences, however, have disputed this figure, arguing that the 1996 income calculation had been inflated by delaying the long-overdue re-zoning of certain suburban areas from rural to urban (Far Eastern Economic Review 1997). As well as the slow rate of growth in peasant incomes other problems have arisen. These include official corruption, exorbitant and often illegal taxes and levies placed on rural based enterprises, delays in cash payments to the peasants for their grain, and inflation. Some relief has been granted in the past. In May 1993, for example, it was decided to cancel forty-three ‘unreasonable’ levies. In April 1997, the central authorities issued a thirteen-point decision ordering all local government departments to cancel a number of illegal levies on peasants. The Ninth Five-Year Plan (1996– 2000) also stipulated that no new taxes would be imposed on peasants (Beijing Review 1997). Despite these measures local officials still continue to squeeze the income of peasants in order to raise money to fund their projects, including new factories, hotels and economic development zones. Corruption at various levels of government is also frustrating these efforts to deal with these problems. Despite these problems

44

3 The Chinese Economy

firms that emerged from the rural sector are still an important part of the structure of Chinese industry. After the original success of reform of the rural economy China’s leaders turned their attention to the industrial sector in the early 1980s. There was no successful precedent, let alone a blueprint, for the transformation of such a large country from a command economy to one of ‘socialist market economy’. Observers have described the resulting Chinese approach to economic reform as being one of ‘gradualism’, while Deng Xiaoping referred to it as: ‘crossing the river by feeling for the stones’. It has meant that there has been a fair degree of experimenting with various methods, the mixing and matching of different policies, and at times retreats from bold reform measures if they proved to be ineffectual or politically too difficult. This approach contrasts sharply with the ‘shock therapy’ used in many of the former communist countries of Eastern Europe. But while there have been substantial reforms in China’s state-owned enterprises they remain inefficient and an obstacle to economic development. As recognized at the Fifteenth Congress of the Chinese Communist Party in September 1997, dealing with problems of the state owned enterprises would be one of the biggest challenges for the Chinese leadership over the following few years (Cai et al. 2002). One main focus of the reforms since 1978 has been the clarifying of the roles of the state and the management of the state owned enterprises. In a transitional economy, such as China’s, the relationship between the state, as the legal owner of these companies, and of their managers has been rather complicated. It was made even more complex by the fact that the state is also the regulator of the business environment in which all enterprises (public and private) must operate. Prior to the reforms, the relationship between the state and enterprise managers was straightforward and relatively simple, as management was directly subordinated to administrative control. In the pre-reform period there had had been times when the administration of these enterprises had been transferred from the higher to the lower levels of the bureaucracy, as in the transfer of many enterprises from central to regional control in the late 1950s and in 1970, but overall the relationship had been a recognised and consistent one. Since 1984 there has been an attempt to grant a much greater degree of autonomy to the state owned enterprises. The Factory Director Regulations of 1986 were the first in a series of new laws and regulations that aimed to grant business autonomy to the state owned enterprises. The Factory Director Responsibility System, as the new organizational structure became known, designated the manager as the legal representative of the state owned enterprise. It gave the manager the power to make all decisions concerning business operations, thus weakening the influence of various levels of state bureaucracy. Nevertheless, the manger was still appointed by ‘competent authorities in charge of the enterprise’—that is, by the government ministry or department which exercised administrative control. The autonomy enjoyed by the manager was also limited by the provisions under the new regulations, which required the approval of ‘competent authorities’ for many important decisions. To increase the business autonomy of state enterprises, the State Owned Enterprise Law was adopted by the First Session of the Seventh National People’s Congress in

An Economy Transformed

45

April 1988. It provided the legal framework for the enlargement of the powers of enterprise by redefining relations among the Party, the state and enterprises. One of the stated objectives of the Law was to specify the obligations of the enterprises and to define and protect their legitimate rights. The functions and powers assigned to the enterprise manager include the ability to make decisions on production, pricing, investment, use of reserve funds, personnel management, etc. Most of these rights are, however, are still subject to State Council ‘regulations’ or ‘stipulations’, thus again putting limits on the real autonomy enjoyed by these enterprises. The Law also provides that the manager must act together with the management committee of the enterprise, which is composed of the secretary of the Chinese Communist Party committee, the head of the official trade union, and the secretary of the Communist Youth League in the enterprise. The State Owned Enterprise Law allows for the possibility of separating the rights and responsibilities of the owners of the enterprise assets (the state) from the rights and obligations of the enterprise management. It stipulated that the manager should be either appointed by the government department in charge of the supervision of the enterprise, or elected by the employees with endorsement by the supervisory department. Managers of many, large State owned Enterprises are still appointed by the supervisory departments, although small and medium companies frequently use elections for managerial appointments. In 1992 the State Council issued the Autonomous Management Rights Regulations, which described in greater detail the management rights provided under the State Owed Enterprise Law. Enterprises were made accountable for their own profits and losses. The regulations also described in specific terms the conditions for property rights transactions, and clarified the legal responsibilities of the companies and their government supervisory departments. To ensure greater enterprise autonomy, anyone who obstructed a factory manager or other management personnel in the execution of their duties could be punished by law. Even government departments infringing on enterprise rights could be subject to disciplinary action. Despite the enactment of new laws and regulations, enterprise autonomy remains limited by administrative interference. Most enterprises do not have full authority in investment decisions, hiring and firing of employees, wage fixing and imports and exports. A 1994 World Bank survey involving 156 state owned enterprises in five cities found that; ‘more than 90 per cent of the state owned enterprises surveyed indicated that they were fully autonomous in production, sales and selection of suppliers’. However, more than 60% indicated that they faced significant constraints with respect to the rights to trade, disposal of assets, and mergers (World Bank 1997). Moreover, in the appointment and dismissal of senior managers the Party still has a strong voice. As an extension of the reform measures to increase enterprise autonomy, the government created a legislative framework to transform the State Owned Enterprises into modern corporations. The Company Law of 1993 (which came into effect in July 1994) was seen as the most important legal development in the drive to establish State Owned Enterprises as separate legal entities. The Company Law does not apply to State Owned Enterprises only, but they did stand to benefit more by having their rights and obligations clearly defined. It was also hoped that as modern corporations

46

3 The Chinese Economy

they would be more accountable for their performance than enterprises that continues to operate under the control of government departments. The Company Law introduces such well-known corporate legal concepts as limited liability, share capital, shareholders’ meetings and boards of directors, previously unfamiliar to Chinese managers and workers. It also provided a legislative basis for the registration of businesses as limited liability companies or limited liability shareholding companies. Not all provisions, however, of the Law applied uniformly to all types of organizational structures. State owned enterprises without private or foreign equity partners continued to be treated differently in some areas of corporate governance. The process of corporatisation progressed slowly. By 1996, about 5800 industrial State owned enterprises had become corporations—that is, less than 5% of the total. One of the main reasons for the low rate of corporatisation was the difficulty in identifying an enterprise’s ‘investor’ because of the competing claims by different government departments, ministries and bureaus. Included in the above figure were the 100 large and medium enterprises which were selected for a corporatisation experiment in 1995. Their corporatisation was facilitated by the central government through reform of property rights and corporate governance systems. In addition, these enterprises were also entitled to support for technical renovations. There was, however, no change in their ownership structure as they were all registered as wholly state-owned group companies under the Company Law. Nevertheless, not all corporatised state owned enterprises have remained wholly state-owned. Many have already listed on the Shanghai and Shenzhen stock exchanges, with some even having listed on the Hong Kong and foreign exchanges. As publicly listed companies they have had to comply with the reporting requirements of these stock exchanges and are accountable to their shareholders. Most Chinese companies with share listings are still majority state-owned, with only a small percentage of tradable shares. There are two types of shares listed on China’s two domestic exchanges: ‘A’ shares are for Chinese investors only and paid for in renminbi; and ‘B’ shares which are restricted to foreign investors and paid for in hard currency. The ‘A’ shares are further divided into four categories: state shares (held only by government agencies and wholly state-owned enterprises); legal-person shares (mostly held by majority state-owned or controlled institutions); employee shares; and individual shares. Only the individual shares are generally tradable. Despite these efforts at reforms in China’s state industrial sector since 1978, their net effect on industrial efficiency has been marginal. In a detailed study released in July 1997, the World Bank concluded that China’s industrial reforms had so far failed effectively to separate government from the management of state enterprises (World Bank 1997). Focusing on the management of assets, the study found that while the earlier reforms were ‘genuinely creative’, they had not succeeded in addressing important asset management issues. In other words, the government had allowed its industrial enterprises to continue to operate at sub-optimal levels of efficiency.

An Economy Transformed

47

There were 7.34 million industrial enterprises in China by the end of 1995. Of these, 118,000 were state owned enterprises, 1.48 million were urban and rural collectives (including township and village enterprises), 5.7 million were individuallyowned enterprises’ (with less than seven employees each) and 63,000 ‘other’ enterprises. The last category includes private firms with more than seven employees, joint ventures and wholly foreign-owned enterprises. In terms of shares in the country’s gross value of industrial output for 1995, state owned enterprises accounted for 34%, urban and rural collectives 37%, individually-owned enterprises 13%, and ‘others’ 17%. The corresponding figures for 1992 were that state owned enterprises produced 48.4%, urban and rural collectives 38.2%, individually-owned enterprises 6.8%, and ‘others’ 6.6% (Goldstein 1997). Thus, while urban and rural collectives managed to increase their share slightly, individually-owned enterprises doubled their share and ‘other’ enterprises nearly trebled their share in three years. The state owned enterprises’ share, by contrast, has dropped very substantially. Such a rapid change indicates the problems faced by the state owned enterprises. While they account for over one-half of the country’s total industrial assets, twothirds of urban employment and nearly three-quarters of investment, their profits have declined from 6% of the gross domestic product in the late 1980s to below 1% by the third quarter of 1996. According to World Bank estimates, in 1996 about 50% of industrial state owned enterprises incurred net losses, amounting to 1.3% of GDP (World Bank 1997). Moreover, a large portion of industrial capacity is lying idle. The Third National Industrial Census, conducted in 1995, revealed that the factory capacity utilization rates for almost half of the 900 major products surveyed were on average below 60% (Brandt et al. 2005). The changes approved by the Fifteenth Congress of the Chinese Communist Party, meant that out of a total of 118,000 state-owned industrial enterprises in 1996, only 512 would remain entirely state-owned. These were the so-called ‘pillar industries’ which account for nearly half of state industrial assets. The government would ‘let go’ the remaining companies which would survive by issuing shares to the general public and their employees, merging with other enterprises, forging joint ventures with foreign firms, shedding workers, or would go bankrupt and be liquidated. Although the actual process was not made clear at the Fifteenth Congress, the remaining 512 were keep under central control, even if they were originally controlled by provincial or municipal governments. These then formed the core of the ‘modern enterprise system’ under state control and ownership. Jiang Zemin was careful to claim that this process was not ‘privatisation’, as that would cause anguish within Party ranks and among those likely to be affected by the restructuring. Rather, he said that the state should maintain ‘control power’. Clearly, the government wanted to preserve some control over even those enterprises that sell shares. Whether it would retain more than half or just a controlling share was not made clear. According to the World Bank, however, ‘there is a proposal - not yet approved - that for certain sectors, “relative control” by the state, with a minimum of 30 per cent state ownership, is required; for some sectors, “majority control”, i.e., at least 51 per cent state ownership is required; and for other sectors, “absolute control”, i.e., 100 per cent state ownership is required’ (World Bank 1997).

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3 The Chinese Economy

In the centrally planned command economy which prevailed before the reforms, virtually all resources were allocated by the state and no significant markets existed for goods or services. Officials, with direct or indirect authority over the allocation of resources, could gain limited private and professional benefits by trading these powers in an economy marked by shortages. But since factory managers and lower-level officials had little authority to alter government plans for production and distribution, the scope for illegal transfers of resources and products for personal gain was extremely limited. Moreover, private business activity was forbidden and foreign companies were not allowed to operate in China. The foreign trade system was highly centralized and the total volume of China’s trade with the outside world was insignificant. In short, the economic system, while inefficient, and was not conducive to large-scale corruption. The reform process has changed this. In 1995, Transparency International, an anti-corruption organization, rated China as the second most corrupt country in the world, after Indonesia (Transparency International 1995). Along with the internal reform of the Chinese economy one of the major drivers of change was the opening up of the country to foreign investment. Since 1979 foreign direct investment in China has grown steadily and today large numbers of foreign forms operate in China.

Foreign Trade and Investment Foreign direct investment in China has been important since the reform period began in 1979 (Berthelemy and Demurger 2000) and was a part of the policy of opening up the Chinese economy. It was particularly important in enabling the introduction of new technologies to the Chinese economy and for enabling a period of catch up growth. Foreign direct investment in China increased steadily after 1979 and increased even further after 1992 over a wide range of industries. By the late 1990s China was one of the world’s largest receivers of foreign direct investment (Tian et al. 2004). Opening up the Chinese economy to the world has been a crucial part of the process of reform, to the extent that it is enshrined in the Chinese Communist Party Constitution as part of the Party’s basic line. This was a marked change from the very restrictive approach, which applied in the pre-reform era. During the 1950s, China’s foreign economic relations were largely confined to the Soviet Union and Eastern European countries, which provided much needed economic and technological support. In the 1960s, after the split with the Soviet Union, China’s isolation increased. Although from the early 1970s China began to expand trading relations with Western countries and Japan, it was not until after the death of Mao Zedong in 1976 that foreign trade and investment grew rapidly. In 1978 Hua Guofeng’s Ten-Year Plan included plans for the large-scale importation of foreign good and technology, but these were soon abandoned as ill-conceived and impractical. After 1978 the Chinese leadership developed a different strategy of giving greater importance to

Foreign Trade and Investment

49

foreign investment and international trade in the process of economic development (Chuang and Hsu 2004). The new strategy clearly included a different attitude to foreign investment, altering as it did from rejection to strong encouragement. Foreign investment was negligible in the late 1970s, but China is now the world’s second largest recipient of foreign capital (after the United States), accounting for 40% of combined flows of foreign direct investment to all developing countries. Table 3.4 provides data on the growth of foreign investment into China. There was a sharp increase in foreign direct investment flows to China beginning in 1991. There were several factors responsible for this sudden increase in the 1990s, including: a general increase in flows to developing countries; the explosive growth of the Chinese economy after 1992; systematic liberalisation of China’s foreign investment regime; and the increasing flow of recycled Chinese funds being invested back in China as foreign investment (Lardy 1996). Foreign investment in China is, however, highly concentrated geographically and its sectoral distribution is very uneven. A World Bank study found that the geographical distribution of FDI in China is determined largely by gross domestic product, infrastructural development, level of general education, and coastal location. It also revealed originally foreign investment in China had been biased towards speculative types of investment, particularly the real estate sector, although later it begun to move in line with the rest of world (Arayama and Miyoshi 2004). Similarly to foreign investment, the approach to trade changed greatly. Formerly China did not actively seek to promote exports and imports but was an extreme example of import substitution common in developing countries in the 1950s and 1960s. Since 1978, trade was no longer viewed simply as a means of balancing shortages and surpluses, but as a way to develop the economy. By the 1990s international trade occupied a substantial share of China’s gross domestic product, approaching 35% in 1996. China’s share of world trade also grew rapidly. In 1978 China was ranked thirty-second among the world’s trading countries. By 1991 it had climbed to the fifteenth position and by 1996 to eleventh. China’s total exports and imports rose from US$20 billion 1979 to US$290 billion in 1996, with exports expanding at an average annual rate of 16% and imports at 15%. Today (2020) China is the world’s largest exporter (Central Intelligence Agency 2020). By 1996, foreign-invested enterprises (including joint ventures and wholly foreign-owned firms) accounted for 47% of China’s total external trade. They also employed 17 million Chinese workers. In 1985 the share of China’s total exports accounted for by these companies was only 1.1%. In the first eight months of 1997, these companies’ share of foreign trade increased by 16.8% to over US$100 billion or 53% of the national total. Their exports grew by nearly 20% to by 12.8% to US$44.6 billion (51.3% of the national total) (Berthelemy and Demurger 2000). Openness encouraged technological change and the restructuring of China’s industries to be less import competing and self-reliant in character and more export orientated. Foreign direct investment was important in creating in China a large, export orientated industrial sector which in turn become a major driver of economic growth and development. Foreign direct investment has been found to have made very positive contributions to economic growth in China (Chuang and Hsu 2004).

50 Table 3.4 Foreign direct investment in China (US$ million), 1979 to 2018

3 The Chinese Economy Year 1979–1982 cumulative

Actual 1767

1983

916

1984

1419

1985

1959

1986

2244

1987

2647

1988

3739

1989

3773

1990

3755

1991

4666

1992

11,292

1993

27,514

1994

31,787

1995

33,849

1996

41,000

1997

41,674

1998

41,117

1999

36,978

2000

37,483

2001

37,357

2002

46,789

2003

47,229

2004

53,131

2005

67,821

2006

56,934

2007

121,418

2008

94,320

2009

131,057

2010

243,703

2011

380,072

2012

241,214

2013

290,928

2014

268,097

2015

242,489

2016

174,750

2017

166,084 (continued)

Foreign Trade and Investment

51

Table 3.4 (continued)

Year

Actual

2018

203,492

Source Lardy (1996) and World Bank (1996–2019), World development indicators

Tian et al. (2004) found that provinces which had the highest levels of foreign direct investment also had a higher level of economic growth. This investment along with direct benefits also was found to create externalities in the form of technology spillovers where technologies and management methods were copied, through backward and forward linkages or took place through labour mobility.

Provincial Divergence Foreign investment in China and the growth of a dynamic export manufacturing sector led to a growing divergence of average incomes across the country. The gains in productivity were not uniform across the country and there have been considerable differences between provinces. The most advanced provinces tend to be those on the coast where the greatest levels of capital accumulation and foreign direct investment have occurred. These provinces are also home to the greatest concentrations of export industries as well. The introduction of market forces increased regional ad provincial disparities (Chen and Fleisher 1996; Lyons, 1991). They also lead to large scale migration of labour from country to city and between different parts of the country. Table 3.5 provides data on the relative structures of China’s provinces in 2017. As can be seen from the data there is wide variance in average per capita incomes with the richest province (Shanghai) having an average per capita income four or five times that of the lowest provinces. In addition the relative structures of the various provinces differ. A number of the coastal provinces have very high levels of economic activity concentrated in the secondary (manufacturing) sector, not just by Chinese standards but also compared to most parts of the world. Foreign direct investment in importance varies across the provinces as well, with in some cases it being a very substantial part of total regional output.

The Growth Drivers In the Chinese case it is pretty clear that foreign investment, the manufacturing sector and exports have played a key role in national development. Generally the main contributors to economic growth are considered to be the accumulation of labour, capital as well as investment in human capital and new technologies. At its very simplest level one very important cause of economic growth is the simple

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3 The Chinese Economy

Table 3.5 Provincial level macroeconomic data for China, 2017 GRP 100 million Yuan

Population Primary (in million) industry (%)

Secondary industry (%)

Tertiary industry (%)

Real GRP/capita Yuan

FI/GRP (%)

Beijing

28,015

17.801

0.4

19

Tianjin

18,549

12.778

0.9

40.9

80.6

157,379

0.76

58.2

145,164

Hebei

34,016

62.086

9.2

2.61

46.6

44.2

54,789

0.64

Shanxi

15,528

30.550

Inner Mongolia

16,096

20.849

4.6

43.7

51.7

50,828

0.51

10.2

39.8

50

77,203

0.6

Liaoning

23,409

35.969

Jilin

14,944

22.424

8.1

39.3

52.6

65,081

2.83

7.3

46.8

45.8

66,643

1.19

Heilongjiang

15,902

Shanghai

30,633

31.251

18.6

25.5

55.8

50,885

0.43

19.826

0.4

30.5

69.2

154,509

Jiangsu

1.88

85,869

66.100

4.7

45

50.3

129,908

4.63

Zhejiang

51,768

46.573

3.7

42.9

53.3

111,155

1.41

Anhui

27,018

51.658

9.6

47.5

42.9

52,302

1.1

Fujian

32,182

32.221

6.9

47.7

45.4

99,879

1.91

Jiangxi

20,006

38.163

9.2

48.1

42.7

52,423

2.42

Shandong

72,634

82.502

6.7

45.4

48

88,039

1.66

Henan

44,552

79.005

9.3

47.4

43.3

56,391

0.52

Hubei

35,478

48.684

9.9

43.5

46.5

72,874

0.45

Hunan

33,902

56.647

8.8

41.7

49.4

59,848

0.82

Guangdong

89,705

91.922

4

42.4

53.6

97,588

2.19

Guangxi

18,523

40.385

15.5

40.2

44.2

45,866

1.12

4462

7.640

21.6

22.3

56.1

58,403

1.68

19,424

25.337

6.6

44.2

49.2

76,663

1.39 0.8

Hainan Chongqing Sichuan

36,980

68.609

11.5

38.7

49.7

53,900

Guizhou

13,540

29.612

15

40.1

44.9

45,725

0.43

Yunnan

16,376

39.709

14.3

37.9

47.8

41,240

0.4

Tibet

1310

2.797

9.4

39.2

51.5

46,836

0

21,898

31.649

8

49.7

42.4

69,190

0.44

Gansu

7460

21.720

11.5

34.3

54.1

34,346

0.42

Qinghai

2625

4.939

9.1

44.3

46.6

53,148

0.91

Ningxia

444

5.627

7.3

45.9

46.8

7891

0.27

Xinjiang

10,882

20.210

14.3

39.8

45.9

53,845

0.21

Shaanxi

Source China (2019), China Statistical Yearbook

The Growth Drivers

53

building up (accumulation) of the factors of production (land, labour and capital). Accumulating factors of production such as capital or labour will raise output levels over time. In terms of productivity levels, using more capital plant and equipment per worker will raise labour productivity levels. Saving and investment in new capital will raise the amount of capital used per person. This in turn will raise the level of output per person (or real GDP per capita). Over the past thirty years in China capital has accumulated on farms, in factories and in offices. This process has added considerably to the productivity of the Chinese labour force. Examples of capital accumulation include such things as more farm equipment and irrigation in agriculture, roads and highways, airports and motor vehicles, and computers and communications systems in banking, insurance and in other service industries. In order to finance investment in the accumulation of capital it is necessary to have adequate savings. China over the past thirty years has had a very high level of savings as a proportion of GDP. Saving and investment in new physical capital and spending on human capital can help to create economic growth. Investing in capital, which uses the same level of technology, however, cannot continue to raise output levels. Gradually diminishing returns from investing in capital will occur. Diminishing returns is the idea that continually using more of an input (say capital), while holding the amount of other inputs constant will eventually mean that output will continue to rise, but at a slower (diminishing) rate. Using more capital, therefore, may raise output, but if the level of technology is fixed then this rise will eventually slow down. Economic growth can therefore only be sustained in the long run by improvements in technology. Technology refers to the whole process of converting raw materials and factors of production into goods and services. It refers to the management and organisational practices as well as the engineering transformation of raw materials into outputs. Technological change occurs because of the investment in research and development programmes and from the practice of trial and error. It also comes from the introduction of new technologies from other industries and overseas. In the Chinese case the influx of foreign direct investment also brought with it a substantial transfer of new technologies. The main factor creating long-term growth in the world today is technological progress (both through invention and technology transfer). This progress is created by innovation. Innovation is the attempt by people and companies to reduce costs and develop new products. Innovation is a term linked to technology and means any improvement in technology that creates more output with the same level of inputs. Not only is it possible to invest in physical capital such as factories, equipment and transport equipment it is also possible to invest in the creation of the skills and knowledge of the labour force. The second cause of economic growth, therefore, is the investment in the knowledge and skills of the labour force. This is known as human capital. Human capital can be defined as being the accumulation of skills and knowledge of humans above that of unskilled labour. Investment in human capital raises the productivity of people. One way in which human capital can raise productivity is by the use of one of the most basic skills of all: that is reading and writing. Being able to read and

54

3 The Chinese Economy

write means that the labour force can learn from the experiences of others. Even today the extension of primary school education in a number of countries has made an important contribution to raising productivity. Ensuring the basic provision of education is an important part of economic growth. At the more advanced level the development of mathematics laid the foundations for the raising of knowledge about the physical forces and chemical and biological processes of our existence. Raising knowledge and skill levels do not just simply mean raising technical skills but also involve the development of managerial and entrepreneurial skills. These mean a person can make better use of resources. Organising and managing things better can achieve higher levels of labour productivity. More efficient and better-managed organisations can improve the flows of information, create better incentives for people and make better use of resources. Investment in human capital takes place in schools, universities and technical training institutions as well as in the workplace. People often learn by doing the same thing many times over and when they work with people more experienced than them. This is called learning by doing. Formal education and training of the labour force can also raise productivity not just by creating a higher level of knowledge and expertise but also by helping people to be better able to make use of new technologies. It is important to remember that these three causes of growth—physical capital, human capital and new technologies—are all related to each other. Human capital, for example, helps to create new technologies and investment in physical capital often means using new technologies. Usually a labour force that has a high level of skill and knowledge is better able to make use of new technologies. Whether growth can occur depends on the opportunities to make use of investment in physical capital, human capital and new technologies. The greatest scope for gains from economic growth exists for those countries that begin from a low level of economic development. In the case of China catch-up growth has been an important driver of economic development. Catch up growth means transferring technologies from a leading country to those countries starting from a lower level of development. There is scope for quite big rises in economic growth if this can occur. There has been a varied view on the relative impacts of the different contributions to Chinese growth. While some studies have found that human capital, for instance, has made a positive and significant contribution towards economic growth others have found little impact. According to Chow (1993) technological changes did not contribute towards economic growth in China between 1952 and 1980 and increases in output were due to capital formation and growth of the labour force. Between the years 1979 and 1994, in contrast, 42% of economic growth was due to increases in productivity (Hu and Kahn 1997) brought about by the accumulation of human capital and technological change. Brandt et al. 2005) point out that this change continued after 1994 and that improvements in productivity in the industrial sector and export growth enabled a transfer of labour from agriculture to industry which in turn leads to a substantial restructuring of the Chinese economy.

The Growth Drivers

55

Ezaki and Sun (1999) found in their study that those provinces with the greatest economic growth were also those that had the highest growth in capital. Sheer accumulation of capital was found to be a main driver in a number of provinces whilst in others the use of additional capital and technological change were found to be more important. Arayama and Miyoshi (2004) found that capital accumulation was the major source of economic growth in China’s provinces. Expenditure on infrastructure increased sharply after the introduction of reform. Fleisher and Chen (1997) and Demurger (2001) have shown the important of infrastructure to economic growth and development. Investment in infrastructure, new technologies and human capital, therefore, all seem to have made an important contribution to the growth and development of the Chinese economy. In the context of this work it is the role of human capital that is important and in turn the role of higher education in the accumulation of human capital.

Chinese Human Capital Although foreign direct investment by bringing new technology to China was, and is, a main driver of economic growth these technologies do requires new forms, and greater levels, of human capital. If foreign direct investment, R&D and international trade are important drivers of economic growth then investments in human capital and education are important contributions to allowing this to occur. With the opening up of China’s economy and integration into the world economy China’s pool of knowledge had to be expanded rapidly in order to enable this growth to occur. Substantial investment by the Chinese Government in basic education led to a higher rate of literacy which in turn encouraged the utilization and adoption of imported technology. Investments by both the government and private individuals in made important contributions to the rise of human capital in China. A number of researchers have found a significant relationship between investment in education and economic growth. Fleisher and Chen (1997) and Chen and Fleisher (1996), for instance, found a positive relationship between university level education and economic and productivity growth. Cai et al. (2002) found that investments in human capital lead to a higher growth in GDP. Jordaan and Blignaut (2005) came to similar conclusions. Other researchers have found more ambiguous results (Berthelemy and Demurger 2000). Growth and development in China has, therefore, been reliant to some degree on the development and improvement of its education sector, at all levels. It is to the development of this sector that we must now turn our attention.

56

3 The Chinese Economy

Conclusion China has seen a rapid growth and development in recent decades as it has been transformed from a largely self-reliant country, to becoming the world’s largest exporter of manufactured goods. The heavy clusters of export orientated manufacturing sectors based mainly in the coastal regions have driven the Chinese economy forward and substantially raised standards of living in that country. The reform of the Chinese economy over a forty year period has meant a substantial opening up of the Chinese economy, as well as a growing diversity of companies and industries within China. This has driven growth by encouraging an influx of foreign investment, new technologies and a powerful accumulation of capital. This growth and development in turn has led to an enormous demand for a variety of different labour market skills. To enable this growth to occur, therefore, an expansion of the education sector; including higher education has had to occur. It is in this context of a rapidly growing and developing economy, and huge increase in investment in, and demand for human capital that the education sector in China has developed. It has also meant that investment by the government in higher education has not been able to keep pace with demand for higher education which has enabled the private sector to establish higher education institutions in China. To a large degree it has been the economic imperatives that have driven the growth of the private higher education sector in China as well as provided families with the income by which they can pay for higher education.

References Arayama, Y., & Miyoshi, K. (2004). Regional diversity and sources of economic growth in China. World Economy, 27(10), 1583–1607. Beijing Review. (1997, April). CPC calls to cut farmers’ Burdens. Beijing Review, 40(16), 21–27. Berthelemy, J.-C., & Demurger, S. (2000). Foreign direct investment and economic growth: theory and application to China. Review of Development Economics, 4(2), 140–155. Brandt, L., Hsieh, C., & Zhu, X. (2005). China’s structural transformation (mimeographed). Berkeley: University of California. Cai, F., Wang, D., & Du, Y. (2002). Regional disparity and economic growth in China: The impact of labor market distortions. China Economic Review, 13(2–3), 197–212. Central Intelligence Agency. (2019). Fact book. Washington, DC: CIA. Central Intelligence Agency. (2020). Fact book. Washington, DC: CIA. Chen, J., & Fleisher, B. M. (1996). Regional income inequality and economic growth in China. Journal of Comparative Economics, 22(2), 141–164. Chow, G. C. (1993). Capital formation and economic growth in China. The Quarterly Journal of Economics, 108(3), 809–842. Chuang, Y. C., & Hsu, P. F. (2004). FDI, trade and spillover efficiency: Evidence from China’s manufacturing sector. Applied Economics, 36(2004), 1103–1115. Da costa, M., & Carroll, W. (2001). Township and village enterprises, openness and regional economic growth in China. Post-Communist Economies, 13(2), 229–241. Demurger, S. (2001). Infrastructure development and economic growth: An explanation for regional disparities in China? Journal of Comparative Economics, 29(1), 95–117.

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Ezaki, M., & Sun, L. (1999). Growth accounting in China for national, regional, and provincial economies: 1981–1995. Asian Economic Journal, 13, 39–71. https://doi.org/10.1111/1467-8381. 00074. Fan, Y., Chen, N., & Kirby, D. A. (1996). Chinese peasant entrepreneurs: An evaluation of township and village enterprises in rural China. Journal of Small Business Management, 34(4), 72–76. Far Eastern Economic Review. (1997, February 13). Doubts arise over rural-income figures. Far Eastern Economic Review, 160(7), 28. Fleisher, B. M., & Chen, J. (1997). The coast-noncoast income gap, productivity, and regional economic policy in China. Journal of Comparative Economics, 25(2), 220–236. Goldstein, A. (1997). China in 1996: Achievement, assertatives, anxiety. Asian Survey, 37(1), 29–42. Hu, Z. F., & Kahn, M. S. (1997). Why is China growing so fast? International Monetary Fund Staff Papers, 44, 103–131. Jordaan, J. C., & Blignaut, J. N. (2005). To what extent does investment in human capital contribute to physical capital growth? Problems and Perspectives in Management, 2(2005), 45. Lardy, N. (1996). The role of foreign trade and investment in China’s economic transformation. In Andrew G. Walder (Ed.), China’s transitional economy. Oxford: Oxford University Press. Lyons, T. (1991). Interprovincial disparities in China: Output and consumption, 1952–1987. Economic Development and Cultural Change, 39(3), 471–506. McKinsey also Farrell, D., & Grant, A. (2008). Addressing China’s looming talent shortage. Shanghai: McKinsey & Company. Organisation for Economic Cooperation and Development. (2018). Education at a glance 2018. Paris: OECD. Roberts, J. A. G. (1999). A concise history of China. Harvard University Press. Schoppa, R. K. (2000). The Columbia guide to modern Chinese history. Columbia University Press. Tian, X., Lin, S., & Lo, V. I. (2004). Foreign direct investment and economic performance in transition economies: Evidence from China. Post-Communist Economies, 16(4), 499–510. Transparency International. (1995). Corruption perceptions index 1995. Berlin. Walder, A. (1995, September 1). Local government as industrial firms: An organizational analysis of china’s transitional economy. American Journal of Sociology, 101(2), 263–301. World Bank. (1985–2019). World development indicators. Washington, DC: World Bank. World Bank. (1997). China’s management of enterprise assets: The state as shareholder (pp. 23–24). Washington, DC: World Bank. Xinhua News Agency Report. (1997, July 27). China’s township enterprises key to economic growth. Yatsko, P. (1997, May 1). Collective empowerment. Far Eastern Economic Review, 160(18), 51.

Chapter 4

Education Background

Introduction China’s rapid economic growth has meant that has been a corresponding growth of China’s higher education sector. In 2018 there were over 40 million students enrolled in higher education in China according to that country’s Ministry of Education (public and private, full-time and part-time). These numbers made it the world’s largest higher education sector (UNESCO, Institute of Statistics 2018). Expansion of the higher education sector has been rapid over the past twenty years with numbers rising from around 6.4 million in 1990 to 29.07 million in 2008. At the same time the participation rate of young people of higher education age rose from around six per cent to over 23.3% (see Fig. 4.1). This rise in higher education enrolments in China was driven by a range of factors including, a rising participation rate in secondary education, increasing living standards, stronger demand for higher educated people by industry, and increased expenditure by the government on the provision of higher education. All of these factors have combined together to push expansion of the system. The purpose of this chapter is, therefore, to provide a general background to the nature of the structure of the higher education system in China as well as some specific examples of private education institutions in China, which help to provide a basic understanding of the institutions that operate in China. It will also provide some background to the development of the private higher education sector in China and the public policy framework in which it operates. The private higher education system has expanded faster in the last ten years than the public sector and now is an important part of the overall Chinese higher education sector. Government regulation of both government and private education institutions is extensive and must also be understood before the main analysis of this work can be undertaken.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_4

59

60

4 Education Background

30

25

20

15

10

5

0

Gross enrolment is the percentage of the population aged between 18 and 22 enrolled in higher education

Fig. 4.1 Gross enrolment rate in higher education in China 1990–2013, 18–22 age group. Source China, Ministry of Education, Education statistics for …

Chinese School Education Throughout the reform period addition investments in the basic education system in China and rising enrolment in senior secondary schools has meant that a greater cohort of young people are looking to progress to higher level to study in China. The changes that occurred, therefore, in the primary and secondary school levels of China had important implications for the higher education level. Education in China is divided into three stages, as is common in most countries around the world. These three stages are basic education (primary and secondary), tertiary education (higher education and vocational education and training) and adult education. Basic education is divided into compulsory education and senior secondary education, with an optional pre-school system prior to primary school education. Compulsory education starts at the age of seven and lasts for nine years. These years are made up of six years in primary school and three in junior middle school. Participation at the primary school level is virtually universal. Senior secondary education is accessible through entrance examinations at the age of 16 and lasts for three years, during which students are prepared for the National College Entrance Examination, which determines whether they will be allowed to study at a higher education institution. Those students whose abilities are more practical or who wish to enter the workforce at an earlier stage are educated in specialised or vocational secondary schools instead of attending senior secondary

Chinese School Education

61

schools. The secondary school enrolment ratio for both boys and girls has been growing in recent years (UNESCO, Institute of Statistics 2019). Alongside of the economic reforms that occurred after 1979, China’s education sector has been the subject of reform. Perhaps the most important element of Deng Xiaoping’s reforms in the administration of the education system in the late 1970s and 1980s was financial decentralization of the system. In the 1980s the government decided that townships and villages, rather than the higher county governments, should assume financial responsibility for the construction and furnishing of school buildings. The decision referred to the principle of ‘walking on two legs’, meaning that government and community should share financial responsibility. In May 1985 the Chinese Communist Party Central Committee announced a series of major educational reforms, which it claimed were based upon wide consultation. The main elements were: the staged introduction of universal nine-year education; a rapid increase of technical and vocational secondary schools; more autonomy for higher education institutions; and the development of postgraduate education and research, and of exchanges with industrialized countries (Lewin 1988). In financial terms the effect was to further decentralize administration, with the division of responsibility between the state, local government, the community and the school changing. Many teachers are classified as ‘public’ and receive their salaries from the state, but many others, including a large proportion of those in rural primary schools (47% in 1992), are called ‘community’ (minban) teachers and are paid from locally levied educational taxes, local donations, or state subsidies. Capital construction comes from local donations with state matching grants, while other non-recurrent expenditure comes from school-generated incomes (Cheng 1995). In June 1985, the government replaced the Ministry of Education with a State Education Commission, arguing that such a high-level body would be better able to lead and implement the proposed reforms. In April 1986, the National People’s Congress followed the Chinese Communist Party’s lead and adopted the Law of the on Compulsory Education, which stipulated nine years’ compulsory education in the cities and developed areas by 1990, and almost everywhere else in the country by the end of the century (China, State Council 1986). These nine years included six years of primary school education and three years of junior secondary school education. In order to promote modernization, authorities have seen it as important that foreign experts teach in China and that Chinese scholars and students study abroad. Such exchanges were not new when adopted as part of the educational reforms of 1985, but have gathered momentum since then. They have brought many benefits in the form of technological and other expertise, but also some problems. Because the standards of living in the industrialized countries are incomparably higher than in China, and opportunities for further education and research are very much better, most students have opted to remain abroad if they can. One problem facing the education system is the supply of teachers. Although the government invested more in teacher training in the 1990s, it remains far behind the needs of the country. Low salary scales, as well, meant that there has been a lack of incentive to attract people to the profession.

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4 Education Background

Another change that has occurred has been the introduction of school fees. In the 1990s, fees were introduced at tertiary and senior secondary levels. Children in China may begin schooling very young. Many attend nurseries from their first year and kindergartens cover the ages of three to six. Children then enter primary school at six and secondary school at around twelve. The Cultural Revolution initiative which was to shorten the period of schooling has now been reversed. The number of years of primary school had been reduced to five, but the trend in the 1980s was to revert to six, although five-year primary schools still remain common in the countryside. On a nationwide basis the proportion of five-year primary schools to all primary schools fell from about 60% in 1980 to about 40% in 1993 (Educational Atlas of China 1995). Junior secondary covers three years and senior secondary another three. There was a big expansion of technical and vocational secondary schools during the 1980 sand as well a system of adult education, which runs courses ranging from basic literacy and numeracy to university-level programs, was expanded during the 1980s and 1990s. The normal period of study at tertiary level is four years, although there are variations, depending on the field. The most prestigious universities are designated as ‘key’ (zhongdian), and they stress teaching, research and postgraduate study. Postgraduate degrees, which the Cultural Revolution had suppressed, were reintroduced at the beginning of 1981, while in mid-1983 doctoral degrees were conferred on the first batch of research students to be trained in China. Institutions at a lower level are less focused on research and devote almost all of their energies to teaching. Lower still are a range of two and three-year colleges, many devoted to specialist training in particular fields. Another way to categorise universities in China is: comprehensive, which include humanities, social and natural sciences and other faculties; specialist, teaching such subjects as foreign languages, engineering, commerce or law; and teacher training. The reforms of 1985 gave considerable authority back to the universities themselves and reduced state intervention. There are now many privately run institutes, but still no fully private competitive examinations, although applicants’ physical health and ideology are also taken into account. Specific university enrolment is determined by a series of government committees on the basis of state needs and student preference, although the universities themselves now enjoy more influence over enrolments. Initially in the reform period, enrolment size growth tended to be small. Two reasons for this have been suggested. The first is that the birth control campaign, which began in the early 1970s substantially reduced the size of the relevant age cohorts in the urban areas by the late 1970s, with cities like Shanghai, Beijing, Tianjin, Nanjing and Guangzhou reporting ‘declining primary school enrolments for this reason’ by the late 1970s (Pepper 1980). The other explanation is the decline of the locally-run community (minban) schools. Although they may have received state subsidies, typically they were financed by rural collectives. With de-collectivisation, and with greater emphasis on profit and money-making, many of them closed down.

Chinese School Education

63

Teachers could find other more remunerative work in the growing services sector, and often nobody was prepared (or had the money) to keep the schools going. In secondary schools enrolments fell until 1989 and began to rise thereafter, but still reaching nowhere near their 1978 level by 1995. The number of secondary schools has declined consistently since 1977. One explanation may again be the birth control program, affecting the secondary level about six years later than the primary. But a more important cause is changing government policy. During the Cultural Revolution the government sought to popularize junior secondary schooling by one year, but adding two-year junior secondary classes to the village primary schools. From the late 1970s the government deliberately reduced the number of secondary schools, arguing that the former policy spread financial resources too thinly and ‘aggravated the shortage of qualified teachers’, with the result that the quality of both junior and senior secondary school education had declined. During the 1980s, the number of secondary schools continued to fall. Enrolment rates—that is, the proportion of children of the relevant age cohort who begin schooling—have risen dramatically since 1949. From 49.2% in 1952, they rose to 84.7% in 1965. From 1979 to 1982 they remained fairly constant at about 93%, rising consistently to 97.8% in 1990, and after a slight drop in 1992, continuing to climb to 98.5% in 1995 (China, Chinese statistical yearbook). While these figures are impressive, they give no indication of how long the children stay at school, as even a child who attended for only a month would count as having enrolled. Gradually through the 1990s student numbers began to rise more swiftly. This occurred not because of population growth but because of a rise in the participation rates. In recent years participation in secondary schools has been rising. Figure 4.2 provides figures for the growth of the secondary school age population and participation levels. Over the period 1999 until 2006 the participation rate of young Chinese at secondary school rose from 62 to 75% (UNESCO, Institute of Statistics 2019). This rate is still lower than the secondary education participation rate of developed countries such as the United States (88%), Japan (99%) and even lower than China’s 160 140 120 100 80 60

Secondary school age population

40 Enrolments in total secondary sschools

20 0

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Fig. 4.2 School population and enrolments in China, 1999–2018. Source UNESCO, Institute of Statistics (1999–2018)

64

4 Education Background

Hong Kong (78%), but fairly typical of developing countries and at a similar level to that of Malaysia, Columbia and Thailand. The inference from this is that this rate will probably continue to rise if China’s growth and development continues and if China makes the full transformation from developing to developed country. On the whole it can probably be expected that the secondary education enrolment rate will continue to rise at a fairly steady rate to reach approximately 90% before leveling off. It is also clear that the secondary school population in China has leveled off and has even fallen slightly in recent years. A rising participation rate has boosted numbers in secondary schools but it is anticipated that overall numbers will rise as the participation rate does but gradually level off over the next few years. Many students of course do not attend the senior secondary schools in China, but instead attend vocation education and training institutions. Vocational education and training in China provides pre-employment certification and skills formation for employed persons and for people who wish to retrain in order to change employment. The delivery of vocational education and training involves higher vocational institutions (part of the tertiary education system) and secondary polytechnic schools, advanced technical schools, technical schools, employment training centers, private training institutions and enterprise training centers. These institutions over the past ten years have played a crucial role in providing China with a skilled workforce that is capable of providing for the rapid expansion of China’s industrial sector. Eventually the reform of the Chinese secondary education system and growth in participation rates began to flow on to affect the higher education sector. In the 1990s after a period of slow growth the number of students studying in the Chinese higher education sector began to expand rapidly. The Chinese Government became more prepared to invest funds in the expansion of the system and in a short period the Chinese higher education system was transformed into the world’s largest.

Chinese Higher Education Tertiary education in China is made up of regular tertiary education institutions, adult tertiary education, in-service training leading to vocational qualifications, preparatory courses for state-administered college level examinations for self-taught learners, distance education and internet based education. The central government has responsibility generally for policy, regulation and teaching quality evaluation in respect of tertiary education. The provincial governments are responsible for managing the institutions in their provinces and for financing those public tertiary education institutions that are not managed by the central ministries. Growth in incomes, growth in demand for graduates and a rising participation in secondary education has meant that participation in higher education had risen at a considerable pace in recent years. Figure 4.3 shows that the growth in the higher education sector has been very strong over the past ten years. The rapid rate of expansion of enrolments has meant that the participation rate in China has risen. The

Chinese Higher Education

65 40 35 30 25 20 15 10 5

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0 -5 -10 -15

Fig. 4.3 Growth of enrolment numbers in regular institutions of higher education in China, 1979– 2015. Source China (2003–2019), Education statistics

participation rate (enrolment ratio) of young people studying at the tertiary level rose from 6.4% in 1999 to 50.6% in 2018 (Table 4.1). As part of this process the higher education sector also expanded. In effect the Chinese tertiary education sector was transformed in a very short time from an elite one to a mass education one. This mass education sector, although now the world’s largest, is perhaps not as large as it will grow into the future. In terms of its relative size compared to the population as a whole the Chinese sector, even after years of rapid growth, is not especially large. Not only is the Chinese figure of net enrolment in tertiary education at 50.6% below that of developed countries (i.e. Japan 56.3%, and the United States 60.0%), but it is also below that of some developing countries (Table 4.1). It would appear; therefore, very likely that China’s higher education sector will continue to grow in size in the future, perhaps not as rapidly as in the past, but nonetheless at a fairly steady rate. Perhaps the only factor that will constrain this growth is the aging of the Chinese population. At some stage in the future the higher education sector’s growth will slow. Until that happens, however, it would appear that a combination of strong growth of the Chinese population, and raising participation rates in education will continue to drive expansion of the system. This expansion is taking place in an education system that has a considerable historical legacy. Although China has a long history of education, it was really at the end of the nineteenth century that the first of the modern Chinese universities were founded. The Chinese education system is based on legalist and Confucian ideals and the teaching of Confucius has shaped the overall Chinese mindset for the past 2500 years. But, other outside forces have played a large role in the nation’s educational development. Defeats in wars against western powers and the Japanese invasion in the nineteenth century opened up the country to outside influences. As a result, Chinese intellectuals discovered the numerous western advances in science and technology. This new information greatly impacted the higher education system and curriculum.

66 Table 4.1 Net enrolment rate; secondary and tertiary education in selected countries, 2018

4 Education Background Secondary

Tertiary

Australia

92.8

58.6

Azerbaijan

88.5

27.7

Belarus

95.6

67.0

Belize

71.2

24.7

China

80.0

50.6

Colombia

77.5

55.3

Fiji

79.1

17.9

Hong Kong (China), SAR

96.1

76.9

Indonesia

78.7

36.3

Japan

98.7

56.3

Malaysia

72.2

28.9

Mexico

81.1

45.1

Panama

63.8

47.8

Peru

89.3

70.7

Philippines

65.6

35.5

Republic of Korea

98.0

94.5

Russian Federation

90.7

81.9

Thailand

77.3

99.3

Turkey

87.2

34.8

Ukraine

85.7

82.7

United Kingdom

92.5

60.0

United States

92.5

88.2

Source UNESCO, Institute of Statistics (2019)

These new institutions when they were established, therefore, were influenced by the existing institutions that had been established in Europe and the United States as well as in Japan. The first university was established in Tianjin, China back in 1895 and was then known as the Peiyang University (known since 1951 as the Tianjin University). Jiaotong University, the next, was founded in Shanghai in 1896. In the 1950s, a large portion of this university was moved to Xi’an, an ancient capital city in northwest China, and became the Xi’an Jiaotong University; the part of the university remaining in Shanghai was renamed Shanghai Jiaotong University. Other leading universities in China were also established around this time such as the Zhejiang University (1897), Peking University (1898), and Nanjing University (1902). In the early decades of the twentieth century growth of the Chinese universities was unspectacular but steady. By June 1931 there were 39 universities (13 national, 12 provincial and 14 private) in China as well as 17 colleges and 23 professional schools (Hayhoe 1989). By the time of the founding of new China in 1949 there were 205 universities in China (China 1985, China statistical yearbook). Although this was a sizeable number of institutions, for a country with China’s enormous population it

Chinese Higher Education

67

constituted a very small enrolment of the total population. Most of these institutions were quite small and only a tiny proportion of the country’s population attended university at this time. After the Chinese Communist Party came to power they consolidated the universities between 1949 and 1953, the number of comprehensive universities was reduced from 49 to 13, accompanied by a severe reduction in the number of university places in the humanities and social sciences (Ouyang 2004). In addition the private universities were taken over by the government. Soviet influence in the early 1950s was strong and tended to shape the development of the higher education sector. This meant that research was separated from teaching. The government also introduced a central plan for a nationally unified instruction system, i.e. texts, syllabi, etc. Universities tended to be concentrated into specialized fields, such as teaching, radio and communications, transport and construction, etc. The impact of this shift can still be seen today. Chinese higher education continues its struggle with excessive departmentalization, segmentation, and overspecialization in particular. After 1957 the number of higher education institutions was greatly increased and rose from 229 in 1957 to 1289 in 1960, although many of these were of very small size and barely sustainable. This number was pared back in subsequent years and stood at 434 in 1965. The advent of the Cultural Revolution in 1966 meant that growth and development of the higher education system was curtailed for a number of years and it was not until 1977 that the National College Entrance Examination was resumed and many universities were reopened. From 1967 to 1976, China’s Cultural Revolution took a great toll on higher education, which was devastated more than any other sector of the country. The number of tertiary level students dropped from 674,400 to 47,800, which was to have a considerable impact on education in China through into the twenty-first century. From the 1980s on, Chinese higher education has undergone a series of reforms that have slowly brought about improvement. In 1977, Deng Xiaoping made the decision to resume the national college entrance examination (Gao Kao). From 1977 the academic degree system was reintroduced and Masters and Doctoral degrees established in a number of universities. By 1995 1054 universities and colleges were operating with some 2,906,000 students. Between 1996 and 2000 another round of mergers took place and the number of institutions in China fell, at a time when actual enrolments grew substantially (see Table 4.2). In terms of the higher education sector in China itself, the sector consists of two and three year colleges as well as universities. The former institutions award associate degrees and diploma qualifications and the latter mainly four year degrees. Masters degrees and PhDs are offered by universities and research institutions that are accredited by the State Council. Until the late 1980s higher education was free to students, but since then fees have been introduced for most qualifications and have in recent years risen steadily. The reforms aimed to provide higher education institutions with more autonomy and with the ability to better meet the needs of students. Instead of micromanagement, the government has been moving toward a greater concentration on general planning of the growth of the sector.

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4 Education Background

Table 4.2 Number of regular higher education institutions and enrolled students in China, 1952– 2013 Regular institutions of HE no

Regular institutions of HE students

Students overseas no

1952

201

191,000

231

1957

229

441,000

529

1962

610

830,000

114

1965

434

674,000

454

1970

434

48,000

1975

387

501,000

245

1980

675

1,144,000

2124

1985

1016

1,703,000

4888

1990

1075

2,063,000

2950

1995

1054

2,906,000

20,381

2000

1041

5,560,900

38,989

2007

1908

18,848,954

144,000

2013

2491

24,680,726

174,806

na

Source The author made this table

Over the same period of growth of the higher education sector the approach of government oversight has also changed. In 1986 the State Council on education promulgated the Provisional Regulations Concerning the Management of Institutions of Higher Learning. These regulations initiated a number of changes in administration and adjusted educational opportunity, direction and content. These reformed regulations allowed universities and colleges to: • choose their own teaching plans and curricula; • accept projects from or cooperate with other government establishments for scientific research and technical development in teaching, scientific research, and production; • suggest ways of making appointments and removals of vice presidents and other staff members; • take charge of the distribution of capital construction investment and funds allocated by the government; and • be responsible for the development of international exchanges. The reform process picked up pace in 2000, when the government began to reform 200 universities operating under China’s ministries and started 15 university-based scientific technology parks. In 2002, there were slightly over 2000 higher education institutions in China, of which close to 1400 were regular higher education institutions. A little more than 600 of these were higher education institutions for adults. Combined enrollments in 2002 were 11,256,800. The number of graduate student enrolments was 501,000. In

Chinese Higher Education

69

2005, there were about 4000 Chinese institutions and enrollment had increased to 15 million (China, Ministry of Education 2003–2019). As well as growth in numbers the Chinese government has tried to raise the general quality and world profile of the country’s universities. Since 1998, ten universities were targeted by the Chinese government to become ‘world-class’ institutions— including Peking and Tsinghua Universities. To achieve that goal, the government promised to increase the educational allocation in the national budget by one percent a year for each of the five years following 1998. When Chinese president Jiang Zemin attended the hundredth anniversary ceremony at Peking University in 1998 and the ninetieth anniversary ceremony at Tsinghua University in 2001, he emphasized this goal of advancing several of China’s higher education institutions into the top tier of universities worldwide. Along with the top tier of universities efforts have been undertaken to raise general quality across the system. In the late 2000s only 30% of faculty in Chinese higher education institutions held postgraduate degrees. This is a consequence of the lack of an academic degree system in China until the 1980s. In recent years, more internationally—trained scholars have been employed with the goal of both improving quality and strengthening ties to other institutions around the world (Tables 4.3, 4.4 and 4.5). In the spring of 2007 China conducted a national evaluation of its universities. The results of this evaluation were used to support the next major planned policy initiatives. The last substantial national evaluation of universities had been in 1994. The evaluation raised a number of concerns but chief amongst these was that the quantity of rote memorization instilled in Chinese students served as a detriment to creative thinking and the lack of real-world experience during the formative years negatively impacts students’ ability to adapt to the global business environment easily. An additional concern was the manner in which expansion was occurring and the relationship between higher education institutions, including private ones, and the government. The rapid expansion of the higher education in China has meant that its growth has extended beyond the resources available to the government. This has meant not only that the government owned universities have increasingly relied on the charging of fees to students, but also the government has shown a willingness to allow for the growth of private higher education institutions. These ‘demand-absorbing’ institutions have steadily become an important component of the Chinese higher education sector and it is to them that our attention now must turn.

Chinese Private Higher Education Private higher education is defined primarily by its type of ownership. Private higher education institutions are not operated by governments, although they may or may not receive funding from government sources depending upon the country in which they operate. Some countries such as the United States, Japan and the Philippines

70

4 Education Background

Table 4.3 Number of higher education institution in China, 2018 高等教育学校(机构)数 Number of Higher Education Institutions 单位:所 unit: institution 地区 Region

普通高校 Regular HEIs

总 计 Total

2663 119

成人高等学校 Adult HEIs

民办的其他 高 等教育 机构 Other 合计 其中:中 本科院校 高职(专 合计 其中:中 Total 央部门办 HEIs 科)院校 Total 央部门办 Non-government of Which: Offering Higher of Which: HEIs HEIs Degree Vocational HEIs under Programs Colleges under Central Central Ministries Ministries & & Agencies Agencies 1245

1418

277

13

786

北京 Beijing

92

38

67

25

23

8

64

天 津 Tianjin

56

3

30

26

14

0

0

河 北 Hebei

122

4

61

61

6

1

38

山 西 Shanxi

83

0

33

50

10

0

45

内蒙古 Inner Mongolia

53

0

17

36

2

0

0

115

5

64

51

19

2

60

吉 林 Jilin

62

2

37

25

14

0

15

黑龙江 Heilongjiang

81

3

39

42

20

0

35

上海 Shanghai

64

10

39

25

14

0

210

江苏 Jiangsu

167

10

77

90

8

1

0

浙江 Zhejiang

108

2

60

48

9

0

20

安 徽 Anhui

119

2

45

74

6

0

7

福 建 Fujian

89

2

37

52

3

0

0

江 西 Jiangxi

102

0

43

59

8

0

23

山东 Shandong

145

3

67

78

11

0

65

辽宁 Liaoning

河 南 Henan 湖 北 Hubei

139 128

1 8

55 68

84 60

10 14

0 0

50 18 (continued)

Chinese Private Higher Education

71

Table 4.3 (continued) 高等教育学校(机构)数 Number of Higher Education Institutions 湖 南 Hunan 124

3

51

73

12

0

27

广东 Guangdong

152

5

64

88

14

0

29

广西 Guangxi

75

0

36

39

6

0

0

海 南 Hainan 20

0

7

13

1

0

0

重庆 Chongqing

65

2

25

40

4

0

6

四川 Sichuan

119

6

51

68

16

1

39

贵州 Guizhou

72

0

29

43

3

0

0

云南 Yunnan

79

1

32

47

2

0

0

西 藏 Tibet

7

0

4

3

0

0

0

陕西 Shaanxi

95

6

55

40

14

0

0

甘 肃 Gansu

49

2

22

27

5

0

35

青海 Qinghai

12

0

4

8

2

0

0

宁夏 Ningxia

19

1

8

11

1

0

0

新疆 Xinjiang

50

0

18

32

6

0

0

Source China, Ministry of Education (2018), Number of Higher Education Institutions

have very substantial and old private higher education institutions while in some countries private universities are a new phenomenon (for examples see Table 4.6). Depending on the region, private universities may be subject to government regulation. Private universities are common in some countries but do not exist in others. Many of the oldest are non-profit institutions originally founded by religious orders but have subsequently grown into being substantially, non-secular, non-profit institutions. Since the 1980s there has been very strong growth in private higher education both in countries with a long history of private provision and in others that previously had little experience of this type of institutions (Altbach 1999; Levy 2002, 2005, 2006). In more recent times the most prominent type of private institution that has arisen has been the for-profit type (often legally non-profit) with demand-absorbing aims and commercial characteristics. China provides one of the most important examples of the growth of private higher education in recent years. Private higher education in

Art

Source The author made this table

2,630,811

77,400

Management

Total

271,406

395,064

Medicine

125,839

Agriculture

226,291

Science

1,051,682

20,279

History

Engineering

90,573

104,552

158,694

Law

Literature

94,281

Economics

Education

14,750

Philosophy

Post-graduate 92

40,873 2,971,134

16,973,343

742,172

889,556

42,503

599,351

38,727

2736

194,757

248,580

109,675

62,113

Adult

1,627,976

2,996,311

1,294,258

28,8719

5,692,317

1,135,022

77,425

1,609,161

675,442

585,714

980,980

10,018

Under-graduate

2,825,757

12,453

1,215,336

229,652

25,580

668,525

23,078

1213

149,975

160,494

236,838

102,613

0

Internet based

25,401,045

1,758,702

5,348,883

2,684,872

482,641

8,011,875

1,423,118

101,653

2,058,445

1,175,089

1,090,921

1,239,987

24,860

Total 2018

Table 4.4 Enrolments by discipline in regular institutions of higher education in China, 1995, 2007, 2018

100.0

6.9

21.1

10.6

1.9

31.5

5.6

0.4

8.1

4.6

4.3

4.9

0.1

2018 (%)

100.0

0.0

23.6

8.3

1.8

30.7

5.2

0.3

14.5

5.4

5.2

5.1

0.1

2007 (%)

100.0

0.0

0.0

48.1

2.2

22.9

6.1

1.0

7.2

2.3

1.8

8.5

0.1

1995 (%)

72 4 Education Background

Chinese Private Higher Education Table 4.5 Student numbers in regular higher education institutions in China 2018

Postgraduate

73 2,731,257

Doctor’s

389,518

Master’s

2,341,739

Regular undergraduate

2,8310,348

Enrolled in full undergraduate courses

16,973,363

Enrolled in specialised courses

11,337,005

Adult undergraduates

5,909,878

Enrolled in full undergraduate courses

2,971,134

Enrolled in specialised courses

2,938,744

Other

8,793,799

Internet based courses

8,256,553

Self-learning programmes

160,028

Postgraduate courses for advanced study

25,618

College preparatory courses

44,099

Overseas students

307,501

Total

45,745,282

Source The author made this table based on China, Ministry of Education (2019), Number of Students of Formal Education by Type and Level, Ministry of Education, Beijing Table 4.6 Private higher education shares of total higher education in selected countries, percentage, 2000–2009 Country Australia

Private % of total higher education enrolment

Year

3.5

2008

China

19.9

2008

France

16.6

2006

Germany

4.9

2008

Hong Kong

59.0

2007/08

Japan

77.4

2007

India

30.7

2005/06

Malaysia

50.9

2004

9.3

2006

New Zealand Philippines

65.2

Russia

14.9

2004

South Korea

80.1

2006

United States

26.1

2007

Vietnam

10.4

2005

Source Program for Research in Private Higher Education 2013

2005/06

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4 Education Background

Table 4.7 Public and private higher education enrolments in China, 1999–2009 Public HE enrolments no

Private HE enrolments no

Private HE enrolments (%)

na

na

Education exp/GDP (%)

2000

9,321,219

2005

20,949,642

2,036,050

8.9

1.9

1.7

2008

26,976,244

4,037,603

13.0

2.6

2013

34,091,920

5,300,000

12.0

3.7

2015

43,367,394

6,000,000

13.6

3.8

2018

44,935,169

6,300,000

14.0

3.7

Source UNESCO, Institute of Statistics (2019)

China re-emerged in 1978, but was an important part of the China’s higher education sector before 1952. In that year 89 private institutions, most of them not-for profit institutions, were transformed into government ones. Subsequently private education at all levels was prohibited by the central government but re-emerged after 1978 (Qin 2000). In the 1980s the private sector re-emerged and subsequently grew steadily (Liu 2002; Qin 2000; Yan and Wu 2004). From Table 4.3 it can be seen that by 2018 the number of private higher education institutions in China had risen to 786. Table 4.7 shows that after 2000 the proportion of private higher education in total higher education has risen steadily. This growth has not been uniform across China but instead is concentrated in a number of provinces. All private institutions are designated solely for educational purposes instead of for-profit, with the permission that they may make ‘reasonable returns’ and their foreign investors are allowed to repatriate returns. Its founders may include from individuals, enterprises, public universities to Sino-foreign cooperation and others, with the requirement of financial viability, qualifications of both teaching and managing staff, as well as internal administrative procedures with a three-year probation. The average tuition fee for the public tertiary education institutions various from the range of RMB 2000 to RMB 6000 per academic year; and it is bit higher in the private tertiary education institutions from RMB 8000 to RMB 13,000 per annual. ‘Limits are set at provincial level having regard to costs of provision, the socioeconomic conditions of the region, and the disposable incomes of families.’ Student accommodation charges typically fall within the range of RMB 1000–1500 per year (Organisation for Economic Cooperation and Development 2007, p. 38). The founders of private tertiary education institutions in China may include a range of different people and include individuals (such as retired academics, government officials etc.); community organizations; enterprises; public universities or international/Chinese joint ventures. It is normally required that applicants for private accreditation in China provide evidence of financial viability, the qualifications of teachers and administrators and internal governance procedures. Private institutions normally have to show satisfactory performance over a probationary period of three years.

Chinese Private Higher Education

75

The private higher education sector in China has evolved into a diverse one and consists of a large number of large specialist institutions, as well as a number of quite large scale institutions with diverse offerings. In order to understand the private higher education sector in China it is helpful to observe a few examples. The first example is that of the Geely University of China (GUC, originally named Beijing Geely University). It is one of the most famous private universities in China and was based in the capital city—Beijing until the year of 2020. It was founded in the year 1999 by Beijing Geely International Education of the China Geely Group and was approved by the Beijing Municipal Government and registered by the Ministry of Education of China to issue graduation certificates and diplomas. GUC is a privately managed higher education institute with enrollments ranging from undergraduate level, self-taught to diploma test and overseas students. There are over 1000 fulltime working staff at the university with over 11,000 students enrolled today and it aims to attract 30,000 students in the near future. GUC, has a building space of around 450,000 m2 , containing 18 buildings used for student accommodation, six largescale connected classroom buildings, extra two for expert accommodation, six grass football pitches, twenty basketball courts, twelve volleyball courts, four tennis courts, six badminton courts, one gym and one standard track and field. The university has invested RMB 7 million into the building of a modern library, covering an area of 20,000 m2 . Students have been provided services such as convenience stores, a hospital, communal bath-rooms, self-operated laundries, reception rooms and ATMs on campus. The tuition fee for the university was RMB 29,500 per year for 2010, and student accommodation fee ranges from RMB 2200 to 4200 per annual for the year of 2010. Student apartments have private toilets, air-conditioning, DDD telephones, broadband connections, closed-circuit television and 24 h security (Beijing Geely University 2013). Another, older, example is that of the Beijing Renwen University, which was established in 1984 with the authorization of the Beijing Municipal Education Commission. It is one of the earliest and one of the 50 most competitive private higher education institutions for employment in China. Beijing Renwen University covers a building area of over half a million square metres. It is made up of four campuses in four districts in Beijing, which include; Tong-Zhou, Shun-Yi, Chang-Ping, and YanQing. It is a full-time multi-disciplinary comprehensive institution with 16 schools and four institutes and more than 60 majors and specialities with multi-skill training bases (three-year and four-year) which cover arts, science, industry, management, economics, foreign languages and martial arts. It has over 1100 faculty and staff members including over 300 full-time and part-time professors and associated professors as teaching staff, and over 18,000 full-time students (Beijing Renwen University 2013). Another private university is the Dalian Neusoft Vocational Institute of Information Technology. It is located in the Software Park of Dalian city, Liaoning Province in China, and is a private higher education institute authorized by Liaoning Provincial Government and registered by the Ministry of Education in 2002. The institute covers an area of 585 thousand square meters with 30.3 thousand square meters occupied by buildings. It carries out three and four year, full-time higher college education

76

4 Education Background

qualifications and the institute’s enrollment has been included in the national general higher education enrolling plan. As a professional IT institute invested in by private enterprise, it enjoys a reputation of being a ‘laptop university’ because each student in the institute owns their personal laptop, which is not so true in most of other universities in China. In addition, the institute has established regular contact and academic exchange programs with dozens of universities such as the University of Adelaide and Swinburne University in Australia, the University of Reading in Britain, and Waseda University in Japan (Dalian Neusoft Vocational Institute of Information Technology 2013). From these three examples it is possible to see that the private higher education sector in China does possess a number of very substantial institutions, with very well established facilities and reputations. This is not to say that all private higher education institutions in China are regarded in a similar fashion. Many are far smaller in size, and narrower in scope often specializing in the provision of education in a range of fields such as English language, business studies and IT. Nonetheless it is apparent that the growth of these institutions over the past ten years has meant that China today has a very substantial private sector.

Regulation and Planning of Chinese Higher Education Higher education institutions in China, historically, have been subjected to a very highly centralised and prescriptive system of regulation and planning. This system, however, has been the subject of considerable reform since the 1990s. Universities and vocational colleges are administered at the national, regional and local levels, or combinations of the three. In China, the public higher education institutions are administered and financed by one of the following administrative authorities: (a) the Ministry of Education (MOE); (b) central level ministries and agencies; (c) provinces and province-level municipalities. Figure 4.4 provides a description of the basic regulatory structure of Chinese higher education. In terms of regulation of the education sector, in the year 1982, Article 24 of the Constitution was promulgated, and was further amended later in 1988, 1993, 1995 and 2004 respectively. This article points out the importance of promoting education to China’s social and economic development. In 1985, the Decision of the Chinese Communist Party Central Committee on the Reform of the Educational System began the process of decentralization in education. The Education Law promulgated in 1985 stipulated that the corner stone of modernization in China was education, and that priority should be given to its development (China, State Council 1986). Article 14 of the Education Law stipulated that the State Council and local governments at all levels shall guide and administer educational work according to principles of management at different levels with suitable division of responsibilities. Education

Regulation and Planning of Chinese Higher Education

77

State Council of the PRC

Ministry of Education (MOE)

Provinces, autonomous regions

Ministries other that the

or municipalities

MOE

(Education Commissions)

Education institutions

Institutions affiliated with the

Institutions affiliated

MOE

with other Ministries

Fig. 4.4 Structure of regulation of higher education in China. Source China (2003–2019), Education statistics

at the secondary school level or lower would be administered by local governments under the leadership of the State Council. Higher education would be administered by the State Council and the governments of the provinces, autonomous regions, and municipalities directly under the central government. On the 29 August 1998, the fourth conference of the Ninth Standing Committee of National Congress promulgated the Higher Education Law and put it into force on 1 January 1999, which was the first comprehensive legal document regulating higher education in China (China, Ninth National People’s Congress 1998; China, Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the People’s Republic of China 1999a, b; China, Central Committee of Communist Party of China and the State Council 1999; China, State Council 1998). On 28 August 2004, the Eleventh Session of the Standing Committee of the Tenth National People’s Congress amended the Regulations on Academic Degrees of the People’s Republic of China (which was adopted earlier in 1980 at the 13th Meeting of the Standing Committee of the Fifth National People’s Congress), stated the conditions for awarding bachelor’s, master’s and doctoral degrees (China, State Council 2004). On 28 December 2002, the Thirty-first Meeting of the Standing Committee of the Ninth National People’s Congress promulgated the Private Education Promotion Law of the People’s Republic of China, and put it into force on the 1 September 2003 (China, Ninth National People’s Congress 2002). This law stated that to establish non-public schools that provide education for academic credentials, pre-school education, training for preparing self-study examinations and other cultural education shall be subject to examination and approval by the administrative departments of education at or above the county level within the limits of their powers defined by

78

4 Education Background

the State. The establishment of a non-public school that mainly provides vocational skills, including training for vocational qualifications, shall be subject to examination and approval by the administrative department of labour and social security under the government at or above the county level, within the limits of its powers defined by the State. The Law made it possible for foreign institutions to offer programmes in China through joint ventures with Chinese higher education institutions (Netherlands Organization for International Cooperation in Higher Education 2010; China, Ministry of Education, Chinese National Commission for UNESCO National Center for Education Development Research 2008). Based on the Education Law, the State Council and local governments at all levels guide and administer education according to the principles of management at different levels and with a suitable division of responsibilities: the administrative educational departments under the State Council are in charge of educational work throughout the country, and undertake overall planning, coordination and management of educational activities. The administrative departments of education under the governments, at or above the county level, are in charge of educational activities in their respective administrative regions. Other administrative departments of the governments, at or above the county level, are responsible for the relevant educational activities within their jurisdiction. Other ministries and commissions under the State Council also have departments in charge of educational administration within their sphere of competence. The State Education Commission was the agency in charge of education throughout the country between 1985 and 1998. Today the Ministry of Education is the highest educational administrative body. It takes charge of implementing relevant laws and regulations, principles and policies, defining specific educational policies, preparing and coordinating educational development plans, coordinating the education-related work of all departments in the country, and providing guidance to the reform of the education system. The management of pre-school education is mainly within the responsibility of local governments. Compulsory education is guided by the State Council and principally managed by the governments at the county level; its implementation is carried out in accordance to the overall planning of the provincial, autonomous regional and municipal governments. Vocational education is under the leadership of the State Council, with the local authorities taking up the major responsibility, and the overall coordination of government and the participation of the society (China, Ministry of Education 2010). Higher education is under the supervision of the State Council and administered by the governments of the provinces, autonomous regions and municipalities directly under the central government. Higher education institutions include universities, research institutes, specialized institutions, independent colleges (since 2008), professional universities, military institutions, medical schools and colleges, and executive training schools. Admission to university depends on the results of the national entrance examination (Gaokao). Universities and other higher education institutions offer practically-oriented, non-degree programmes, typically lasting two or three years, leading to the award of a diploma; diploma holders can continue on to a Bachelor’s degree by completing an additional three or two years of study.

Regulation and Planning of Chinese Higher Education

79

Programmes leading to a Bachelor’s degree normally take four years to complete (five years in medicine, traditional Chinese medicine, architecture, and engineering). If successful in the entrance examination, Bachelor’s degree holders can pursue a master’s degree, normally awarded after two to three years of study. Admission to a programme leading to the award of a Doctorate requires a master’s degree, passing the entrance examination, and formal recommendations by at least two professors. Programmes usually last between three and five years. Programmes combining a master’s and a doctorate are also offered; in this case, it is not required to sit the entrance examination for admission to the doctorate programme (China, Ministry of Education, Chinese National Commission for UNESCO 2008). To enlarge the scale of higher education, the Ministry of Education planned that the gross enrolment rate in higher education institutions should have reached 15% of the age cohort by the year 2010. In 2002, the goal was achieved eight years ahead of the schedule. In the following years: the rate rose from 19% in 2004, to 22% in 2006 and 23.3% in 2008, which was a big leap comparing to 9.7% in the year of 1997 (UNESCO, Institute of Statistics). Undertaking an expansion of higher education of this size, in such a short time, created a number of infrastructure construction problems. The policy of decentralization allowed three approaches to help with solving the problem of supply: to begin with the local government support, many universities in China are located in inner cities. In order to solve the problem encountered while taking in more students verse a shortage of buildings and land, the municipal government gives special consideration to universities in planning to build new campuses. Of the about 100 universities of the ‘211 Project’, about half of them have built new campuses in suburban areas. Another approach to solving the problems of resource scarcity was to establish partnerships with non-government sectors. In the process of social economical system marketisation, some entrepreneurs looked for opportunities universities, for example, to invest in building the student living areas, and to allow the university to be responsible for constructing the teaching area, with the joint efforts. Since the Tenth Five-Year plan (2002–2007), the Ministry of Education adhered to the guidelines of deepening reform, safeguarding results, raising quality and facilitating the pace of development. Two important major measures have been taken to guarantee quality levels in the process of decentralization and mass expansion of higher education. One was to control the student quota. All higher education institutions under the direct administration of the Ministry must apply yearly for approval of the number of students to be taken in. Other institutions apply to the provincial government for their quota, and the total of the province must be approved by the Government, to make sure that the increase of the gross enrolment rate is in accordance with the rate of increase of the GDP. Another measure has been the quality assessment. In 2000, the Ministry appointed a specialist group to work out a programme for evaluating the capacity of undergraduate education of a university and the actual level of teaching, which was originally considered as part of the university teaching assessment system. It consisted of seven first-rank checking items, 19 second-rank checking items and 44 points of observation. The programme covered all aspects of undergraduate education, including

80

4 Education Background

infrastructure, facilities, teaching staff, administration, teacher performance, student discipline, student abilities, etc. It was first tried out 2002. In the following three years over 180 universities and colleges were assessed. The rest were checked by the end of 2007. Since then, all institutions of higher education will be assessed every five years. The policy change of decentralization has resulted in the emergence of plurality in institutional ownership and sources of funding for higher education. For a century higher education institutions in China were public and funded solely by the central or local government. Now over one thousand universities or colleges are privately owned. These independent colleges (a special mode of institutions of higher education) with 0.68 million students, are funded and run by private enterprises. In 2003, the Ministry of Education issued a document to officially support this new type of ownership and to announce the requirements for the establishment of this kind of institutions. The designation of university title, the award of academic qualifications, standards criteria are all regulated by the national Ministry of Education in Beijing. Direct management of these regulations, however, has been delegated to provincial ministries, with the exception of 73 national universities which are regarded as ‘flagship’ institutions of the Chinese nation. Private higher education institutions fall under the scope of the same regulatory regime as the government institutions. This means that they are regulated to some degree by the guidelines set down by the national Ministry of Education. In practice, however, the various private institutions are regulated to some degree by the differing interpretations of the provincial Ministries of Education. This means that there can be some variety in terms of regulatory standards across the country. The regulatory climate for private higher education institutions is, therefore, a complex and ever changing one with circumstances being altered and reformed from one year to the next. This might be one of the reasons why the private higher education sector varies in importance across the different provinces. According to Tao Xiping, the chairman of China Association of Private Education, China’s private education is divided into two phases, which are: the start-up period and transition period of development. The first phase was from the year of 1978– 2003, with ‘Closely supervise regulations’ in 1997 as a symbol, to break the barriers of higher academic education, so that non-governmental forces in the field of higher education have a broader space for development; the second phase is from the year of 2003–2020, with ‘Private Education Promotion Law’ being promulgated as a starting point, private education enters into the legal phase of the restructuring period of its development. Tao Xiping emphasized that the development of private education in China shortly before entering the transition, the rapid development of private education from the start-up period to maturity of the transition need more rational thinking and practice efforts to achieve a higher level of private education in the health development. Public awareness, funding, autonomy and school system are the main concerns in the transitional stage of the development in China’s private higher education. Wang Wenyuan, the director from the Institute for Private Education, Beijing Academy of

Regulation and Planning of Chinese Higher Education

81

Education in China, stated that if the above four issues are resolved properly, it is bound to open up more space to the development of private education and the growth of private institutions, thereafter, it will also move into new round of rapid period of development. Tao Xiping predicted, according to ‘Education Plan’ requirements, private education in China after 2020 will enter into a relatively mature stage of development, he suggested the government speed up the implementation of equal treatment policy, or private education might never grow to maturity.

Foreign Investment in Higher Education The government policies toward Chinese-foreign cooperation in running schools and colleges in China have undergone a striking change in the past 30 years. In doing so the year 1995 was a watershed one. Before 1995, it was more informal, incidental and laissez-fair in this area, but since 1995, with the issue of the ‘Interim Provisions for Chinese-foreign Cooperation in Running schools’, it has been more formal, systematic and well regulated. From the start of the open-door policy in 1978 until the mid-1980s, cooperation projects were started with caution, mainly among higher education institutions but without any clear regulations from the Chinese government. Since the mid-1980s, there were some well-known public universities in China—the Renmin University of China and Fudan University which started cooperation with their foreign counterparts in providing economic and law training classes. The Nanjing University cooperated with Johns Hopkins University from United States in opening the Sino-American Cultural Center in Nanjing in 1986. This was followed by Tianjin University of Finance, which cooperated with Oklahoma City University from the United States in running MBA training classes in 1987. From the end of 1980s until the mid-1990s, higher education in China experienced a fundamental change. On 30 June 1993, the State Education Committee issued: ‘Foreign institutions and individuals in China on Cooperation in Running Schools Issues’, which raised some issues on the regulation of the running of schools related to cooperation in terms of its meaning, principle, range, types and its main body (China, State Board of Education 1993). In January 1995, the ‘Interim Provisions for Chinese-foreign Cooperation in Running schools’ was passed by the State Education Commission (SEC, later changed its name into the Ministry of Education, MOE, in 1998), which promulgated, in Article 2 of Chapter 1: ‘Chinese-foreign cooperation in running schools mentioned in these provisions refers to educational undertakings enrolling Chinese citizens as the main objectives and run by educational institutions (hereinafter referred to as cooperative educational institutions) established in cooperation with foreign bodies corporate, individuals and relevant international organizations and Chinese educational institutions and other social organizations with the status of a legal person…; and in Article 20 and 22 of Chapter 3, it stated that ‘the operations and administration in these institutions requires that the number of local Chinese members of

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the Board or any governing bodies cannot be less than half of the total; and that the post of president, or major leaders in such institutions can only be held by Chinese citizens living in China, approved by the related administrative body in the government’, which made it clear that trans-national education was to be provided with some form of cooperation with or involvement of Chinese institutions located in China, instead of being provided solely by foreign institutions themselves. Apart from that, it also stated in Article 5 of Chapter 1 that: ‘Chinese-foreign cooperation in education shall abide by Chinese law and decrees, implement China’s guideline for education, conform to China’s need for educational development and requirement for the training of talents and ensure teaching quality, and shall not seek profits as the objective and/or damage the state and public interests’, so it is by law that the Chinese-foreign cooperative running schools is not allowed for profit hunting regardless of the reality that quite a few of them do get lots of de facto profit. In 2001, China joined the World Trade Organization (WTO). Of which Item 3 of Article 10 in ‘GATS’ promulgated that, in addition to the teaching activities completely funded by the Governments, all those teaching and learning activities with which charging tuition fee, and with commercial nature belong to trade in educational service areas. Therefore it requires China to put the WTO rules, agreements and the Protocol into its domestic legislation. In March 2003 the: ‘Regulations of the People’s Republic of China on Chineseforeign Cooperation in Running Schools’ was issued by the State Council, which promulgated to further expand its opening-up in education, to provide a legal basis for Chinese and foreign cooperative education activities. According to Article 3 of Chapter 1, the Chinese-foreign cooperative running schools, with quality foreign teaching resources, are encouraged to be introduced by Chinese government, and the cooperation in running schools between Chinese higher education institutions and well-known foreign counterparts in higher education and vocational education is encouraged. But for the organization and administration, in Article 21 of Chapter 3, it mentioned that ‘Chinese members of the board of trustees, the board of directors or of the joint managerial committee shall not be less than half of the total number’, which again emphasised the importance on the Chinese side in leadership of Chineseforeign cooperative running schools, furthermore, in Article 25 of Chapter 3, it stated that ‘the president or the principal administrator of a Chinese-foreign cooperativelyrun school shall be a person with the nationality of the People’s Republic of China and shall be subject to approval of the examination and approval authorities’, which means it’s not allowed for foreigners to be a legal person to run a Chinese-foreign cooperative school in China, apart from that, in Article 6 and 7 of Chapter 1, it is allowed for various of education to be run cooperatively by Chinese-foreign partners, except compulsory education and some special educations. All these indicate that various levels and forms of cooperative running schools are encouraged in China, especially in higher education. In order to better implement the ‘Regulations’, in March 2004, the Ministry of Education promulgated the: ‘Implementation Measures of the PRC Chinese-foreign cooperative education’ (hereinafter referred to as the ‘Measures’), further refining the management systems and measures. The promulgation and implementation of

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the ‘Regulations’ and the ‘Measures’, marked the beginning of Chinese and foreign cooperation in running schools. Since first years of the twenty first century, especially after the entry of WTO, China’s education market has been attracting more and more attention from foreign education institutions, and the demands for foreign education resources are increasing in China. As the approval process for Chinese-foreign cooperation in running schools is pretty stringent, some Chinese and foreign cooperative education program does not start under the name of ‘foreign cooperative education’, which in an attempt to circumvent the management from ‘Chinese-foreign Cooperation in Running Schools’, but in fact the broad foreign cooperative education activities in colleges and universities continue to be carried out, many universities have expanded their enrolment through the means of foreign cooperation in running schools. As in the market economy, the higher education system is affected by the role of multiple factors, in addition to a number of colleges and universities, some unqualified institutions also have carried out cooperative education activities in this area, which made it developing towards large-scale, chaotic and market-oriented trends with foreign cooperation in running schools. Because there is a huge market demand for foreign cooperation in running schools in China, and the cooperative education program were not approved by education authorities after a certain long period of time, resulting in a number of colleges and universities monitoring activities of Chinese-foreign cooperative education through vague concepts and alternative mode of operation in ways that essentially belongs to the Chinese-foreign cooperation in running schools of education and teaching activities. Facing to the issues mentioned above, in 2006, the Ministry of Education issued: ‘on a number of current views of the Ministry of Education on Chinese-foreign cooperation in running schools’ pointed out the basic principles to be followed in cooperation in higher education. In order to further standardize the order of Chinese-foreign cooperation in running schools, and to ‘tighten’ its policy, early April 2007, the Ministry of Education released document No. 14 [2007], ‘Notice on Further Specification of Chineseforeign Cooperation in Running Schools’, which states that, there are still some outstanding problems existing from the Chinese-foreign cooperation in running schools, such as repetition in running schools, poor quality, and it’s not standardised enrolment information, excessive pursuit of economic interests, etc. (China, Ministry of Education 2007; China, Twelfth Beijing People’s Congress 2006). The disorder of Chinese-foreign cooperation in running schools makes the authenticity and gold content of foreign qualifications questionable. As a result, in order to maintain the seriousness of the system, approved by the State Council Academic Degrees Committee and the Ministry of Education in China, Study Service Centre of Ministry of Education in China is providing a nationwide credential service on academic degree certificates and diploma certifications of higher education acquired from outside the country (territory), so as to identify the authenticity and provide for china’s admission and employers with some advice to safeguard the seriousness of the academic degree system in this country. If the academic degree obtained abroad is not certified by the Ministry of Education of China, after the students returned to China from overseas, students deemed not to have access to higher education

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qualifications, therefore they will be incorporated into the ‘workers’ series instead of ‘cadres’ series in its personnel system, resulting in the direct impact on students’ employment and promotion. Document No. 14 of 2007 by the Ministry of Education in China, is a warning for the unauthorised holding of foreign cooperation in running schools or training programs of higher education institutions. It indicates that any issue that related to the credits and/or degrees in the Chinese-foreign cooperative study pre-projects or training programs, should obey Chinese-foreign cooperative education project procedures in application for and getting approval. Up till now, the education authorities have detained a number of applications for Chinese-foreign cooperation projects in higher education, which also means that there exists a huge market demand and space in carrying out foreign cooperation in running schools in higher education. There exist some kinds of cooperation, which are not classified into the category mentioned above, yet are not prohibited by laws or any regulations clearly, and there is no mandatory requirement to go through the approval by the Ministry of Education, which means the exercise of autonomy in the following aspects by the higher education institutions: The first is that foreign higher education institutions to carry out training activities to Chinese citizens in China as the main object, which means that Chinese higher education institutions are commissioned by foreign higher education institutions to train the students in preparing for their studying abroad, and the training does not involve credit courses or professional courses or credit recognition studied abroad, usually training courses are focused mainly on language, culture, learning environment and methods of foreign universities. Secondly, the enrolment cooperation in targeting Chinese citizen within the boundary of China by Chinese and foreign higher education institutions (belongs to one form of Chinese-foreign exchanges and cooperation in higher education institutions), which foreign universities signed a cooperation agreement with their China’s counterparts, and then China’s higher education institutions recruit, select and recommend students for foreign higher education institutions through the channels which do not violate laws or regulations, and make sure that the process of cooperation does not involve academic, professional, curriculum of education and teaching activities. Thirdly, China’s higher education institutions within China recruit and enrol students for foreign higher education institutions, and provide these students with pre-service training. Those students, after training, who meet the entrance requirements of foreign higher education institutions, will be admitted to foreign higher education institutions abroad. And of which is the combination of type 1 and 2 yet is not prohibited by laws or regulations in China. Fourthly, the cooperation of non-academic degree training programs among Chinese-foreign higher education institutions does not belong to the scope of Chinese-foreign cooperation in running schools. The quo status of Chinese-foreign cooperation in running schools Since the ‘Interim Provisions’ was promulgated over the past decade, especially after the implementation of ‘Regulations’ and ‘measures’, the Chinese-foreign cooperation in running schools has been developed very rapidly, and the size of running schools

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has been expanded gradually, meanwhile the schooling level has been increased, the mode of running schools has been diversified, therefore there has established a batch of high-quality, distinctive Chinese-foreign cooperative education institutions and projects. By the end of 2005, there has been over 1000 institutions and projects in Chinese-foreign cooperative education, which has covered 28 provinces, municipalities and autonomous regions, an increase of more than 10 times compared to 1995. In terms of geographical distribution, Chinese-foreign cooperative education institutions and projects are relatively concentrated in the economically and culturally more advanced big and medium sized cities and eastern coastal provinces, such as: Beijing, Shanghai, Shandong, Jiangsu and Guangdong. Contrast to this, the development of which in the western region is pretty slow. Among the 12 provinces, municipalities and autonomous regions in western China, only Sichuan, Yunnan, Guizhou, Chongqing, Guangxi have the educational projects in Chinese-foreign cooperative undergraduate education, and the remaining seven provinces and autonomous regions are still blank in this area, which makes it imbalance in terms of the geographical distribution of Chinese-foreign cooperation in running schools in eastern and western China. From the partner country and regional distribution, the foreign partners are mainly from the economically developed, technologically advanced and levels of education developed countries. There are about half countries from the OECD that participate in Chinese-foreign cooperative education, among which four English-speaking countries, United States, Britain, Australia and Canada have the most projects. From the perspective of majors in cooperative education, China’s foreign cooperation in running schools is mainly involved in the disciplines of applied liberal arts, including the main categories of economics and management, yet engineering professional categories only account for a small proportion of all, and of which computing science are the main body. The so-called ‘fast track’ majors with small investment and quick effect are becoming the focus of cooperation in running schools. Against the original objectives of policy in cooperation in running schools, which are highlighted in the badly needed by society, the weak and blank disciplines were not chosen to become a key object, the establishment of discipline majors are convergence severely, with low-level redundant. From the view of partnership, the cooperation projects are few cooperated with the higher level foreign higher education institutions or general institutions with the advantaged disciplines and academic majors. In addition to some famous domestic universities which have a higher level of cooperation, the vast majority of foreign partners in Chinese-foreign cooperation in running schools, are unknown non-highquality educational institutions, and the level of cooperation is low. In terms of the type of cooperation, Jianjun Cen, the deputy director of International Department of Ministry of Education, summarized Chinese-foreign cooperation in running schools into four types,

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(a) the ‘label type’, with which there is no substantive cooperation, no introduction of foreign materials, nor the introduction of foreign teaching staff; and the socalled ‘introduction’ is only one singular teaching staff from foreign higher education institutions sent to a dozen of higher education institutions in China to do a speaking tour only; (b) the ‘introduction type’, with which the foreign courses are copied completely, without any serious analysis or digestion, gulped in teaching; (c) the ‘repairing type’, after the curriculum are introduced, they are repaired and amended appropriately according to their own situation and characterization; (d) the ‘innovative type’, which must go through four stages: introduction, grafting, localization and internationalization. But little of this type of cooperation is running in China. From the aspect of national policies in cooperation among Chinese-foreign partners, ‘Regulations’ by Chinese government clearly states: Chinese-foreign cooperation in running schools are public welfare, is an integral part of socialist education. The fees charged by Chinese-foreign cooperative education institutions should be used for the education, teaching activities and improving their school running conditions. ‘The views on a number of issues of current Chinese-foreign cooperation in running schools’ by Ministry of Education, also clearly pointed out that: ‘Adhering to the principle of public welfare of foreign cooperation in running schools. Education services are not trade in goods, and also different from the general trade in services,’; which is conflicted with OECD countries. Contrary to this, as the main foreign partners of the OECD countries, government-led strategy is to promote education as an export industry, as the revenue of trade in education. Chinese-foreign cooperation in running schools is the collision of educational philosophies of Chinese and foreign sides, is the exchange and integration of teaching practice. Based on the introduction, the domestic educational institutions should learn the advanced ideas of education, the mode of training, the teaching content and the management experience from foreign educational institutions; to truly assimilate the high-quality of foreign education resources; and through the ‘grafting’ from foreign education, to promote the innovation in domestic curriculum, teaching methods, and training models. From direct introduction of foreign domestic programs to achieve grafting, and then to the localization of curriculum and teaching, and finally to international development, to create their own brand, should be the ultimate and highest goal for the Chinese-foreign cooperative education in China.

Conclusion Alongside of the economic reforms that have occurred in China since 1979 there has been a process of educational reform as well. This has occurred at all levels of the sector including primary, secondary and tertiary. This has meant greater autonomy for institutions, growth a greater influence by influences originating outside of China

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Over the past twenty years there has been a rapid expansion of the Chinese higher education system. Rising economic growth rates, technological improvements across the economy, rising incomes and higher secondary school participation rates have all combined to increase the size of demand for places in the higher education sector. As demand for higher education rose steadily the Chinese Government devoted more resources to expand the sector. Although amounts of state resources have been devoted to expanding the higher education sector the government has not had sufficient resources to invest to keep up with demand. This has meant that first fees on students were re-introduced in government institutions and later the private sector expanded to meet excess demand. The private higher education sector in China, therefore, has emerged mainly to absorb the increasing demand in the Chinese market. This growth of the private higher education sector has been accepted by the government on the whole but the impact of government regulation has not always been one that has encouraged the sector to realise its full potential. One has to look a little bit deeper to discern the relative influence of the various factors (income, secondary participation, lightness of regulation) to understand which has been the greatest influence of the expansion of the private higher education sector in China.

References Altbach, P. G. (Ed.). (1999). Private Prometheus: Private higher education and development in the 21st century. Westport, CT: Greenwood Press. Beijing Geely University. (2013). http://www.yinda.com.cn/info/property/jldxe.htm. Beijing Renwen University. (2013). http://www.bjrwdx.com/english/Digits.htm. Cheng, K.-M. (1995). Education—decentralization and the market. In L. Wong & S. MacPherson (Eds.), Social change and social policy in contemporary China. Aldershot, England: Avebury. China. (1985). China statistical yearbook. Beijing: National Bureau of Statistics. China, Central Committee of Communist Party of China and the State Council. (1999). The program for education reform and development in China. Beijing. China, Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the People’s Republic of China. (1999a). Education Law of the People’s Republic of China. Beijing: Beijing Foreign Languages Press. China, Legislative Affairs Commission of the Standing Committee of the National People’s Congress of the People’s Republic of China. (1999b). Higher Education Law of the People’s Republic of China. Beijing: Beijing Foreign Languages Press. China, Ministry of Education. (2003–2019). Education statistics. Beijing: Ministry of Education. China, Ministry of Education. (2007, February 3). School running management provisions on private higher education institutions. Beijing. [民办高等学校办学管理若干规定,教育部2007年2月3 日发布]. China, Ministry of Education. (2010). Outline of China’s national plan for medium and long-term education reform and development (2010–2020). Beijing. China, Ministry of Education, Chinese National Commission for UNESCO. (2008). National Educational Development Report: Inclusive education in China. Presented at the 48th session of the International Conference on Education, Geneva. China, Ministry of Education, Chinese National Commission for UNESCO National Center for Education Development Research. (2008). National Report on Mid-term Assessment of Education for all in China. Beijing.

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China, National Bureau of Statistics. (2003–2019). China statistical yearbook. Beijing. China, Ninth National People’s Congress. (1998, August 29). Higher Education Law of the People’s Republic of China. Fourth meeting, Beijing.《中华人民共和国高等教育法》 1998年8月29日第 九届全国人民代表大会常务委员会第四次会议通过. China, Ninth National People’s Congress. (2002, December 28). People’s Republic of China private education promotion law. Thirty-first session. 中华人民共和国民办教育促进法,2002年12月28 日第九届全国人民代表大会常务委员会第三十一次会议通过. China, State Board of Education. (1993, August 17). Provisional regulations on private institutions of higher learning are set. Beijing.《民办高等学校设置暂行规定》 ,国家教育委员会1993年8 月17日发布. China, State Council. (1986, December 15). Provisional regulations on institutions of higher learning are set. Beijing. 普通高等学校设置暂行条例》 ,国务院1986年12月15日. China, State Council. (1998, September 25). Provisional regulations on the registration administration in private non-enterprise units. Eighth executive meeting. Beijing. 民办非企业单位登记管 理暂行条例》 ,1998年9月25日国务院第八次常务会议通过. China, State Council. (2004). PRC regulations for the implementation of private education promotion law. Forty-first executive session, Beijing, February 25. 中华人民共和国民办教育促进法 实施条例》 ,2004年2月25日国务院第四十一次常务会议通过. China, Twelfth Beijing People’s Congress. (2006, November 3). Measures to implement ‘People’s Republic of China Private Education Promotion Law’ in Beijing (Thirty-second session). [北京市实施中华人民共和国民办教育促进法办法, 2006年11月3日北京市第十二届人民 代表大会常务委员会第三十二次会议通过]. Dalian Neusoft Vocational Institute of Information Technology. (2013). http://www.neusoft.edu.cn/ english/index.html. Educational Atlas of China (Zhonguo jiaoyu ditu ji,). (1995). Shanghai Science and Technology Press, Shanghai. Hayhoe, R. (1989). China’s universities and the open door. Armonk, NY: M.E. Sharpe. Levy, D. C. (2002, April). Unanticipated development: Perspectives on private higher education’s emerging roles (PROPHE Working Paper No. 1), Albany, NY. Levy, D. C. (2005, Spring). Analyzing a private revolution: The work of PROPHE. International Higher Education. Levy, D. C. (2006). The unanticipated explosion: Private higher education’s global surge. Comparative Education Review, 50(2), 217–240. Lewin, K. (1988). Educational reforms: Quality, access and equity. In Robert Benewick & Paul Wingrove (Eds.), Reforming the revolution, China in transition. Basingstoke and London: Macmillan. Liu, J. (2002). Social transformation and private education in China. Westport, CT: Praeger. Netherlands Organization for International Cooperation in Higher Education. (2010). Country module: China, Evaluation of foreign degrees and qualifications in the Netherlands (4th ed.). The Hague: International Recognition Department. Organisation for Economic Cooperation and Development. (2007). Education at a glance 2007. Paris: OECD. Ouyang, K. (2004). Higher education reform in China today. Policy Future in Education, 2(1), 141–149. Pepper, S. (1980, March). Chinese education after Mao: Two steps forward, two steps back and begin again? The China Quarterly, 81, 7. Qin, G. (2000). A dream of private universities: The past, present and future of private higher education in China. Xiamen, China: Lujiang Press [in Chinese]. UNESCO, Institute for Statistics. www.uis.unesco.org/, Montreal. UNESCO, Institute of Statistics. (2018). UIS statistics. Retrieved January 28, 2021, from http:// data.uis.unesco.org/#. UNESCO, Institute of Statistics. (2019). UIS statistics. Retrieved January 28, 2021, from http:// data.uis.unesco.org/#. Yan, F., & Wu, P. (2004). Research of private higher education in China: Retrospect, comparison and prospect. In Qifang seminar on Minban higher education. Xi’an Foreign Affairs College.

Chapter 5

Higher Education Research

Introduction One of the main objectives of this study was to quantify the impact of regulation on the growth and development of private higher education in China. In undertaking this work the study also tried to identify some of the other main drivers of growth and development of private higher education in China. It is possible that these main drivers might outweigh any of the impacts of regulation (Chap. 1, Introduction). In undertaking this research the two main issues raised in the introduction will be addressed. That is to: identify government regulation and its character in reference to the private higher education sector in China, to see if it is competitively neutral, to see if it creates barriers to entry and be able to access what the overall impact of regulation is. The second issue is to determine if the regulation has had any impact on the quality assurance of private higher education in China, and whether regulation assists students in anyway, or alternatively if it creates barriers to entry. Besides regulation other economic factors that may have had an impact on the development of private higher education in China include such things as the participation rate of students in secondary education, the growth of per capita incomes, the split in between urban and rural populations, and the emphasis given by governments (both national and provincial) on the expansion of the private sector. The study did not aim to judge the quality of private education on the economic development of China, or the employability of Chinese private higher education graduates. Within this broader question narrower questions were asked such as: what was the relationship between the regulation of private higher education providers and that of the regulation of government providers (Chapter 1.3, pp. 5–6)? To some degree, this research of would be an extension of past analysis undertaken on the public universities accountability regimes. This chapter contains the methodological framework for this research project. A research methodology decision is one of the most important decisions to be made in © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_5

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any research project. The research methodology used in any research must be capable of not only supporting the research, but also be able to facilitate the accomplishment of the main aim of the research from the beginning through to the completion of the research. In the first section of the chapter some general background on research methodologies is presented. This is followed by sections on the quantitative analysis that were undertaken and another on the source of the data that was used. This is followed by sections which describe the quantitative study that was undertaken. In the final section some conclusions have been made.

Methodologies In the study of business and in the social sciences more generally there are many different research methodologies that can be used. Many of these provide approaches that can be used by researchers in an important, creative and an engaging manner. These research methodologies not only give an indication of the depth and complexity of business research but also illustrate the complexity of the different approaches. Academic work is generally divided up into two main categories; quantitative or qualitative (Gutherie 2010). Quantitative involves making use of numerical representations and the manipulation of observations in order to describe and explain the phenomena that the observations reflect. Qualitative analysis on the other hand uses non-numerical examination and interpretation of observations for the purpose of discovering underlying meanings and patterns of relationships. Although it is possible to take either approach, separately, it is also possible to combine the two in some fashion, or alternatively use aspects of both to address a research question (David and Sutton 2004, p. 33). In the case of this study both approaches will be used in order to analyse as far as possible what the general characteristics of the regulation of the Chinese higher education sector are. One of the problems associated with any analysis of Chinese institutions is the problem of getting access to data. In order to undertake a study as comprehensive as possible a combination of approaches is used. Although the distinction between qualitative and quantitative approaches have been a point of contention with social science researchers over the value of one versus the other it is possible to overcome the divide between them and combine the approaches (Cooper and Schindler 2008). In this study, therefore, two approaches were undertaken: • The first approach was to run regressions equating provincial level data enrolments in private higher education to a range of other variables including a dummy variable indicating the severity of regulation in the provinces.1 This approach is used mainly in addressing the first of the issues earlier raised; and 1 Using this approach to determining the severity of regulation has been common in economies since

Stigler and Friedland first wrote their important paper in 1962. To date, however, publications using this approach to the regulation of higher education has not been attempted.

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• The second approach was a series of interviews with private higher education sector administrators. The number of interviews was limited, and therefore this section of the study could be characterised as being a case-study approach to research.2 This approach mainly addresses the second of the major issues raised. The main reason behind the dual approach is that there are data limitations to undertaking a comprehensive study of the Chinese private higher education sector. Generally in business and social science research quantitative analysis takes the form of substantial surveys of individuals and companies. In the case of the Chinese private higher education sector this approach is flawed given the general reticence on the part of private higher education operators to be interviewed. Instead a case study approach was undertaken, alongside of a statistical analysis. A case study is an in-depth examination of a single instance of some phemeomeon (Cooper and Schindler 2008; Hox 1997; Hox and de Jong-Gierveld 1990). Rather than using samples and following a rigid protocol such as strict set of rules to examine limited number of variables, the case study methodology involves an in-depth study of a single or multiple instance/s or event/s that is a case. The case study methodology provides a systematic way of not only looking at events but also collecting data, analysing information, and reporting the results. The researcher can gain a sharpened understanding of what the circumstances and discover what might become important to look at more extensively in future research. The case study approach lends itself to both generating and testing hypotheses (Flyvbjerg 2006, pp. 219–245). It can be used in many situations to contribute to knowledge of individual, organisational, social, political and other related phenomena. Case studies are very commonly used in the case of the higher education sector, not just to study managerial and governance issues but also of course pedagogical ones (Merriam 1988).

Quantitative The first part of the research analysis involved a quantitative study of the private higher education sector in China. The data used in the regression analysis was collected from a range of sources but the most important ones were from the Chinese Government’s National Statistics Bureau and the Chinese Government’s Ministry of Education. The National Statistics Bureau is an agency within the State Council of the Chinese Government charged with the collection and publication of statistics related to the economy, population and society of at the national, provincial and local levels. The Chinese Government’s Ministry of Education also collects and publishes data but only on education related matters. The data ran from 2003 to 2008 and consisted of a panel data of provincial level data. By using provincial level data, rather than national level data, it was possible to make use of a wider variety in data. 2 Examples

of using this approach to higher education, although not specifically in the case of regulation, include the work by Cao (2007) and Praphamontripang (2010).

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The basic methodological approach was to run a regression using the proportion of higher education in the private sector in each province in China as the dependent variable and a range of other variables as independent variables. Determining the impact of regulation using regression analysis with the severity of regulation depicted using dummy variables has a long history in economics (Stigler and Friedland 1962). These independent variables included: the level of real GDP per capita, the participation rate in secondary school education, the relative size of the public sector (which competes directly with the private sector), and the level of foreign investment in the province. A one year time lag was also analysed in the equations to see the longer-term effect of variations of the independent variables. By running this regression it was possible to identify the effects of a range of variables on the growth of the private higher education sector. In addition the regression was run with dummy variables, which was included for the severity of regulation of the private higher education sector. Based on the objective of the study the following equations were developed to examine the strength and direction of relationship between the dependent and independent variables. First one generic equation (Eq. 5.1) was developed by using a linear regression formula showing the relationship between the dependent variable and independent variables for the present year. These equations are fairly standard in approach (Chatterjee and Hadi 2006) and are similar to those estimated by Abbott and Ali (2009, 2010) who look at the link between exchange rates and international higher education and tourism. The list of variables is included in Table 5.1, followed by the equation itself. The variables themselves were chosen as they are generally considered to be key drivers of the growth of high education. The Organisation for Economic Cooperation and Development (2009) for instance lists rising participation rates and per capita GDP as being key drivers in the growth in demand for higher education in China. McKinsey (2008) identified as well the growth in the tertiary sector and high levels of foreign investment in China as being important in creating a greater need for a wider range of skills in the workforce as being critical at raising demand for higher education. Table 5.1 List of dependent and independent variables for two regression equations Variable Dependent variable

Proportion of students in higher education enrolled in private higher education (P)

Independent variable

Participation rate of students in secondary education (S)

Independent variable

Real GDP per capita (Y)

Independent variable

Ratio of foreign investment to GDP (F)

Independent variable

Proportion of the economy in the tertiary sector (T)

Independent variable

Level of expenditure on education as ratio of GDP (E)

Independent variable

Dummy variable of severity of regulation (R)

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ln P = a + b1 ln S + b2 ln Y + b3 ln F + b4 ln T + b5 ln E + b6 ln R + μ (5.1) ln P = a + b1 ln S + b2 ln Y + b3 ln F + b4 ln T + b5 ln E + b6 ln R + b1 ln S−1 + b2 ln Y−1 + b3 ln F−1 + b4 ln T−1 + b5 ln E −1 + b6 ln R−1 + μ (5.2) Where: α Represented the constant of the equation and β represents the coefficient of correlation. The data used was a panel data for China’s 22 provinces, five autonomous regions and four municipalities (31 separate jurisdictions in all). This setup took advantage of the uneven spread of provincial regulation of private higher education. It also took advantage of the fact that the separate provinces have quite different levels of economic development, secondary school participation and foreign investment. Hsiao and Pesaran (2004) and Matyas and Severstre (1992) have discussed the advantages of undertaking an analysis based on panel data compared to cross— sectional analysis or times series, particularly in terms of a larger number of data points and hence greater degrees of freedom and less collinearity between the explanatory variables. The following provides a list of relevant data sources. • Ministry of Education, China (students in private higher education; students in government higher education, participation rates in senior secondary school; national and provincial). • Provincial Departments of Education (Provincial, a selection). • UNESCO Institute for Statistics (national level participation rates in secondary education). • National Statistics Bureau of China (GDP and GDP per capita, foreign investment levels).

Data A description of each variable is given as follows: P This was the proportion of students enrolled in higher education that are enrolled in private institutions. This figure varied across the country being very high in some provinces and rather modest in others. S This was the first of the independent variables. This is an indicator of the participation rate of students in senior secondary education. In order to get a simple figure that indicates the degree to which students pass on from junior secondary school to senior secondary school a simple ratio of the figures in the latter to the

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E

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former was calculated. It was expected that there would be a positive relationship between a high pass onto secondary school and growth of the private higher education sector. This independent variable was the level of real GDP per capita. It was expected that those provinces with high levels of GDP per capita would be those with high levels of participation in higher education and also, perhaps, private higher education. This independent variable was the level of foreign investment in a province as a proportion of its GDP. A higher level of foreign investment would be expected to mean a higher level of development, which in turn would mean a greater demand for higher education in general, and private higher education more specifically. This variable was the proportion of the economy in each province that is accounted for by the tertiary sector. Generally the more developed provinces have higher concentration in this sector and would, therefore, be expected to have had a greater demand for private higher education. This variable was the level of expenditure by the government on education as a proportion of GDP. It was not quite clear what would be expected by this variable. On the one hand a heavy level of expenditure on schools would be expected to lead to a greater flow on of students to higher education, including private higher education. On the other hand a low level of expenditure might indicate that the private sector had more scope to expand in the absence of the government sector. Dummy variable of the severity of regulation.

Table 5.2 provides some descriptive data on the variables used. Full tables of data are provided in the Appendix

Limitations of the Data In many cases where regression analysis is undertaken there are limitations with the data collected and used. In this case the data is fairly reliable but results should be interpreted with some degree of care. Generally to get the best results detailed disaggregated data would be used that spans a number of decades. In the case of private higher education enrolment numbers this is problematic as the National Statistical Bureau and Ministry of Education only began distinguishing between public and private sector enrolments in 2003. This limited the span of the study to some extent. It is, however, better to use the most reliable data possible rather than insert some that distorts the results. In addition a number of researchers have raised doubts about the quality of Chinese national accounts data (see Holz 2004). In the context of this study, however, the data used is broadly robust and from it some conclusions can be made. In addition the main criticisms by Holz refer mainly to a period outside the scope of this study (i.e. prior to 2004).

6

23

0

STDEV

MAXIMUM

MINIMUM

7

37

1

STDEV

MAXIMUM

MINIMUM

23

MAXIMUM

MINIMUM

6

62

32

STDEV

MAXIMUM

MINIMUM

Real GDP per capita Yuan

39

MEAN

Tertiary industry %

8

57

STDEV

46

MEAN

Secondary industry %

15

MEAN

Primary industry %

7

MEAN

Private higher education enrolments %

2003

7

9

29

60

6

37

23

60

8

47

1

37

7

15

0

32

2004

5

8

30

69

7

40

25

57

8

46

1

34

7

14

0

28

2005

Table 5.2 Descriptive statistics, China and Chinese higher education, 2003–2008

4

9

30

71

8

40

27

58

8

47

1

33

6

13

1

20

2006

30

72

8

40

27

60

8

48

1

30

6

12

1

20

14

13

2007

29

73

8

39

26

61

9

49

1

30

6

12

3

19

4

12

2008

(continued)

Limitations of the Data 95

3,536

0.0

MAXIMUM

MINIMUM

1.1

7.1

1.4

STDEV

MAXIMUM

MINIMUM

2004

0.2

0.6

0.2

MAXIMUM

Source Author’s calculations

MINIMUM

0.7

0.1

0.1

0.3

STDEV

0.4

1.3

7.1

1.2

2.5

0.0

5.0

1.2

1.5

4,013

42,483

8,393

12,988

MEAN

Secondary participation ratio

2.5

MEAN

Education expenditure/GDP %

1.1

6.1

STDEV

0.8

MEAN

Foreign investment/GDP %

MINIMUM

7,522

38,496

MAXIMUM

STDEV

2003

11,284

MEAN

Table 5.2 (continued) 2005

0.2

0.9

0.1

0.4

1.3

8.1

1.3

2.5

0.1

4.3

1.1

1.4

4,970

48,163

10,163

15,106

2006

0.3

0.9

0.1

0.4

1.3

7.1

1.2

2.5

0.0

6.4

1.4

1.5

6,067

57,817

12,335

18,630

2007

0.3

0.7

0.1

0.5

1.7

9.8

1.6

3.2

0.1

4.3

0.9

1.3

6,972

64,162

13,570

21,138

2008

0.3

0.7

0.1

0.5

1.8

11.9

2.0

3.5

0.0

4.6

1.0

1.2

8,113

67,504

14,300

23,763

96 5 Higher Education Research

Limitations of the Data

97

Provinces are political units rather than economic ones. Any given province might have within it a range of different economic climates. The use of sub-provincial or city level data might be expected to be more relevant to a study such as this, but in its absence provincial level data is used. In addition it is important to note when analysing the results of the study that the dependent variable given in this regression is the proportion of higher education enrolments accounted for by private institutions (as opposed to government ones). This means that the independent variables are being tested to see if they are increasing the level of the private sector at the expense of the public sector. Overall the private sector would be expected to have expanded in absolute terms just by the growth of such things as the level of income; growing complexity of the Chinese economy and such things as higher participation rates in secondary education as has been argued by the OECD (2009) and McKinsey (2008). But the issue being analysed here is not whether these factors led to a growth in demand for higher education (they clearly do) or that they would lead to a growth in private higher education, but instead the question is whether they would lead to a higher proportion of higher education in the private, rather than the public sector. With these factors in mind provincial data was used for the years 2003–2008. This was a period of strong growth, and was a period that is post-reform so the data is expected to be more stable and reliable than that of earlier periods. The quantitative approach is most useful in addressing the first of the major issues earlier raised. In this sense it is useful in determining the degree to which regulation and other actors such as government expenditure on education impact on the development of the private higher education sector. It can also be used to make some inferences about the degree to which regulation and expenditure creates barriers to entry. The quantitative approach, in this context, is less useful at determining anything about the impact of government regulation on the character of quality assurance.

Qualitative After the statistical analysis was undertaken a series of interviews were also undertaken with managers of private higher education institutions in China. The purpose of the interviews were to further understand the key drivers of growth of the private higher education sector in China and the impact that the regulatory functions of government have on this growth. This research was designed mainly as a qualitative study, attempting to explore and better understand the nature of government regulation and its impact on the growth and basic structure of private higher education in China. As Van Maaren (1979) stated Qualitative research is ‘an umbrella term covering an array of interpretive techniques which seek to describe, decode, translate and otherwise come to terms with meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world’.

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Merriam (2009) commented that qualitative researchers are interested in understanding the meaning people have constructed. Conducting qualitative research is pivotal for studying ‘why’ and ‘how’ forms of research questions (Yin 1994). Qualitative input from experts with established methods of qualitative research is recommended in modelling to identify the appropriate variables and relationships (Laurent and Massart 2000). By using both quantitative and qualitative elements it is possible to undertake a degree of cross checking of results (triangulation) which can magnify the validity of qualitative research (Patton 2002; Praphamontripang 2010). Some researchers have stated that researchers usually combine multiple methods in order to maximize knowledge and understand what they seek (Brewer and Hunter 1989; Praphamontripang 2010). Regarding the reviewed literature, quantitative and qualitative approaches complementarily help one another in dealing with the nature and intent of the government regulation of the behaviour of private, foreign, higher education institutions, so that we can get a better understanding of the general attitude of Chinese government toward the development of this sector. The qualitative research is especially useful at getting some sort of indication about the character of quality assurance regulation in China. For this reason this approach is mainly used to address the issues raised in the introduction under the second set of issues. Although the qualitative approach gives some insights to the first group (i.e. competitive neutrality, barriers to entry etc.) it also enables an analysis of the second set of issues (quality assurance) to be addressed. The first stage of this research was to conduct the in-depth interviews with senior managers from private higher education institutions, specialists and government authorities within mainland China, and then to undertake a qualitative analysis.

Sampling Sampling is the process of selecting a number of study units from a defined study population. The number of cases to be observed depends greatly on the research design and what types of inference the researcher will attempt to make (King et al. 1994). For this study, the research was designed to observe variations of different types of private higher education institutions, using Chinese private institutions. It would be impossible for an individual researcher to interview all, or a majority of private higher education institutions, in China, given time and resource constraints. Accordingly, drawing from the population as large a sample as possible is a solution. Indeed, King et al. (1994) suggested some sample figures ranging from five to twenty observations for a typical qualitative study. Furthermore, in Marginson and Considine’s (2000) study, the authors selected half of Australian’s universities (17 cases) believed to represent the Australian university system and structured the sample of their cases to include several key characteristics such as age, size, and wealth of the institutions. Likewise, a priori knowledge suggests that the private higher education institutions in China with similar size and age tend

Qualitative

99

to share some common defining institutional characteristics and that those outside the urbanized Beijing and surrounding provinces tend to be comparable. There were three main stages: Stage I: Permission to proceed Stage II: Data collection Stage III: Data handling Stage I: Permission to proceed Consent was obtained from the relevant authorities, and ethics approval for the study was sought and obtained from the Research Ethics Committee of the Swinburne University of Technology in Australia, when this work was originally undertaken. Stage II: Data collection

Data Collection Method: In-depth Interviews A series of in-depth interviews were conducted with the senior managers from private higher education institutions, specialists and government authorities within mainland China. This information was important for understanding the characteristics, governance and financial support of private higher education institutions in China. Harrell and Bradley (2009) states that: High-status individuals may be unlikely to respond to interviews, so the researcher may be more successful if he or she attempts to conduct interviews with them, although it may be very difficult to obtain time on a senior person’s calendar. Other projects might include interviews with senior-ranking individuals from an organization and, simultaneously, surveys of more junior personnel. Using multiple methods can enhance the research project, but the important thing to remember is that, regardless of the methods chosen, quality research includes collecting quality data.

Open-ended questions were used and permitted free responses, which were recorded in the respondents’ own words. Such questions are useful for obtaining in-depth information on: • facts with which the researcher is not very familiar; • opinions, attitudes and suggestions of informants; and • sensitive issues. The advantages of completely open-ended questions include such things as: • it allows you to probe more deeply into issues of interest being raised; • issues not previously thought of when planning the study may be explored, thus providing valuable new insights on the problem; • information provided in the respondents’ own words might be useful as examples or illustrations, and

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• often, re-reading an answer in a later phase of the analysis offers the possibility for different interpretations in relation to other data collected, which would have been impossible if the answer had been pre-categorised. The researcher first arranged to visit with the senior managers of each private higher education institution separately and ask for copies of the institution’s mission, news clippings, brochures, and any other written material describing the institution and its purpose. The investigator reviewed the purpose of the study with the senior managers of each private higher education institution, scheduled individual interview time with as many senior managers as can cooperate, confirms key contact data, and requests that all senior managers respond to the written survey which will be mailed later. The particular interviewees were chosen for a range of reasons. First of all the individuals were chosen because they were in senior management positions that gave them a good view point of the running of the higher education institutions. Secondly it was thought necessary to choose institutions in a number of cities, but in addition with a few in the major city and capital of China (Beijing). In this way it was hoped to get a limited cross section of conditions across China. Finally it was necessary to use personal contacts in China in order to find contacts that would have the necessary degree of openness. The researcher took detailed notes during the interviews and recorded field notes after the interview was completed. The interviews, although open-ended, were structured around the research questions defined at the start of the case study. The interview questions are provided as follows. The general line of questioning was designed to first get a general background on the nature of college involved, then understand some of the imperatives of its financing and finally then to see to what degree the operations of the college were effected by government regulation. In doing so the aim is to determine the nature of the regulation that exists. To see if the regimes in place are competitively neutral and if they help to create barriers to entry. The second point is to see if the regulation changes the behavior of the institutions themselves. These relate to the questions raised in Chap. 1, Section 1.3.

Interview Questions 1. 2. 3.

4.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution?

Interview Questions

101

5.

Are there any incentives or penalties associated with the control of your institution by external authorities? Give example? 6. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. 7. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. 8. How would such policy make your institution different or similar to other institutions? 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? 10. How significant are the direct compliance costs of these regulations? 11. In your view, are there any benefits to your institution that can be attributed to regulation? 12. Are there any other thoughts about institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? Transcripts of the replies are provided in the Appendix of this study. The results of the interviews are provided in Chapter 7.

Summary Although it is possible to come to some conclusions on the character of Chinese private higher education by using quantitative analysis of provincial level data there is a limit to how much can be inferred from it. Such a quantitative analysis might, however, be limited in finding out all we can about the main drivers of the development of Chinese private higher education in recent years. For that reason it seems important to also undertake further research of a qualitative nature which can help to expand on any conclusions made from the quantitative work. A broader approach to research, which also contains qualitative as well as quantitative research, is advisable. The main results of the two studies have been presented in the following two chapters.

References Abbott, M., & Ali, E. (2009). The impact of exchange rate variations and university reputation on the choice of destinations of international students in Australia and New Zealand. Journal of Economic and Social Policy, 13(1), article 7. Abbott, M., & Ali, E. (2010). Identifying the links between international education and tourism. Journal of International Education and Business, 1(2), 87–110.

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Brewer, J., & Hunter, A. (1989). Multimethod research: A synthesis of styles. Newbury Park, CA: Sage. Cao, Y. (2007). Chinese private colleges and the labour market (Doctorial Dissertation), Educational Administration and Policy Studies, University at Albany, State University of New York, Albany. Chatterjee, S., & Hadi A. S. (2006). Simple linear regression. Regression analysis by example (pp. 21–51, 4th ed.). Wiley. Cooper, D. R., & Schindler, P. S. (2008). Business research methods (10th ed.). New York: McGrawHill. David, M., & Sutton, C. D. (2004). Social research: The basics. London: Sage Publications. Flyvbjerg, B. (2006). From Nobel-prize to project management: Getting risks right. Project Management Journal, 37(3), 219–245. Gutherie, G. (2010). Basic research methods: An entry to social science research. Thousand Oaks: Sage Publication. Harrell, M. C., & Bradley, M. A. (2009). Data collection methods: Semi-structured interview and focus groups. Santa Monica: RAND National Defense Research Institute. Holz, H. (2004). Deconstructing China’s GDP statistics. China Economic Review, 15, 164–202. Hox, J. J. (1997). From theoretical concept to survey item. In L. Lyberg, P. Biemer, M. Collins, E. de Leeuw, C. Dippo, N. Schwarz, & D. Trewin (Eds.), Survey measurement and process quality (pp. 47–71). New York: Wiley. Hox, J. J., & de Jong-Gierveld, J. (Eds.). (1990). Operationalization and research strategy. Amsterdam and Bristol, PA: Swets & Zeitlinger and Taylor & Francis. Hsiao, C., & Pesaran, M. H. (2004). Random coefficient panel data models (Cambridge Working Papers in Economics 0434), Faculty of Economics, University of Cambridge. King, G., Keohane, R. O., & Verba, S. (1994). Designing social inquiry: Scientific inference in qualitative research. Princeton: Princeton University Press. Laurent, B., & Massart, P. (2000). Adaptive estimation of a quadratic functional by model selection. Annals of Statistics, 28(5), 1302–1338. Marginson, S., & Considine, M. (2000). The enterprise university: Power, governance and reinvention in Australia. Cambridge and Melbourne: Cambridge University Press. Matyas, L., & Severstre, P. (Eds.). (1992). The econometrics of panel data. Dordrecht: Kluwer Academic Publishers. McKinsey also Farrell, D., & Grant, A. (2008). Addressing China’s looming talent shortage. Shanghai: McKinsey & Company. Merriam, S. B. (1988). Case study research in education: A qualitative approach. San Francisco: Jossey-Bass. Merriam, S. B. (2009). Qualitative research: A guide to design and implementation. San Francisco, CA: Jossey-Bass. Organisation for Economic Cooperation and Development. (2009). China; OECD reviews of tertiary education. Paris: OECD. Patton, M. Q. (2002). Quantitative research and evaluation methods. Thousand Oaks, CA: Sage Publications. Praphamontripang, P. (2010). The decline of Thai private higher education. International Higher Education, Fall. Stigler, G. J., & Friedland, C. (1962). What can regulators regulate—The case of electricity. Journal of Law and Economics, 5, 1–6. Van Maaren, J. (1979). Reclaiming qualitative methods for organizational research: A preface. Administrative Science Quarterly, 24(4), 520–526. Yin, R. K. (1994). Case study research: Design and methods (2nd ed.). Thousand Oaks, CA: Sage Publishers.

Chapter 6

Quantitative Analysis

Introduction As was related in Chap. 5 of this study; one of the main objectives of the study is to quantify the impact of regulation on the growth and development of private higher education in China. Emphasis is placed on the degree to which they impact on the competitive neutrality of the sector compared to the state sector and the creation of barriers to entry. For that reason a series of relatively simple regressions have been undertaken. Regulation and its degree of severity is of course not the only factor that would have had an influence on the growth and development of the private higher education sector in China. As past studies have shown (see Chap. 2) often it is simply just a series of demographic and income factors that drive growth of the sector, along with a lack of funding to accommodate this expansion in public institutions. In undertaking this study, therefore, some of the other variables that have driven the growth and development of private higher education in China are also identified. It is possible that these main drivers might have outweighed any of the pressures of regulation. Besides regulation other factors that may have had an impact on the development of private higher education in China include such things as the participation rate of students in secondary education, the growth of per capita incomes, the general spending of governments on higher education in general, the level of foreign investment, and a range of other factors. The main objective of the statistical analysis in this chapter of the study, therefore, is to determine what some of the main drivers of the growth of private higher education in China are, and in addition see if regulation has any impact at all. By using data on the proportion of students enrolled in private higher education in China it is possible to ascertain what influence a range of variables has had. The purpose of this Chapter, therefore, is to present the results of the regression equations that were explained in Chap. 5. In the first section a description of the © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_6

103

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6 Quantitative Analysis

variables included in the statistical analysis are given. In the following sections results of the two main regressions are given. In the final section of the chapters some conclusions are made.

Data and Variables To begin with an indicator of the level of activity of the private higher education sector is needed. The data that was used in the regressions was for each of the Chinese 31 provincial jurisdictions over the years 2003–2008. The period 2003–2008 was chosen because the data is readily available and not one disturbed by any major economic disturbances. The dependent variable in this case is the proportion of students enrolled in higher education that are enrolled in private institutions (P). This figure varies across the country being very high in some provinces and rather modest in others. The independent variables that are included are the participation rate of students in secondary education, the real gross provincial product (GPP) per capita, the ratio of foreign investment to GPP, the proportion of the economy in the tertiary sector, the level of expenditure on education as ratio of GPP and a dummy variable of severity of regulation. All of these variables are thought to possibly have some impact on the proportion of higher education enrolments that are taken up by the private sector. It is, however, possible that a range of other factors may have been important in driving growth of the sector. The first of the independent variables is to take a simple figure that indicates the degree to which students pass on from junior secondary school to senior secondary school. To achieve this, a simple ratio of the figures of the latter to the former was calculated by dividing the number of students in senior secondary school in each province and time period by the number in junior secondary school in each province and time period. The higher the figure, the greater the flow on of students from junior to senior school. This gives a good general indicator of the degree to which participation in each province at the secondary school level takes place. It is expected that there would be a positive relationship between a high pass onto secondary school and growth of the private higher education sector. The more students that complete secondary education the more students that would be expected to go onto higher education. It is possible of course that these students might go on to public institutions rather than private ones, and so it would be expected that the degree to which this ratio influences the growth of the private sector would depend upon the level of development of the public sector. The second independent variable is the level of real GDP per capita. It is expected that those provinces with high levels of GDP per capita would be those with high levels of participation in higher education and also, perhaps, of private higher education. It could be, however, that just as with the participation rate it is possible that a high level of income would mean that students flow onto the public higher education

Data and Variables

105

sector rather than the private sector. Again it would depend on the degree of development of the public sector and how much in each province the government invested in the development of the sector and the subsidisation of students. The third independent variable is the level of foreign investment in a province as a proportion of its GDP. A higher level of foreign investment would be expected to mean a higher level of development of the economy, which in turn would mean a greater demand for higher education in general, and private higher education more specifically. Again the results of this variable in the regression would be interesting as the role of the foreign is an important one in the development of the Chinese economy more generally and it would be of interest to see if this flows back to the development of the private higher education sector. The fourth variable is the proportion of the economy in each province that is accounted for by the tertiary (services) economic sector, as opposed to manufacturing and agriculture. Generally the more developed provinces have higher concentration in this sector and would, therefore, be expected to have a greater demand for higher education and perhaps for private higher education as well. The fifth variable is the level of expenditure by the government on education as a proportion of GDP. It is not quite clear what would be expected by this variable. On the one hand a heavy level of expenditure on schools would be expected to lead to a greater flow on of students to higher education, including private higher education. On the other hand a low level of expenditure might indicate that the private sector has more scope to expand in the absence of the government sector. It is noteworthy, however, that a few of the previously mentioned variables and their importance depended on the degree to which the private sector can fill a gap left by the public sector. Finally we have a dummy variable which looks at the degree of severity of regulation. Although the Chinese higher education sector is the subject of national wide regulation it is also influenced by provincial differences as well. Although these variations between provinces can be minor, they often might have some impact. In particular they can be influential at making it more difficult to establish private colleges. A proxy was used for regulatory severity, therefore, was used in the form of the number of private colleges in a province per population, which was then converted into a dummy variable of 0 for less severe and 1 for more severe. The proxy was arrived at by determining how many private colleges there were in each province (regardless of size) and then comparing it to the population. The easier it is to get accreditation to run a private college (compared to population) the more such colleges it is expected would exist. The provinces were then placed into the two groups depending on the degree of ease of establishing colleges. The more severe the regulation the less developed it would be expected that the private sector in higher education would be. The results of the first regression equation that was estimated follows in the next section.

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6 Quantitative Analysis

Results and Discussion (Eq. 6.1) The first equation that was estimated is as follows: ln P = α + β1lnS + β2 lnY + β3ln F + β4 lnT + β5 ln E + β6ln R + μ

(6.1)

where, α represents the constant of the equation, and β represents the coefficients of correlation. It is notable, that the positive sign of the coefficient of the model shows a positive impact and that of the negative sign shows the negative impact on the proportion of students in private higher education. That is, a positive sign indicates that if the variable rises then so too did the proportion of students enrolled in private rather than public higher education institutions. The two variables move in the same direction so if one falls, then so too does the other. If the sign is negative, then the reverse is true. An increase in the variable will lead to a fall in this proportion. Descriptive statistics of the equation are in the following Table 6.1. The estimated equation using the data provided in the Appendix of this study is as follows: P = −2960.682 − 0.075S + 0.0Y + 0.394F − 0.017T − 0.810E − 1.590R

(6.1)

Significance levels and t-values of the variables of Eq. 6.1 are shown below (Table 6.2): Equation 6.1 shows that: • the relationship of the proportion of student numbers in private higher education with the regulatory dummy (R) is significant. The term significance explains whether the relationship is meaningful or not. The Fig. 0.000 tells us the relationship is meaningful at the 99% confidence level. In this case there is a negative relationship. This is as expected. If regulation in a province is more severe then Table 6.1 Descriptive statistics of Eq. 6.1

Mean P

9.41

Standard deviation 4.972

N 155

S

40.26

12.348

155

Y

18324.90

12432.445

155

1.26

1.196

155

0.708

155

F T

39.0

E

2.66

1.321

155

R

0.78

7.577

155

Results and Discussion (Eq. 6.1)

107

Table 6.2 Regression results of Eq. 6.1 Variable

α

S

Y

F

T

E

R

t-value

−5.699

−1.716

−0.667

1.216

−0.256

−2.458

−2.736

0.000

0.088

0.505

0.226

0.798

0.015

0.000

Sig level

Source Author’s calculations

•

•

•

• • •

there would be few private enrolments as it would be more difficult for private colleges to be established, and for them to compete strongly for students. In terms of the original research question this indicates that regulation is important, that is not uniform in impact across the country and that it does impose barriers to entry. These barriers are not so high as to preclude all entry but they do seem to impact on the degree to which the private operators expand and attract students. In terms of competitive neutrality between private and public institutions it is unlikely that complete neutrality can be obtained given the fragmented impact on private institutions across the country. The relationship between the proportion of students in private higher education and government expenditure on education overall (E) is also close to significant (significance level 0.015). The sign here is a negative one which is what we might expect. For example, if government expenditure on the public sector is high it is quite possible that enrolments in the private sector would be lower. This would occur because the government expenditure could be used expand the number of places in government higher education institutions which would give the private sector less scope to expand; The relationship between real GDP and the ratio of students carrying on to secondary school education (S) does not appear to be significant. This ratio would be expected to increase the numbers of students qualified to go onto higher education. What is does not appear to do, however, is influence the split between private versus public sectors. Whether or not an increased number of students wanting to go onto higher levels of study go into private (as opposed to public) institutions seems to depend on other factors. The same is also true of foreign investment (F), although it is notable that the sign is a positive one. That implies greater foreign investment in a province encourages greater enrolments in the private higher education sector. The same is also true of the proportion of the work force in the tertiary sector (T) and level of per capita income (Y) in that the relationships are not significant ones. The R2 is only 0.261 which indicates that about 74% of factors that might have an influence of the proportion of students in private higher education are not included in the equation. This means that although the factors captured in the equation may be of some importance, there are other factors and characteristics that are important as well. There may be, for example, some degree of influence on this choice through such things as cultural affinity, the level of entrepreneurship in a province in the private higher equation sector or other factors;

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6 Quantitative Analysis

Table 6.3 Regression results with individual independent variables Variable

α

β

t-value 2.624

Sig level

R2

0.009

0.036

S

4.159

0.164

Y

7.585

0

2.462

0.015

0.032

F

7.812

0.841

2.745

0.007

0.039

T

12.526

−0.093

−1.859

0.065

0.018

E

10.752

−0.674

−2.776

0.006

0.035

R

11.211

11.211

−3.051

0.003

0.043

Source Author’s calculations

• The Standard Error of the estimation is 4.392; • The signs of the t-values and β values of the respective variables support the validity of the model. As well as running the independent variables in a single equation it is also possible to run them and the dependent variable individually. When this is done the results are as follows (Table 6.3). When this is undertaken the results are similar to those of a single equation. • The relationship of the proportion of student numbers in private higher education with the regulatory dummy is significant. As in the case of the single equation in this case there is a negative relationship. This is as expected. • The relationship between the proportion of students in private higher education and government expenditure on education overall is also close to significant (significance level 0.006). The sign here is a negative one which is what we might expect. For example, if government expenditure on the public sector is high it is quite possible that enrolments in the private sector would be lower. As explained earlier this is because more government expenditure on places for students in higher education leaves less scope for private education to meet demand. • The same is also true of foreign investment, although it is notable that the sign is a positive one. That implies greater foreign investment in a province encourages greater enrolments in the private higher education sector. It is not entirely clear why this might occur. Perhaps it is simply because a high level of foreign investments correlates with a high growth in modern business activity and corresponding high demand for university graduates. This high demand might not be able to be met from public resources thus opening up more scope for private activity. • The relationship between real GDP and the ratio of students carrying on to higher education does not appear to be significant. • The R2 in each case is relatively small. As explained earlier this means that there must be other explanations that are important along with the severity of regulation and level of government expenditure and foreign investment. What is found overall is that although the regulatory ease of establishing a private higher education college is of some importance, that variation of regulatory structure

Results and Discussion (Eq. 6.1)

109

across the provinces is of minor consequence compared to a range of other factors. These other factors include such things as the level of government expenditure on higher education and the level of foreign investment into a province. The level of real GDP per capita does not appear to be an important factor as does the structure of the economy (i.e. services versus manufacturing). What appears to be occurring is that there is a strong and growing demand for higher education across most of China (regardless of income level or economic structure) and whether this is being undertaken by the private or public sector seems to depend on the degree to which this demand is met by government expenditure on public institutions or whether it is being left more to private institutions filling the gaps.

Results and Discussion (Eq. 6.2) Although it is possible that the various variables have an impact on the proportion of students in private higher education it is also possible that it takes some time for changes in these variables to have an impact. For that reason it is useful to run Eq. 6.1 again but with some time lagged variables. This varied equation is given as in Eq. 6.2. The second equation that was estimated is as follows: ln P = α + β1lnS + β2 lnY + β3ln F + β4 lnT + β5ln E + β6ln + R + β1lnS−1 + β2 lnY−1 + β3ln F−1 + β4 lnT−1 + β5ln E −1 + μ

(6.2)

where, α represents the constant of the equation, and β represents the coefficients of correlation. In each case all of the independent variables were equated dependent variables, along with each of them lagged to one year, with the exception of the regulatory dummy which is included only once. It is notable, that the positive sign of the coefficient of the model shows a positive impact and that of the negative sign shows the negative impact on the proportion of students in private higher education. Descriptive statistics of the equation are in the following Table 6.4. The estimated equation is as follows (Table 6.5): P = −3991.981 − 0.024S + 0.0Y + 0.096F + 0.078T − 0.119E + 3.693R−0.096S − 1 + 0.0Y − 1 + 0.438F − 1−0.098T − 1−0.820E − 1

(6.2)

Significance levels and t-values of the variables of Eq. 6.2 are shown below: Equation 6.2 indicates that:

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6 Quantitative Analysis

Table 6.4 Descriptive statistics of Eq. 6.2

Mean

Standard deviation

N

P

9.41

4.972

155

S

43.03

11.731

155

Y

1832.90

12432.445

155

F

1.35

1.161

155

T

39.32

7.517

155

E

2.85

1.549

155

R

0.77

0.708

155

S1

40.26

12.348

155

Y1

15829.15

11113.675

155

F1

1.26

1.196

155

T1

39.34

7.066

155

E1

2.66

1.321

155

R1

0.92

0.761

155

• The relationship of the proportion of student numbers in private higher education with the regulatory dummy is still shown as significant. This is unchanged from the case when Eq. 6.1 was run. • In all other cases there are no statistically significant variables, which indicates that the lag of a year on the effect of the independent variables on the dependent variable does not appear to be important. • The R2 , however, has risen to 0.324 which indicates that around two thirds of that factors that might have an influence of the proportion of students in private higher education are not included in the equation. This is a higher figure than was detected when no time lags were used but still indicates that there must be some other factors that influence the growth of the private higher education. • Apparently by using timed lagged variables, therefore, it increases the significance of the regulatory and expenditure variables and reinforces the finding from the results in Eq. 6.1. As well as running the independent variables in a single equation—with lagged variables—it is also possible to run them and the dependent variable individually. When this is done the results are as follows (Table 6.6). When this is undertaken the results are similar to those of a single equation. • The relationship of the proportion of student numbers in private higher education with the regulatory dummy is significant. As in the case of the single equation in this case there is a negative relationship. This is as expected. • The relationship between the proportion of students in private higher education and government expenditure on education overall is also close to significant (significance level 0.015). As is the one year lagged variable. The sign here is a

0.000

Sig level

Source Author’s calculations

−0.191

−4.825

t-value

0.849

S

α

Variable

Table 6.5 Regression results of Eq. 6.2

0.499

−0.678

Y 0.846

0.195

F 0.647

0.460

T 0.869

−0.165

E 0.000

3.950

R 0.472

−0.721

S-1

0.810

0.241

Y-1

0.354

0.929

F-1

0.589

−0.542

T-1

0.315

−1.008

E-1

Results and Discussion (Eq. 6.2) 111

112

6 Quantitative Analysis

Table 6.6 Regression results with individual independent variables Variable

α

β

t-value

Sig level

R2

S

8.232

0.027

0.798

0.426

0.004

Y

8.498

0.000

1.545

0.124

0.015

F

8.344

0.784

2.302

0.023

0.033

T

13.129

−.095

−1.789

0.076

0.020

E

11.194

−.627

−2.463

0.015

0.038

R

8.139

−1.637

2.963

0.004

0.054

S−1

7.879

0.038

1.171

0.244

0.009

Y−1

8.459

0.000

1.670

0.097

0.018

F−1

7.986

1.123

3.471

0.001

0.073

T−1

13.533

−.105

−1.865

0.064

0.022

E−1

11.886

−.930

−3.154

0.002

0.061

R−1

8.911

0.538

1.020

0.309

0.007

Source Author’s calculations

negative one which is what we might expect. For example, if government expenditure on the public sector is high it is quite possible that enrolments in the private sector would be lower. • The same is also true of foreign investment (with a one year lag), although it is notable that the sign is a positive one. That implies greater foreign investment in a province encourages greater enrolments in the private higher education sector. • The relationship between real GPP and the ratio of students carrying on to higher education does not appear to be significant. • The R2 in each case is relatively small.

Summary Although the regressions that were run do not provide overwhelming identification of the various factors that influence the growth of the private higher education sector in China, they do provide some information on the main drivers of growth and development of the private higher education sector in China. First of all there may be some small, lagged, impact on the development of the sector that flows from foreign investment to the sector. Activity in this field probably promotes development of the sector. This would do be creating greater activity in the modern business sector and so would therefore increase demand for graduates of higher education. If the public sector cannot meet this demand then the private sector has some scope to expand. That being said this factor is not the most important one that has been determined by this study. Secondly there does not appear to be any demonstrable link between the wealth of a province, and the development of the tertiary sector and the growth and development

Summary

113

of the private sector. Presumably this means that private higher education is just as likely (or unlikely) in a low income province as a higher income one. Of course this does not mean that there is no link between growth in income or development of the tertiary sector of the economy and demand for higher education. It is quite possible that growth in income and development of the tertiary sector does lead to growth in demand for higher education from students overall, but it is possible in many cases the increase in demand for higher education in a province is being met by the public sector rather than the private one. The level of income does not appear to have any impact of the mix of public and private, whether to encourage it or to discourage it. Instead the mix is influenced more by other factors. This then enables an important point to be made. Although growth in income, a changing balance of the economy between the primary, secondary and tertiary sectors; as well as a rising level of participation at the secondary school level all help to boost demand for higher education in China (Qin 2000; Liu 2002; Yan and Wu 2004), as well as elsewhere, these factors are not necessarily important in influencing the mix of higher education between the private and public sectors. This mix instead, is influenced by other factors. The mix would appear to be influenced by two government related factors. The level of regulation in each province has some influence, although just how substantial this impact is, is difficult to ascertain. In addition the level of government expenditure on higher education is important. The more spending on higher education by the government the less scope there is for the private sector to meet the demands of students. In the context of this study the latter two points are important. The more active the government is in promoting higher education by directly funding places the less likely there is any scope for the private sector to develop meaningfully. This means that growth of the private sector is very much a case of demand absorbing in the absence of government financial support of the growth of higher education enrolments. This point is consistent with past work that has depicted growth of the private higher education sector as being ‘demand-absorbing’ (Castro and Navarro 1999; Galbraith 2003; Kwong 1997; Levy 2006; Mabizela 2004). That is the growth of the private higher education sector takes place in response to growth in demand for higher education in general (which in turn is driven by a range of factors), that is not met by expansion of the public sector. On the other hand the government also has the power to encourage development of the private sector by easing up on the regulatory constraints on the establishment of private higher education institutions. The Chinese regulatory regime, therefore, which has allowed expansion of the private higher education sector, appears, therefore, to be mainly reactive, to growth of the sector, and not so inhibiting such that it prevents expansion of the sector to take place. There appears, therefore, to be two main ways in which there is a regulatory impact of the development of the private higher education sector. The first is ‘regulatory’ in the conventional sense in that an over burdensome regulatory impact can impede the development of the sector. This burden is not so high that it creates insurmountable barriers to entry but it does impede the growth to some degree. It would also appear

114

6 Quantitative Analysis

unlikely that there is full competitive neutrality given the different results across the different provinces. The second and perhaps more important, indirect impact come from the role and scope for expansion of the public sector. Growth of the Chinese private higher education sector seems to come up consistently as being negatively related to the government funding of expansion of the public higher education sector. In provinces and at times, therefore, where local, provincial and the national government all put substantial funds into government higher education expansion, the scope for the development of the private sector is limited. Where funding is less lavish such that the government sector cannot keep up with student demand the reverse is true. It would appear, therefore, that the intervention of the public sector in the Chinese higher education market has important implications for the growth of the private higher education sector. It also raises important implications for the future of the sector. Although it would be expected that the private sector in the future would grow further and develop, as Chinese incomes and secondary school participation rates rise, this is not guaranteed. Instead as student numbers at the second level gradually decline (as the demographic structure of Chinese ages), it is possible that the expansion of the public sector might catch up with the overall growth in demand for higher education. This might make the scope for the demand absorbing private sector less advantages, regardless of how easy or onerous the regulatory burden is on private sector institutions. Finally it should be borne in mind that there appears to be a certain degree of scope for identifying a range of other, non-government, and non-general economic conditions that encourage the development of the private higher education sector in China. The results of the regressions in this chapter do not identify all of the reasons for growth of the private higher education sector. Instead it simply identifies a couple (regulation, growth of government expenditure) and eliminates a few others. There must be other factors that have not been captured in the variables in the regressions which were run. These might for instance include such things as the level of general entrepreneurship in the sector in any given province as well as other factors. To further understand what these factors may be, and what role the public sector has played in the development of the private higher education sector in China a more qualitative approach is given in the following chapter and may provide more information. For that reason the results of some interviews undertaken with private college staff are presented in the following chapter.

Conclusion Although rising incomes, a growing complexity of economic activity, an increase in foreign investment and a growing participation rate at the secondary school level are all helping to drive an increase in demand for higher education in China, there is no evidence from the regressions presented in this chapter that any of these are helping to raise the level for private higher education enrolments compared to public sector ones.

Conclusion

115

Of course these factors may all be helping to raise demand for higher education overall, it is the absence of stringent regulation and lower levels of government expenditure on government higher education that have a significant influence on the proportion of higher education enrolments accounted for by the private sector. This means that the expansion of the private higher education sector in China is a demand absorbing one that is dependent on the tolerance of Chinese public policy makers and regulators and a deficiency in government expenditure on government higher education institutions to meet excessive student demand. This brings it in line with the views of Salerno (2004) and Levy (1986) who categorized government intervention as influencing the mix between public and private sectors. In the Chinese case the attitude of the government is to regulate but to not deter investment in the private higher education sector. It is true that the analysis in this chapter found that both regulation and government expenditure on higher education had a negative impact on the growth and development of private higher education sector they were both not so severe in impact that they eliminated the growth and development of the private higher education sector. These two forms of government intervention had an impact on the public/private mix but they did not create barriers to entry such as to deter absolutely the development of the sector. Similarly they both seemed to have helped to create a degree of competitive un-neutrality between the two sectors but not one that was so severe such as to make the public sector the only one developing in China.

References Castro, C. M., & Navarro, J. C. (1999). Will the invisible hand fix private higher education? In P. Altbach (Ed.), Private Prometheus: Private higher education and development in the 21st Century. Westport, CT: Greenwood Press. Galbraith, K. (2003). Towards quality private higher education in Central and Eastern Europe. Higher Education in Europe, 28(4), 20. Kwong, J. (1997). The reemergence of private schools in Socialist China. Comparative Education Review, 41(3), 244–260. Levy, D. C. (1986). Higher education and the state in Latin America: Private challenges to public dominance. Chicago: University of Chicago Press. Levy, D. C. (2006). The unanticipated explosion: Private higher education’s global surge. Comparative Education Review, 50(2), 217–240. Liu, J. (2002). Social transformation and private education in China. Westport, CT: Praeger. Mabizela, M. (2004). Whither private higher education in Africa. International Higher Education. Winter. Qin, G. (2000). A dream of private universities: The past, present and future of private higher education in China [in Chinese]. Xiamen, China: Lujiang Press. Salerno, C. (2004). Public money and private providers: Funding channels and national patterns in four countries. Higher Education, 48(1), 1–30. Yan, F., & Wu, P. (2004). Research of private higher education in China: retrospect, comparison and prospect. Qifang seminar on Minban Higher education, Xi’an Foreign Affairs College.

Chapter 7

Qualitative Analysis

Introduction In this chapter of the study a case study approach, involving interviews with private college managers are used to analysis some aspects of the development of Chinese private higher education sector, its relationship to the government and the manner in which these institutions are managed. Over the years it has come to be accepted by researchers that the case study approach can be used, usefully, to answer one or more research questions (Yin 2003, 2012; Olalere 2011; Flyvbjerg 2006). These questions begin with questions of: ‘how’ and/or ‘why,’ and are targeted to a certain number of events or conditions and their inter-relationships. In this instance the case study approach can be used to look at the how and why of the relationship between the public sector and the Chinese private higher education sector. The case study approach can, thereafter help to provide evidence in depth that leads to a further understanding of the case and provide answers to the research questions raised by a researcher. Yin stated that the case study approach is a method of empirical inquiry that investigates a contemporary phenomenon within its real-life context (Yin 1994), and it could, therefore, make us better understand what is already known through previous research. This view is widely endorsed and therefore, reports on case studies from many disciplines are generally available in the literature (Yin 2003, 2012). The case study approach is especially useful in attempting to broaden the ‘drier’ analysis undertaken in quantitative work (Flyvbjerg 2006). Case studies can help to make such an analysis easier to understand, and even deepen out understanding of the casual relationships that are detected through more quantitative work. There are eight case studies of Chinese private sector institutions that are presented in this chapter as part of the qualitative study of this study. These eight institutions were selected after in-depth interviews with around 30 senior managers from 20 private higher education institutions, and a few experts from outside of the private sector, among different provinces within mainland China. These eight cases were © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_7

117

118

7 Qualitative Analysis

finally chosen to be presented in this study from the managers of education institutions. In addition two interviews were conducted with senior education bureaucrats in order to get another perspective on the eight case studies themselves. The purpose of these last two interviews was not to undertake an extensive study of the attitudes of government officials to the development of the private sector in China, but instead was aimed at simply providing another viewpoint on the responses of the college officials. The purpose of the interviews with education officials, therefore, was to help the researcher better understand the responses made by the college officials, rather than act as stand-alone surveys in their own right. In order to satisfy agreements with the institutions over the nature of the interviews the institutions and managers themselves remain confidential in order to encourage them to be as free with their comments as possible. The details of the names of interviewed managers and colleges themselves have therefore been omitted from the study. Instead, numbers have been used as codes to indicate each of the interviews that were undertaken (1–8). The interviews 9 and 10 are of the education officials. The completed interviews are provided in the Appendix, along with English translations. The interviews were designed to tease out responses that address the main issues raised in the introduction. That is to: (1) to identify government regulation and its character of the private higher education sector in China, to see if it is competitively neutral, see if it creates barriers to entry and be able to access what the overall impact of regulation is; and to (2) to determine if the regulation has had any impact on the quality assurance of private higher education in China and whether it assists students, or alternatively creates barriers to entry will be assessed. An attempt is made to determine if the college managers feel that regulation is of any benefit to them, along with the costs that regulation invariably brings. Finally attempts are made to cross reference the findings of the case studies to the findings of the quantitative research undertaken as part of this study. The chapter is divided up along the following lines. In the first section a short descriptions of the institutions for which the managers work is provided. This description is deliberately vague so as to ensure the confidentially of the colleges and managers. After that another section is given on the evaluation and analysis of the data generated. This is then followed by a summary of the findings of the overall analysis. In the final section of the chapter some conclusions are made.

The Cases Although the number of case studies presented (eight) is not great they are fairly representative of the types of private higher education institutions in China and provide the best information available in terms of the study. They range in size from having 4000 students to having 20,000. This is fairly typical of the size of private colleges in China.

The Cases

119

In terms of their location some of the institutions are located in the capital city, Beijing, whereas others are located in other major centres of the country, such as Liaoning, Heilongjiang, and Canton etc. Most of the institutions amongst the case studies concentrate on vocational education and training qualifications at the three year diploma level, although one specialises in foreign languages. This is typical of private higher education institutions in China, which tend to concentrate on providing qualifications that are in high demand by students and which help students directly enter employment. Each of the institutions offers a range of different qualifications over a range of disciplines without being as extensive as the average, large sized, government owned university. This is typical of private higher education institutions in China. All of them are a fair age and so are well established, the oldest being founded in 1982, the first year when private higher education institutions were allowed in China. In each case nearly all funding for the institutions came from private sources such as investor funds and student fees. Some have close relationships with local government authorities although even in these cases the vast bulk of funding is from private sources.

Data Evaluation and Analysis The approach used in this analysis attempts to enable the researcher to move beyond initial impressions in order to improve the likelihood of accurate and reliable findings. Generally case studies deliberately sort the data in different ways in order to expose or create new insights and deliberately look for conflicting data in order to advance the analysis. Specific techniques that may be used include placing information into arrays, creating matrices of categories, creating flow charts or other displays, and tabulating the frequency of events. Researchers may also use quantitative data that has been collected to corroborate and support the qualitative data, which is most useful for understanding the rationale or theory that underlies a relationship (Cooper and Schindler 2008). Another technique is to use multiple investigators when a variety of perspectives and insights examine the data and the patterns. When the multiple observations converge, then the confidence in the findings increases. Conflicting perceptions, on the other hand, cause the researchers to investigate further. Another technique is to use a cross-case search for general patterns which enables the investigator to refrain from reaching premature conclusions. This forces investigators to look at the data in different ways. The researcher can then treat the evidence fairly in order to produce analytic conclusions which answer the original ‘how’ and ‘why’ research questions (Soy 1997; Cooper and Schindler 2008). The first analytical technique used for this research is to simply undertake interviews with each of the college managers of the institutions using the same basic questions. The results of these interviews have been provided in the appendix along with English translations from Chinese. In addition two interviews were conducted

120

7 Qualitative Analysis

with the education officials. In these case similar questions were asked, although it should be remembered that they were changed a little to reflect that the fact that the questions were being asked on departmental officials rather than of college managers. The results of these interviews, along with translations, are also provided in the Appendix. The second technique was to undertake a cross-case analysis of the respective interviews (Yin 2003), categorizing the similarities and differences between the responses to the same questions. As patterns begin to emerge, certain evidence may stand out as being in conflict with the patterns. In the case of the studies presented in the Appendix it is possible to identify a number of common themes from cross comparisons of the interview results. The results of the cross comparison are presented in the later part of this chapter rather than presented in the Appendix. In terms of the original two questions that were raised in Chapter 1 of this study, the main issues were: • The first was the nature of the regulation that exists? Do government authorities regulate the behavior of private higher education institutions and if so is it ‘competitively neutral’ compared to the regulation of public higher education institutions? Are there any regulatory barriers to entry, which preclude or make it difficult for private higher education institutions to operate? From the previous chapter it seemed fairly clear that the regulatory regime on China is not uniform across all sectors (public and private) nor is it even uniform across the whole of the private sector for locational reasons. Although the national government sets many of the policy frameworks for the development of the higher education sector it seems clear that the local and provincial governments also have a role, which fragments things somewhat. In addition as the funding of government institutions is quite substantial and of private institutions largely non-existent there is a considerable favoring of the public over the private sector. • The second issue involves the relationship between the regulation of private higher education providers and that of the regulation of government providers. It does seem that the government regulators do impose substantial costs on the private providers, which although perhaps not burdensome than those also imposed on the government sector and nonetheless still regarded as being considerable. Going on from these questions and the findings of the previous chapter the following can be inferred. • The first point that can be considered is the source of funding of the private colleges. All respondents identified students’ fees as the main source of funding of the private colleges. In addition a number also identified the funds of shareholders as an important source of income (cases 2, 3, 4). None of the respondents identified the government as an important source of income.

The Cases

121

The first point is important as it means that student fee levels not only need to be competitive with those of government institutions they also need to be sufficient to fund the colleges. This can put the colleges in an unstable position as government fee levels are taxpayer supported, so effectively put a cap on the level of funding of private colleges. As public institutions compete with private ones (and vice versa) any subsidised public fee level will put downward pressure on private sector fee levels. Private institutions cannot raise their fees very far above that of the public sector. The expansion of the private sector is always going to run into this limitation and is perhaps the greatest influence that the government has on the development of the private sector. In terms of competitive neutrality between the public and private sectors this is an important issue not only because it affects the fee levels of the private sector but also as the public sector has the benefit of public funding, which allows the public sector institutions to fund more lavish facilities that puts even more competitive pressure on the private sector. Private colleges are faced with considerable costs in establishing themselves in the face of competition from the public sector. Land needs to be acquired, buildings constructed and materials purchased (mentioned by Case Study 1). Most of the other Case studies don’t mention this problem in terms of competitive neutrality, although Case Study 10 raises it as an issue for the private colleges, especially in terms of ‘backward facilities’ and the charging of fees higher than public colleges, which deters lower income students. In terms of catering for the expansion of student demand for private higher education this is an important point. Private institutions do not get the same support as the public ones and so rely heavily on student’s fees and investor funds, and can help to create some barriers to entry. This reinforces the point found in the previous chapter which emphasises the negative relationship between government expenditure on education and the development of the private higher education institution. Increased government expenditure makes it more difficult for the private sector to expand, and perhaps as much as anything is the most important government factor that impact on the development of the private higher education sector. • The second point that can be inferred from a cross comparison is that all of the managers state that local and municipal government regulation is important and in a number of cases is stated to be the most important form of government regulation. It appears, therefore, that the variety of local and provincial government regulations do have an impact on the development of the sector. Some of the institutions seem to have a close relationship with local government as well. This means that there is scope for regulatory differences across the country. Many also say that the policies of the national government are important (cases 2, 3, 5, 6, 7 and 8). Indeed there seems to be a general view that instability in national policy and continual change causes a degree of concern on the part of the private sector manager. A lack of stability in policy settings can create a degree of ‘regulatory risk’ for private institutions. Regulatory risk is the risk that a change in laws and regulations will materially impact business in a market. A change in

122

7 Qualitative Analysis

laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment or change the competitive landscape (Galligan 1986). The responses from a number of the interviewees seem to indicate that there is some degree of regulatory risk involved in the development of the private higher education sector. In terms of the mixture of national versus provincial and local government regulations Case Study 5 perhaps explains the state of affairs most accurately when the following is put: It must be the central government. Various policies and regulations are derived from the Ministry of Education; while local governments are all implementing agencies, whose attitude towards its local educational institutions including various types of enterprises should be supporting.

Case Study 6 also captures this view when it states that ‘National regulations’ are the most important while at the same time stating that ‘The local City Board of Education is the immediate government authority, it executes the most important regulations to our college’. What these respondents are saying is that although the national government determines policy and regulations it is often the local authorities that implement them. Those respondents that expressed the view that local government regulation is most important are probably just expressing this view because it is the local authorities that they are responding to on a day to day basis even if they are implementing national policy. Regulation and policy in China is national in scope, therefore, but is probably also subject to some minor variations as different local authorities place a different interpretation on how the implement the national regulations. The degree of severity with which they enforce regulation is probably also varied across different local jurisdictions. • Thirdly the restrictions on offerings, and limits placed on student numbers by central authorities appears to be the greatest government restriction placed on the private colleges. This point was raised by a number of the interviewees (cases 1, 2, 3, 4, 6 and 8). Case study 1 for instance stated that: The number of majors and enrolments admitted by the provincial and municipal education authorities is not very flexible for the autonomy of professional settings and enrolment.

Case Study 3 states something similar: Mainly reflected in the government’s control of the number of students enrolled.

And Case Study 4: It is mainly reflected in the government’s control of the number of students enrolled and the professional settings.

The Cases

123

This would appear to be a hard-line restriction on the growth of the private sector which is acutely felt by the sector and one that potentially could have a tremendous impact on the growth the development of it. Others interviewees point out that there are restrictions on what school income can be spent on. Case Study 7 points out that: ‘it is required by the government that the school income should be put by a certain ratio into teaching’. It states that this: ‘greatly restricts the power of the college’s market competiveness’. One of the government officials (Case Study 9) thought this practice necessary to prevent the colleges diverting the funds of students to non-education, commercial, purposes, and so therefore provides us with a general reasoning behind this stipulation. It is not clear why this stipulation would restrict growth of the sector, and might in fact do the opposite. Chinese private higher education expansion has been depicted in the past as being ‘demand-absorbing’ (Cao and Levy 2005; Liu 2002; Mok 1997), which the research in these study tends to support, but these restrictions mentioned do seem to indicate that the government is directing private higher education institutions to a small degree. Demand absorbing implies that institutions are mainly market driven, responding to excess demand for places in a commercially orientated way, although the Chinese Government restrictions must be distorting this to at least a mild degree. Fourthly compliance costs, imposed by government authorities are regarded by all interviewed as being substantial, and the threat of closure from non-compliance to be a very real one. Case Study 4 for instance stated that: The direct compliance costs of these regulations are very important, and is directly related to the survival and development of my college.

Case Study 5: Yet to pay the money, time and psychological costs are enormous.

The reference to ‘psychological costs’ is an interesting one. Generally people think of regulatory compliance costs as simply being a financial burden that has to be undertaken as a general cost of business. Compliance costs, however, can place a certain degree of strain on managers especially if there is some threat that accreditation may be cancelled due to non-compliance. Just about all the respondents were critical of the level of compliance costs. Regulatory compliance would be expected to cause some change in behaviour on the part of the private higher education institutions and some seem to think it has a greater impact on the private as opposed to the public colleges because of the greater size of the latter (Case Study 5). This seems to be an interesting point. On the whole the respondents seem to think that compliance costs are similar across both the public and private sector are similar in scale, and so therefore competitively neutral, except for institutions that are small in size. This is perhaps true in the case of some of the private colleges, however, many of them are quite large in size so would perhaps not be an issue for all of them.

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Finally in terms of the compliance costs, they do not seem to be as high as to deter entry in the markets, altogether although the comments that smaller institutions might struggle to deal with them is an interesting point. It is possible that the compliance costs have the effect of discouraging smaller institutions to exist and to encourage a trend towards larger sized private higher education institutions in China. In terms of the second range of issues the case of whether regulation has an impact on quality assurance seems to be in the affirmative. Only a few interviewees saw regulation as having any redeeming features. On the whole it seems to be regarded by most respondents as a hindrance. A few stated that government recognition of private colleges was a good thing in that it helped to raise the profile of private institutions, but others pointed out that recognition from the government was often limited in being forthcoming and a lack of recognition of private sector graduates by public authorities hurt the prospects of private colleges. Case Study 1 for instance stated that: The awareness of the private colleges is still insufficient whether it is from our society or government.

And that government public policy did little to alleviate this. Furthermore: The government does not recognize the qualifications of most of the private universities and our students need to participate in a self-exam or academic diploma exam to receive a diploma.

Interestingly the same Case study recognised that the city government did allow for graduates to gain employment rights in the city after graduating. Some case studies reported a more positive outcome: My college has been repeatedly rewarded and got recognition by the Ministry of Education, and has been rated as an advanced excellent school of private higher education by the municipal government and the City Board of Education. These have effectively promoted the development of the college and community recognition. (Case Study 4)

Case study 7 says something similar that their college: Qualified as a good private college in Beijing by the Ministry of Education…The college is also listed as an exemplary vocational college.

Case Study 8: The college has been continuously rewarded by the main leaders from the municipal communist party and administration as the awards of the advanced unit of private education, advanced civil society organization the advanced civil society organization and so on.

A minority of the institutions, perhaps the better run ones, see some benefit from government regulation and accreditation in that it tends to help them to get public recognitions, and presumably helps to boost student demand. One of the interviewees (Case study 5) saw the government regulation as providing a further benefit in creating a degree of standardisation across the sector which was

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beneficial. The recognition and enforced compliance of the private colleges might provide some degree of support for the private colleges, but if this is so it does not seem to be greatly recognised by the managers. Of course the responses of managers do not tell us anything about the responses of students to quality assurance programmes. What is does indicate is that the general view of managers is that the costs of compliance are probably greater than any benefits from quality assurance benefits, although a small number appreciate the recognition that it provides.

Summary of Results The results of the interviews do not contradict the results of the quantitative work in the previous chapter. If anything the results support and amplify the results. The two main points raised in the quantitative work also arise in the case of the interviews. First of all it seems obvious that the private sector managers do see government regulation as imposing considerable constraints upon them, both in terms of increasing the costs of their operating and in terms of their restricting the way in which they operate. These restrictions come from all three levels of government, local, provincial and national, and are not just originating from central government. This is in line with the results of the quantitative research. The second point raised by the quantitative study was the impact that government expenditure on public institutions had on private sector institutions. Although rising incomes, and a higher participation rate at secondary schools can help to drive growth of higher education, whether this growth is met by private or public sector institutions depends upon the level of resources provided by state authorities to government higher education institutions. If government support does not rise in line with demand then scope for expansion of the private sector seems to come about. In related literature this point has often been made that the private higher education sector is attempting to absorb excess demand in higher education markets (Castro and Navarro 1999; Galbraith 2003; Kwong 1997; Levy 2006; Mabizela 2004). Alternatively private higher education expansion can be seen as being created by the desire to create elite or cultural institutions (Levy 1986). In this case, given the strong commercial orientation on the part of the private higher education institutions it can generally be classified as being demand-absorbing (Levy 1986). In the Chinese case demand absorption has been seen as being a response to a ‘public failure’ to meet the soaring demand in higher education (Cao and Levy 2005; Kwong 1997; Liu 2002; Mok 1997). Demand absorbing institutions are usually very commercially and labour market-orientated (Levy 2002a, b, 2003a, b, 2004, 2006) and have strong links to the employability of their graduates (Banya 2001; Burke and Al-Waked 1997; Eisemon 1992; Kelly 2001). The interviewers seem to be vaguely aware of this aspect, especially when it comes to their reliance on the fees of students to finance their colleges. The level of government funding of government institutions, in competition with the private

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ones, would therefore seem to be one of the most important things that can have an impact on the development of the private sector. In responding to the growth of private higher education governments can be inclined to: (1) prevent it, (2) direct it into particular channels or (3) to facilitate its growth. Often governments around the world tend to be reactive to the growth of the private higher education sector (Levy 2002b, 2008, 2009). In the Chinese case the government is not trying to prevent growth of the private sector but instead seems to be facilitating and directing it. A few of the interviewees are aware of the benefits of public recognition from governments and saw it as a positive. This brings it in line with some similar views expressed in other countries (Deil-Amen and Rosenbaum 2004).

Conclusion Rising incomes, a growing complexity of economic activity, an increase in foreign investment and a growing participation rate at the secondary school level have all helped to bring about an increase in demand for higher education in China. A sizeable proportion of this increase in demand flowed over into the private higher education sector as the public sector was unable to meet demand. The degree to which this demand flowed into the private, as opposed to the public sector depended upon a range of factors. In the previous chapter it was found that the absence of stringent regulation and lower levels of government expenditure on government higher education had an influence on the proportion of higher education enrolments accounted for by the private sector. Expansion of the private higher education sector in China, therefore, is a demand absorbing one in that it relies on the demand for higher education that is not met by the public sector. It is, therefore, dependent on the tolerance of Chinese public policy makers and regulators and a deficiency in government expenditure on government higher education institutions to meet excessive student demand. The findings in this chapter from a series of interviews with private college managers and bureaucrats reinforce this view. Regulation, in a variety of forms, does influence the nature of the growth of the private sector in China, although it is worth remembering that the character of the private sector that has evolved is determined by a combination of both regulation and market forces. The private sector tends to be labour market and vocationally orientated, expands where it is allowed to by the state, and where there is market demand, and tends to concentrate in reasonably large sized institutions, that are able to bear the costs of compliance with regulation. The state in effect moulds and distorts the private sector’s growth and development rather than prevents it. In terms of quality assurance the results are far less clear. Basic standards might be influenced, and some of the larger, older, more prestigious private institutions might gain from the recognition of the government but on the whole the sector sees regulation as being a burden rather than something that provides it with any

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benefits. The findings of both this and the previous chapter are consistent with the views of Salerno (2004) and Levy (1986) who categorized government intervention as influencing the mix between public and private sectors. In the Chinese case the attitude of the government is to regulate, but to not deter investment in the private higher education sector, not to create insurmountable barriers to entry.

References Banya, K. (2001). Are private universities the solution to the higher education crisis in sub-Saharan Africa? Higher Education Policy, 14(2), 161–174. Burke, D. L., & Al-Waked, A. A. (1997). On the threshold: Private universities in Jordan. International Higher Education, 9, 2–4. Cao, Y., & Levy, D. L. (2005). China’s shifting private higher education development: Impacts from public sector privatization. International Higher Education, Fall. Castro, C. de M., & Navarro, J. C. (1999). Will the invisible hand fix private higher education? In P. Altbach (Ed.), Private prometheus: Private higher education and development in the 21st century, Westport CT: Greenwood Press. Cooper, D. R., & Schindler, P. S. (2008). Business research methods (10th ed.). New York: McGrawHill. Deil-Amen, R., & Rosenbaum, J. E. (2004). Charter-building and labor-market contacts in two-year colleges. Sociology of Education, 77(3), 245–265. Eisemon, T. (1992). Private initiatives and traditions of state control in higher education in sub-Saharan Africa (SAREC, PHREE Background Paper Series Document no. PHREE/92/48, 10534). Washington, DC: Education and Employment Division, Population and Human Resources Department, World Bank. Flyvbjerg, B. (2006). From Nobel-prize to project management: Getting risks right’. Project Management Journal, 37(3), 5–15. Galbraith, K. (2003). Towards quality private higher education in Central and Eastern Europe. Higher Education in Europe, 28(4), 20. Galligan, D. J. (1986). Discretionary powers: A legal study of official discretion. Oxford. Kelly, K. F. (2001). Meeting needs and making profits: The rise of for-profit degree-granting institutions (ECS issue paper). Denver: Education Commission of the States. Kwong, J. (1997). The reemergence of private schools in Socialist China. Comparative Education Review, 41(3), 244–260. Levy, D. C. (1986). Higher education and the state in Latin America: Private challenges to public dominance. Chicago: University of Chicago Press. Levy, D. C. (2002a, April 9–10). Profits and practicability: How South Africa epitomizes the global surge in commercial private higher education. In Understanding private higher education in South Africa. Benoni, South Africa. Levy, D. C. (2002b, April). Unanticipated development: Perspectives on private higher education’s emerging roles (PROPHE Working Paper No. 1). Albany, NY. Levy, D. C. (2003a). Expanding higher education capacity through private growth: Contribution and challenges. The Observatory, 11, 1–15. Levy, D. C. (2003b). Unanticipated development: Perspectives on private higher education’s emerging roles (PROPHE Working Paper No. 1, April 2002). Albany: State University of New York at Albany. Levy, D. C. (2004). The new institutionalism: Mismatches with private higher education’s global growth (PROPHE Working Paper No. 2). Albany: State University of New York. Levy, D. C. (2005). Analyzing a private revolution: The work of PROPHE. International Higher Education, Spring.

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Levy, D. C. (2006). The unanticipated explosion: Private higher education’s global surge. Comparative Education Review, 50(2), 217–240. Levy, D. (2008). Commonality and distinctiveness: Indian private higher education in international perspective. In A. Gupta, D. C. Levy, & K. B. Power (Eds.), Private higher education global trends and Indian perspectives (pp. 253–272). New Dehli: Shipra Publications. Levy, D. (2009). For-profit versus nonprofit higher eductaion. International Higher Education, Winter. Liu, J. (2002). Social transformation and private education in China. Westport, CT: Praeger. Mabizela, M. (2004). Whither private higher education in Africa. International Higher Education, Winter. Mok, K.-H. (1997). Private challenges to public dominance: The resurgence of private education in the Pearl River Delta. Comparative Education, 33(1), 43–60. Olalere, T. (2011). Methodology in accounting research: A critique of taxonomy. Social Science Electronic Publishing, 1–40. Salerno, C. (2004). Public money and private providers: Funding channels and national patterns in four countries. Higher Education, 1–30. Soy, S. K. (1997). The case study as a research method (Unpublished paper). Austin: University of Texas. Yin, R. K. (1994). Case study research: Design and methods (2nd ed.). Sage Publishers. Yin, R. (2003). Case study research—Design and methods. Washington, DC: Sage. Yin, R. (2012). Applications of case study research (3rd ed.). Los Angeles, CA: Sage.

Chapter 8

Conclusion

Introduction The purpose of this study has been to look at the growth of the private higher education sector in China over recent years and to analyse some of the key drivers of this growth and impediments to it, especially those in terms of government intervention. In particular the study looked at the way in which the Chinese government’s regulatory framework (national, provincial and local) influenced the development of the sector and the way in which it operates. As mentioned in the introduction the growth of China’s higher education sector has been strong in recent years and at 31.1 million students (2010) it is the world’s largest higher education sector (UNESCO, Institute for Statistics). The state of this sector, therefore, is an important issue. Higher education itself plays an important role in promoting national development, through the creation of skills and knowledge of the workforce. In the Chinese case as the public sector has lagged behind demand for higher education the private sector has expanded to absorb the surplus demand. In the following section the main focus of the study is re-introduced. This is followed by a section that provides a summary of the findings. In the next section the overall contribution of the study is explained and then in the final section some suggestions for future research are presented.

Focus of Study The Chinese Government’s approach to regulating higher education (both private and public) plays an important role in maintaining standards and in enabling the higher education to expand while at the same time maintaining educational standards. A significant part of the growth in recent years of the Chinese higher education sector has been in the private sector. Attention in the study was given to the manner in © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2_8

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which this sector is regulated by the government and the manner in which private institutions are managed. The main focus of the study, therefore, was in improving our understanding of the contribution made by this component of the sector to the growth of China’s higher education and the impact that government regulation has had on its development. The present Chinese Government first gave legal recognition to private education in the 1982 constitution. The intent of this legislation in reference to private education, however, was to a large degree vague. Overtime additional legislation was passed that provided greater clarity. The major features of this legislation included the stipulation that foreign institutions must partner with Chinese institutions; partnerships, must not seek profit as their objective; as well as a range of other measures. A general acceptance of the validity of Chinese private higher education occurred at this time because it was felt, and is still felt, that government institutions and public funding, would be insufficient to provide for an expansion of a significant number of graduates to meet China’s economic growth plans. The Chinese Government approach overall, therefore, has been to facilitate (rather than prevent) growth of the private higher education but to also closely regulate it and in some cases direct it. The economic justification for regulation of private businesses (including education) is generally that it may help to overcome some sort of ‘market failure’, which can lead to sub-optimal outcomes. In the case of education regulation has generally been justified on the grounds that these markets have information imperfections (Pusser and Daone 2001; Breneman et al. 2006; Winston 1999; Hansmann 1981). This study, therefore, concentrated on the nature of government regulation and its impact on the growth and basic structure of private higher education in China. Public policy in higher education comes in a variety of forms but the research in this study concentrated on the government regulation of the behavior of private higher education institutions. Although regulation is just one part of public policy approaches regarding higher education, its nature and intent is important in its impact on the development of private higher education and can also tell us quite a lot about the general attitude of government toward the development of this sector. In particular the nature of regulation and its impact can tell us a lot about whether public policy makers want to encourage the growth of private higher education, direct it into the development of niches areas or, indeed, inhibit its growth all together.

Summary of Findings In showing what the impact government regulation has had on the growth of the private higher education sector in China a number of findings were developed. These findings are provided below. First of all although factors such as per capita income growth, rising participation rates at the secondary school level and growing foreign investment in the commercial sector of China all helped to grow the demand for higher education overall, but they were not found to have any significant impact on the private/public mix. Instead

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the degree of government regulation and the extent of government funding of the public sector had the greatest impact on the mix. These findings are in line with much past research on the development of the private higher education sector elsewhere, such as the work by Salerno (2004), Zumeta (1996), Kinser (2009), and Brimah (2000). Although market demand for education is the main driver of growth of higher education in China, these two aspects of government intervention influence the mix between the two sub-sectors. Secondly, regulation does tend to be fairly ‘competitively neutral’ between the two sectors (except to the degree that the public sector is partially taxpayer funded) and regulatory barriers to entry do exist, but they can be overcome by large, wellresourced private institutions. Some degree of regulatory risk exists for private institutions because of the changes in government policy over time. Overall these regulations probably have the impact of discouraging too small private institutions from surviving, and creating a more favourable climate for larger private institutions. Thirdly most of the private institutions see the regulation as creating significant compliance costs with no benefits to them. A small number of institutions recognised that, at least in their cases, there are some benefits from greater quality assurance and public recognition. In terms of the development of policy it is necessary for the Chinese Government to be mindful of the impact of regulation when it reforms its regulatory approach. In doing so it has to balance the need to maintain the standards of the private higher education providers while at the same time ensuring that the regulatory burden is not too onerous on the providers. To a degree China does depend on the contribution of the private providers in providing for a more skilled and knowledgeable work force. The other aspect that must be borne in mind is the impact that the funding of the public sector has on the private sector. To some degree the public funding of government institutions does ‘crowd out’ the private sector institutions. Any reform of the funding of the government institutions needs to be mindful of the impact on the private sector as well.

Contribution A number of contributions emerge from the research conducted in this study. First of all the study contributes to understanding the basic nature of the growth of private higher education in China in recent years. Furthermore it illustrates further the links between a variety of different changing factors in China and the growth of the sector. In the past there has been little research on the nature of Chinese’s private higher education sector, despite its size, and virtually nothing on the relationship between the sector and the government, both in terms of regulation and other aspects of government intervention. Given the complexity and size of the private higher education sector in China and its importance to development in that country this research makes a contribution

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in that it will assists policy makers and other academic researchers who undertake future research in this field.

Future Research Due to the original nature of this study, some limitations are discussed. First, the main limitation of the study is the limits on the nature of data available about the sector, which at present is very limited at the institutional level. The case study interviews are few in number and further investigations in the nature of the response to private/public sector relations in China would be useful. In addition, perhaps, some view on the attitudes of students to government regulation and employees of graduates to regulation would be useful as well. Several extensions to this work are possible. The Chinese regulatory regime for private higher education sector is an especially complex one and all of the ramifications of its implementation require further clarification through more research in the field. Future research should endeavor to provide greater clarity to it and its impact. In concluding the hope of the researcher is that the findings of the study will help future scholars of the sector to gain a greater understanding of the sector and its importance.

References Breneman, D. W., Pusser, B., & Turner, S. E. (2006). The contemporary provision of for-profit higher education (Working paper). Albany: State University of New York Press. Brimah, T. (2000). Higher education: Are for-profit institutions treated differently?. Washington, DC: Education Commission of the United States. Hansmann, H. (1981). The rationale for exempting nonprofit organizations from corporate income taxation. Yale Law Journal, 91, 54–100. Kinser, K. (2009). How the for-profit sector contributes to access in US higher education. Enrollment Management Journal, 3(4), 23–44. Pusser, B., & Daone, D. J. (2001). Public purpose and private enterprise: The contemporary organization of postsecondary education. Change, 33(5), 19–22. Salerno, C. (2004). Public money and private providers: Funding channels and national patterns in four countries. Higher Education, 48, 1–30. UNESCO, Institute for Statistics. (2010). www.uis.unesco.org/. Montreal. Winston, G. C. (1999). Subsidies, hierarchy and Peers: The awkward economics of higher education. Journal of Economic Perspectives, 13(1), 13–26. Zumeta, W. (1996). Meeting the demand for Higher Education without breaking the Bank: A framework for the design of state higher education policies for an era of increasing demand. Journal of Higher Education, 67(4), 367–425.

Appendix A

Interviews

Interview Guide with Open-Ended Questions for Private Institutional Senior Managers Case 1 1.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. There are five dean and deputy deans with senior professional titles, who are old educators and professors and familiar with the university management. And there are nine heads of departments, who are the professional academic leaders, with extensive teaching experience. Among the teaching staff, the holders of postgraduate degree or master’s degree or above accounting for 32%, senior teachers accounted for 26%. Associate professor or above 48.5% are full-time staff. Our college is a college-level with three academic year fulltime study, with the implementation of the credit system management, tuition fee is charged according to study credits. There are twelve disciplines and majors including biotechnology and applications, and computing science and so on. It is located in the Special Economic Zone, adjacent to the city of high-tech industrial area. It provides students with nice internship environment as well as employment opportunities. During the past two years, student employment rate was over 95%, and most of our students were employed in our city. To provide graduates with the opportunity to study abroad, our college also offers them ‘3+1’ special classes studying in England for their final academic year. In addition to receiving the 3 year certificate from our college after graduation, the graduates can also get the opportunities to do study for their diploma and even postgraduate degree at a university in the United Kingdom. We have set up the enrollment incentive mechanisms and scholarships as well as work-study system. The scholarships cover up to 25% of the total number

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2

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of students. Students with social-economical difficulties can participate in the work-study program within and outside of our college. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. Our college was founded in 1998, and got officially approved by local provincial government in 2000, it is the first private college in our city, which is different from other private colleges that it is jointly established by our Provincial Educational Association and city government, it is a private higher education institution with partly government’s sponsorship. The former vice governor, the chairman of the Provincial Education Association and the Vice Mayor are the chairman and vice-chairmen of our college, respectively. From the current situation of our college, there are still many difficulties: The size is too small. The lack of knowledge. The awareness of the private colleges is still insufficient whether it is from our society or government. Therefore, there is a shortage of student source, student enrolment rate is very low in private colleges and universities, only accounts for 48.5%. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. Tuition fees, accommodation fees. Other private colleges and universities absorb more private funds. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? The provincial and municipal education authorities: Department of Education, and Admission Office. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. The number of majors and enrollment admitted is limited by the provincial and municipal education authorities, it is not very flexible for the autonomy of professional settings and enrollment plan; students can only get academic certificates without diplomas after graduation. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. Tuition fees and accommodation fees. Our college is founded by the retired veteran cadres, without big business background, therefore, the financial resources are limited. Tuition fee alone is insufficient to make our college to grow and develop continually due to the lack of financial support, In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. Admission sources and employment policies: From the outset, the private colleges and universities are facing adverse situation of public policies. The

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government does not recognize the qualifications of most of the private universities, and our students need to participate in a self-exam or academic diploma exam to receive a diploma; it is not listed into the college enrollment plan; students from private colleges and universities are not allowed to be employed by the national authorities and state-owned enterprises their after graduation, and they are not allowed to enter into cadres system; even taking train they are not allowed to enjoy half-price treatment; private colleges and universities can only enroll students who are not accepted by public universities through public HEIs (higher education institutions) entrance exam, and they have to fend for themselves after graduation. Education funding policy: In China, student tuition fee is the only source of income for private colleges and universities. 8. How would such policy make your institution different or similar to other institutions? The difficulties faced by the private colleges and universities are enormous. This is because the private colleges and universities almost all start from scratch. From land acquisition to campus construction, from the purchase of books and materials to various devices, all involve a lot of investment, and the private colleges and universities have to resort to bank loans as investment entities, the annual interest to pay is not a small burden. On the surface, the tuition fees charged by private colleges and universities are higher than that of public ones, thus giving people the impression that it should not have difficulties in private colleges and universities for school funding, faculty treatment should be also better than the public universities. It is not necessarily so in fact. Because in addition to the tuition fees charged to students in public colleges and universities, there is the central or local financial allocation, only these two are higher even much higher than the tuition income of private colleges and universities. In addition, the Public Universities have earmarks and sponsorships from all sectors of society, which is unmatched by private colleges and universities. In such a poor policy environment, which parents are willing to send their children to attend private universities? Yet, how can private universities to grow and develop with a very low enrolment rate due to lack of student source? Therefore, if we do want to nurture the Private Higher Education, it must be given a fair policy environment. 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? Province, city. 10. How significant are the direct compliance costs of these regulations? Due to many factors, to enroll students is generally difficult each year for private colleges and universities, and a lot of human and financial resources have to be casted to run for student source, thus makes the cost of enrollment much higher than public universities, which also has increased the cost of running the colleges and universities, and has increased the difficulties in funding. The annual tuition fee is depleted, except maintain the daily operation.

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It can’t make the private colleges and universities get recovery from large investment in fixed assets depreciation, more than that every year more new investment has to be made to make it run. I am worried that if this situation is not changed, whether private colleges and universities would survive in the long-run. 11. In your view, are there any benefits to your institution that can be attributed to regulation? Approved by the municipal government, all graduates from our college, since 2007, get employed within two years in our city, can apply for Hukou (citizenship for legally living and working in the city) according to the receiving college graduates procedures by their employers. 12. Are there any other thoughts about institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? Co-ordination is not enough. A positive interaction mechanism like Private Universities in the United States with the government’s macro-guidance and school self-development is not yet formed. I hope that the government stepped into encourage and support a financially strong group enterprise to invest in private higher education, to found a new modern private university. I hope it can cause ‘herding’ effect, bringing about more social forces into running school independently, and it will encourage private education develop to the direction of being popular, diverse, and popularization, to better meet the social multi-level demand and a variety of educational needs. The further development of the knowledge-based economy, will encourage people to gradually change their concepts of consumption and production. Case 2 1.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. Our university is majoring in vocational higher education, meanwhile to enroll some students from Enrolment Expansion and some students for preparing them to study abroad. It is a new full-time private university. The school is located in the City Technology Park with a planning area of 3,000 acres (currently occupies more than 1,600 acres). It consists of (School of Business, College of Automotive Engineering, School of Information Engineering, College of Foreign Languages, College of Journalism and information dissemination, the Financial Securities Institute of Law and Politics, Institute of Modern Art, the Institute of Animation and Games, Film School, School of Cultural and Economy, College of Social Psychology, College of Life Science and Technology, School of Music and Dance and European and American International College) total of 15 Institutes. It has been basically formed its distinctive features with its professional disciplinary groups classified as complementary automotive technology, commerce management and cultural industry and so on. It has 7 disciplines in engineering, science, economics, management, law, literature and philosophy.

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We also have opened more than 150 new brand professional majors to adapt to the development of the market economy. We have eight large Siamese teaching buildings, two modern laboratory buildings, two ladder classroom buildings, 26 student apartment buildings, 4 expert and doctor buildings and 3 student catering buildings. There are computer network centers with broadband access, multimedia language labs, electronic laboratories, financial security laboratories, broadcast television stations and so on totaled 29 laboratories in the modern laboratory buildings. We also have 18 multimedia classrooms with more than 2,500 computers, with the value of the construction of the campus network worth more than 1,000 million Yuan RMB. The modern library with building area of 24,000 square meters, an investment of 120 million Yuan RMB, a collection of one million books has been put into use. The supermarkets, hospitals, large bathroom, laundry room, mail room, bank automated teller machines and other living facilities are all completely on campus. All student dormitories equipped with separate toilets, air conditionings, heating systems, telephones, cable TVs and computer interfaces. The campus security is 24 h on duty. We have been awarded as Beijing standardized student apartments for our elegant, convenient, safe and comfortable learning environment. There are also six turf football fields, 42 basketball courts, 40 volleyball courts, four tennis courts, a table tennis hall, a fitness plaza, a standard plastic track and field, 6 badminton courts, two swimming pool, an open-air playground. ‘The purpose of entering our university is to better integrate into our society.’ the guiding ideology is in accordance with the needs of the society, ‘The cultivation of talents is according to the demands from society’. In order to train students into qualified workers, we arrange more time, design more teaching contents to allow students to participate in skill development and social practice as well as production training. To this end, we have invested over 3,000 million Yuan RMB in it and have created more than 30 experimental sites in the automotive practice facility, life science laboratory building, and related businesses. We also have established a number of off-campus internship training bases. Our ‘Order Education’ is taking advantage of our quality network resources with nearly 3000 enterprise, it opens the door for student employment. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. In the establishment of the discipline of the college and professional settings, to meet the business needs, and comprehensively improve the relevance of education and training is our starting point. To explore and establish an ‘order service’ mechanism for education and training according to the employment demand of enterprises, and to timely adjust the content and form of curricula and teaching programs through the university-enterprise cooperation. Our automotive College has established 18 majors with specialized and distinctive features in automotive, electrical, industrial product design and modern manufacturing technology. There are more than 50 professors, associate professors, doctors and master’s holders, and senior engineers working in our college.

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Each college of our university relies on its enterprise group, and there has more than 20 off-campus training and practice bases. We hope that the student sign the tripartite employment agreement when enroll, so the students already know where to go after graduate, basically in Germany, enterprises pay tuition fees and the students already know where to go after graduate. So we hope that most of our students will be able to embark on orders’ classes. What is the reason to enroll in our university? It is the orders’ classes. If your family is running business in catering, and you want to learn such a capacity professional, then in general you may not learn it if you go to other schools. But our ‘Order’ classes are jointly opened with enterprises, and if your goal is very clear, then it is very attractive to you. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. Shareholder’s investments and tuition fees paid by students are the main income sources. Our university is founded by an enterprise group with a rolling investment of 800 million Yuan RMB. We have more than 1,000 existing school staff and about 20,000 full-time students. Significantly different from other private universities, The share of business investment in the financial operations of our university is very important to us. Tuition fees only account for 50% of the annual income of our university each year, which is very different from other private higher education institutions with tuition fees accounting for over 80% or even over 90 or 95% of income each year. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? a. National regulations are the sources of external control of my university, mainly in the form of government documents. b. Our university is founded and invested by an enterprise group, therefore it is directly controlled by this group.

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Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. Our university relies on its enterprise group and its related industries, therefore it opens up the green channel for our student employment. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. It is required by the government that the school income should be put by a certain percentage into teaching. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how.

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Continually raising the threshold of the Plan (National long-term Education Reform and Development Plan 2010–2020), and cleaning up the implementation of the policy of the private colleges are very good and a lot of work has been conducted. And it is also listed out and reported a lot which are discriminatory policies by the Association of Private Education in China, but realistically speaking, we just heard the sound of the thunder of good policy without real implementation. It is not easy to propose a good item of policy, due to the past, it might be very difficult to have a very good education policy, but it was aiming to the public universities instead of private ones, so it is problematic itself by taking the same old public university policy sets supervising private universities. Then the introduction of the new policy, we should say, it is really not very easy to achieve many departments’ agree, if it is only the education policy, it also needs to break through the concept of a lot of people, to gain some support. And it becomes even more difficult for a number of departments do so. Currently there is no way for Ministry of Education to deal with the student source decreasing, which is a realistic problem. But it is much more difficult to solve some injustice towards private education. First of all, the issue of funding, Why the education funding can be given to students from public universities, rather than from private ones, which, I don’t think, it is fair for such a right of every citizen. Because the students our Min Banxiao (Private institutions) educate, are the citizens of the People’s Republic of China, and are to work in our enterprises and institutions, and government agencies after graduation. Thus why can’t they have funding, but the public ones can? It is not consistent with most countries of the world. The Ministry of Education would like to change it, yet other departments think Min Banxiao (Private institutions) have their own idea, why should the funding be given to the investing bosses (of private institutions), the idea is backward, Most of our Min Banxiao (Private institutions) are private institutions for public benefits, therefore the investors are not allowed to have dividend of benefits, you can have a very good supervision and control for it. Say, the government spent a hundred dollars, which spent on the students. The economy of our city is so developed, the municipal government is fully capable of supporting our private institutions. But there is no policy to support it, then what to do with the superfluous money? It is supposed to be given out. I heard from the principals of the public institutions, that there is no use to buy some sophisticated stuff, where to place them? How to spend the money (that they have in hands)? Yet students from private universities have to rely on their own to spend more. How would such policy make your institution different or similar to other institutions? If such a policy cannot be changed, then it is unfair for private institutions. Furthermore, with the decrease of student enrolment number, private institutions are facing such difficulties, that some of them are unscrupulous, some hype, some even promise whatever they want. The government has no doubt should strengthen the supervision on it. Yet, the strengthening of supervision is here now instead of the support regarding on this.

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Which level of government imposes the most significant regulation on your institution (local, provincial, national)? The Municipal Education Commission. 10. How significant are the direct compliance costs of these regulations? The direct compliance costs of these regulations decide the survival and development of the our university. 11. In your view, are there any benefits to your institution that can be attributed to regulation? The teaching reform of our institutions, is one of the most profound teaching reform experiment since 1996, (in which year, the Ministry of Education issued a document calling for teaching reform on undergraduate education of colleges and universities,) which is listed as a state-funded project of teaching reform in Beijing, and has been recommended as one of the Top Ten National Outstanding teaching cases. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? Nothing. Case 3 1.

2.

3.

4.

5.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. Our school is a municipal college which is publicly owned and privately running, its management mechanism is constituted and implemented by the School Council under the Board of Directors, and the Board is its highest power structure. In the case of in compliance with national law, the Board can make decisions related to our school, such as it can decide whether to increase investment and how to decide the appointments of personnel. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. No. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. Shareholder’s investments and tuition fees paid by students. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? National regulations, mainly in the form of government documents. No other external factors. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. Yes. Mainly reflected in the government’s control of the number of students enrolled.

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Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. It is required by the government that the school income should be put by a certain percentage into teaching. 7. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. That is, the government’s control on the number of students enrolled and the ratio of the funds invested. It directly affects the income of the shareholders. 8. How would such policy make your institution different or similar to other institutions? Don’t know. 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? Provincial government. 10. How significant are the direct compliance costs of these regulations? Don’t know. 11. In your view, are there any benefits to your institution that can be attributed to regulation? Mainly due to the direct supervision of the Board of Directors, by doing so can solve problems timely. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? Case 4 1.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. My college is mainly vocational higher education, supplemented by non-degree education like self-teaching examination of higher education and various types of post qualification training. It focus on the combination of theory and practice, and a double certificates teaching. Combining study with work, study with sponsoring and school-enterprise cooperation. There has five teaching departments consists of international economic and trade, business administration, foreign language, art design and computing science. There are two secondary colleges of comprehensive education and the Institute of international education. There are 13 Gaozhi (vocational higher education) majors and more than 10 Gao Zikao (self-teaching examination of higher education) and trainings, there are more than 4,000 students enrolled now. My college has a stable teaching staff of more than 300 fulltime and part-time, including 40% of them have senior professional titles. The management team constitutes of over 100 who are good at teaching and management personnel. Each class is equipped with a full-time teacher to be fully in charge, there is a sound management team to manage the basic level for students.

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Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. My college was founded in 1982 by the older generation of educators, and it was the first private university after the opening up of China’s reform. It was approved by the municipal government of workers and peasants education office at that time. In December 2002, it was approved as a college of vocational higher education by the municipal government. Since the past 30 years, the Institute has always been the concern and encouragement of the communist party and the government and strongly supported by the leaders at all levels. The college has got inscriptions by the leaders from the Central Committee of Chinese Communist Party. The college focus on the work of communist party building. College party committee was set up in November 2007, which was approved by the immediate higher Party organization. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. The income source is from the shareholder’s investments and tuition fees paid by students. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? My college is mainly controlled by the national and local government regulations, it is in the form of government documents. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. It is mainly reflected in the government’s control of the number of students enrolled and the Professional settings. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. It is required by the government that the school income should be put by a certain percentage into teaching. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. The policies of the government control of the number of students to be enrolled and the proportion of funding to be invested, it directly affects the income of the shareholders and the operation of the school. How would such policy make your institution different or similar to other institutions? Not really sure about it. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? My college is approved by the local municipal government, and registered in the State Ministry of Education, it is an ordinary vocational higher education

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institution, which has authorized eligibility to grant vocational qualification certificates for private higher education. Therefore, the local City Board of Education imposes the most significant regulation on my college. 10. How significant are the direct compliance costs of these regulations? The direct compliance costs of these regulations are very important, and is directly related to the survival and development of my college. 11. In your view, are there any benefits to your institution that can be attributed to regulation? Yes, The State Council has earmarked the construction of campus buildings, it funded my college with national financial allocations of 28.2 million Yuan RMB in March 1996. My college has been repeatedly rewarded and got recognition by the Ministry of Education, and has been rated as an advanced excellent school of private higher education by the municipal government and the City Board of Education, it has also won the Private Higher Education Entrepreneurial Award issued by the Ministry of Education. These are effectively promoted the development of the college and community recognition. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? The focus is on the overall quality of training in my college, and it actively promotes the construction of campus culture. The qualified students enjoy national scholarships, national motivational scholarships, state grants and well as some top student rewards from the college. The college also emphasizes the strengthening the employment guidance to students and continues to broaden the channels of employment for graduates. It holds regular job fairs for graduates on campus, and recommends job opportunities for them. The graduate employment rate in is more than 95% in the last three consecutive years. Since the last 30 years, the college has been training of more than 20,000 college graduates of various types for the community, therefore it has been widely welcomed and praised by the employers. Case 5 1.

2.

3.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. We have a comparative advantage in foreign language teaching, which covering deeply into various disciplines. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. We did not feel it. The difference among private universities should be on the issues of the way of how to position itself by each institution. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones.

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The source of income for private institutions should be broadly similar. The income source of my college are the following, A. Business investment B. Tuition fees C. Community donations. 4.

Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? If there is any control, it should come from the investment party. 5. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. The most powerful external authority which controls all the institutions should be the Ministry of Education. There are only penalties associated with the control of our institution by the external authority, there is no incentives associated with it at all. 6. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. There must be some restricted conditions. For businesses, the investment in running schools is mainly pubic (community) behavior, but we would like to operate it normally, and hope to obtain a reasonable return when it is possible. 7. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. Positive: the government does to encourage non-governmental forces to offer higher education. Negative: a variety of educational indicators of private institutions are exactly the same as the requirements of national (public) institutions, which in terms of funds investment is an enormous pressure for private sector. 8. How would such policy make your institution different or similar to other institutions? We haven’t seen the difference between private and public sectors yet up till now. 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? It must be the central government. Various policies and regulations are derived from the Ministry of Education; while local governments are all implementing agencies, whose attitude towards its local educational institutions including various types of enterprises should be supporting. 10. How significant are the direct compliance costs of these regulations? Compliance costs account for a very large part of various types of institutions. For all colleges and universities, the Ministry of Education has a series of comprehensive and specific assessments on school running level, and school

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running conditions. But the required assessment does not mean it is needed for running school, yet to pay the money, time and psychological costs are enormous. 11. In your view, are there any benefits to your institution that can be attributed to regulation? Benefits: to standardize school running, to promote the construction of it. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? No. Case 6 1.

2.

3.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. The college was founded in March 2003, by the approval of the local municipal government, filed with the Ministry of Education. It holds a specialist-level vocational higher education, it is a comprehensive general vocational institution, supplemented with self-teaching examination of undergraduate education. It is a vocational college in economic and technical professionals. It mainly provides economic management vocational higher education. Now it has 9 departments and two faculties, providing 20 majors in marketing, finance, insurance, hotel management, business English, and computer application technology. There are 5,000 students enrolled now. Students who are studying economics and management accounts for three-quarters of all students. The independent campus was completed in 2006. The Institute is covering an area of 335 acres, the first phase of the construction area of nearly 100,000 square meters. There are 291 faculty members, of which 80 are fulltime, and 150 part-time. There are nine graduate students this year, 15 undergraduates, of which nine are working in teaching position. The first graduates of nearly 600 are now is working (or learning) already. The first time employment rate was 96%. It achieved to 98% by the end of 2006 (The 881 graduates in 2007, the employment rate is about 98% by to the end of June). Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. The founder of the school has abroad studying experience, and it is the first school in China which is run by a returned student who has studied in foreign countries. It has been since the same year, formally incorporated into the plans of the national college entrance. The college organizer has studied in the United States and Canada for seven years. In 2002, he returned to China to open the business. It is an economic and technical vocational college, majors it offers are mainly economics and management and some other related ones. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones.

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Shareholder’s investments and tuition fees paid by students. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? National regulations, mainly in the form of government documents. 5. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. The college is awarded the honorary title of ‘patriotism education bases’ by Chinese Patriotic Engineering Federation. 6. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. It is required by the government that the school income should be put by a certain percentage into teaching. 7. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. Admissions policies, mainly reflected in the government’s control of the number of students enrolled. 8. How would such policy make your institution different or similar to other institutions? Government control of the school’s income directly affect the normal operation of the school and the shareholder’s income. 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? The local City Board of Education is the immediate governing authority, it executes the most important regulation to our school. 10. How significant are the direct compliance costs of these regulations? Directly determines the survival of our school. 11. In your view, are there any benefits to your institution that can be attributed to regulation? None. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? 4.

Case 7 1.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. The College has a unified enrollment eligibility to offer advanced degree education programs nationwide, it is a full-time private vocational institution (tertiary). The college has qualifications in Sino-foreign cooperation in running schools approved by its governing department from the government. It has five

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categories totally seven majors, with a plan of recruitment of 400 students independently, and it is listed under the unified national entrance program, qualified students will get national recognition of qualifications in specialist diploma. Consists of 6 departments and 1 faculty, which covering 15 majors in vocational higher education, and there are more than 4,200 students enrolled now. The college Features different from the other institutions: The three backbone featured professional group established are: ‘relying on the industry, setting the industry as the core, the working position as the goal,’: i.e., the chain animation professional group with animation film industry as the core; the preschool education industry group which setting the child education industry working positions; the sports management professional group, with which sports and leisure industry as the core, and featured major in golf. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe. The college was formerly an institution of foreign language study, which is a private education organization established in 1984 as a school in the form of self-teaching helping exam. The municipal government approved it as a private college of vocational higher education, which has the qualification in granting diplomas independently in May 2003. After more than five years of development, the college experienced ‘three major changes’: First, achieved the transition to full-time vocational higher education from selfteaching exam; Second, achieved the transition from the separation of studying from industry to the connection of college and enterprises, to the combination of industry with training, Third, achieved a stable teaching staff with fulltime and part-time from only from part-time before. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. The combination of social financing, personal funds and student tuition fees. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? Our college is registered in the Ministry of Education and approved by the local municipal government, is under the charge of the City Board of Education. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. The development of private education as an important content of supervision and evaluation of the city education work. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related.

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It is required by the government that the school income should be put by a certain ratio into teaching. 7. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. National regulations, mainly in the form of government documents. That is, the government’s control on the number of students enrolled and the ratio of the funds invested. It directly affects the development of the college. 8. How would such policy make your institution different or similar to other institutions? The government’s control of the ratio of the number of students to be enrolled and funding to be invested greatly restricts the power of college’s market competitiveness. Facing the fierce competitive situation in the market and public schools, we have to break our own path, starting from the weak part of the public schools, connects with the market demand, to create our own characteristics. Today, we have formed a certain scale, and got accepted by the government and the society. 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? It is under the charge of City Board of Education. 10. How significant are the direct compliance costs of these regulations? It decides the survival of the college. 11. In your view, are there any benefits to your institution that can be attributed to regulation? Yes, it has been successful in the pilot reform of independent enrollment in Beijing in since six consecutive years. It has been qualified as a ‘good’ private college in Beijing by the Ministry of Education, while all the other vocational higher education institutions rated as only satisfactory. The college is also listed as the exemplary vocational college construction plan project of 2009. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? Case 8 1.

2.

Which institutional characteristics differentiate your institution from other private and public institutions? Please give an example. There are seven departments in our college, which covering eighteen majors in vocational higher education, and thirty non-diploma majors in vocational higher education, totalled 60 majors. There are 7,000 students enrolled, and almost 500 teaching staff. Service is the purpose, employment-oriented, combines study with industry for the development of our vocational higher education. Mainly to train students to be skilled expertise with high quality for working in the front line in the modern service industry and the cultural and creative industries, our graduate employment rate achieved to 98%. Are there any external factors (local, provincial, and/or national government) associated with such differences among institutions? Please describe.

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Our school is approved by the local municipal government, has registered in the Ministry of Education, and is qualified to grant national recognized qualifications. It is full-time municipal vocational higher education institution. Its history can be dated back to the school founded by an international friend as well as a well-known social activist during the anti-Japan war in the last century. And it was officially founded in May 1983, with a State Department counselor and some others, it has become one of China’s first private universities after the reform and opening up. 3. Which income source does your institution bank upon the most? Comment on other private institutions and whether they would rely on similar sources or different ones. The main income is from Shareholder’s investments and students’ tuition fees. 4. Describe the sources of external control over your institution and what form these take. If your institution is under various external constituencies, which group has the most direct control over your institution? It’s the national regulations, mainly in the form of government documents. No other external factors. 5. Are there any incentives or penalties associated with the control of your institution by external authorities? Give examples. Yes. Mainly reflected in the government’s control of the number of students enrolled. 6. Describe any conditions by which you must abide that are tied to the funds you receive from income sources. Are there any government policies that are either positively or negatively related to the financial management of your institution? Please explain how these are related. It is required by the government that the school income should be put by a certain percentage into teaching. 7. In your view, which government policy facilitates or hinders your institution or other private institutions the most? Describe how. That is, the government’s control on the number of students enrolled and the ratio of the funds invested. It directly affects the income of the shareholders. 8. How would such policy make your institution different or similar to other institutions? Don’t know. 9. Which level of government imposes the most significant regulation on your institution (local, provincial, national)? The local Municipal Education Committee imposes the most significant regulation on our institution. 10. How significant are the direct compliance costs of these regulations? It concerns the growth and development of our institute in the future. 11. In your view, are there any benefits to your institution that can be attributed to regulation? Due to the outstanding performance of the school-running in the last 30 years, the college has been continuously rewarded by the main leaders from the municipal communist party and administration, such as the awards of advanced unit

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of private education, advanced civil society organization, the advanced unit of the education system in Olympic work and so on. A few years ago, premier Wen Jiabao wrote inscription for our school, which fully affirmed the fine tradition of the college. A former vice chairman of the Standing Committee of the National People’s Congress is currently the honorary president of our school. 12. Are there any other thoughts about your institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? Nothing more.

Interview Guide with Open-Ended Questions for Specialists Outside of Education Institutions Case 9 1.

Which are the institutional characteristics that make private higher education institution differ from other private and public institutions? 1. Private colleges and universities are state-approved private school for the community to develop high-level professionals 2. Various type of education 3. Independent educational philosophy 4. University-industry alliance 5. Various sources of funding, school funding adequacy.

2.

Are there any external factors (local, provincial, and/or national government) associated with such differences or similarities among private higher education institutions? 1. The level of development of urban society and the situation of student enrolment source 2. The governmental or educational department approval system 3. The constraints to sources of funding and the setting up of school system 4. Whether the governments are giving subsidies to school running.

3.

Which is the income source that private higher education institutions typically bank upon the most? Do you see any differences among private higher education institutions? The income source that private higher education institutions typically bank upon the most: 1. Tuition 2. Governmental and financial assistance 3. Donations

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4 Sales and service revenue. The main differences among private higher education institutions are: The school’s qualifications and the degree of external social services. 4.

5.

Describe the sources of external control over private higher education institutions and what form these take? Do you see any differences in how they are externally controlled among private higher education institutions? The central government has adopted some of the policies and regulations, but they are not satisfactory yet. And the private schools are composed of different form and size, which makes private schools are very different from one another. Are there any incentives or penalties associated with the control of the private higher education institutions by external authorities? The central government has introduced some of relevant regulations and policies such as: a. b. c. d. e.

6.

7.

8.

reward policy Funding and preferential tax policies Land acquisition and construction related promotions and restrictions Provisions of a reasonable return corresponding legal constraints to illegal acts.

Describe any conditions by which you must abide that are tied to the funds private higher education institutions receive from any income sources that they have to abide by and in which form such conditions are? The central government requests private higher education institutions to take a certain percentage of income into sponsoring school running in accordance with their sizes, and they are not allowed to fun for commercial purposes. There are roughly a few ways of getting funding for private higher education institutions, the vast majority of private colleges and universities rely on tuition fees charged from students, some of them also get some corporate investment, bank loans or funds raised, some are in the mode of cooperative education or joint-stock, the government may give them direct or indirect financial support, as well as contributions from the community, but not many opportunities, and the amount of it is generally small. In your view, which government policy facilitates or hinders private higher education institutions the most? Are there any different experiences among the private higher education institutions? In China the ‘Private Education Promotion Law’ was promulgated, that it states clearly that it can have a variety of ways to fund. How would such policy make private higher education institutions different or similar among themselves? Describe how. At present, there are a large number of private institutions, and the school quality is uneven. Due to the objective factors, most of the school facilities are unqualified. Generally speaking, it is lack of policy support. As the supplement to public higher education sector, the private higher education sector has occupied

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an important position, but it is lack of policy support in the long run, it also has to face the huge pressure from the market competition. 9. Which level of government imposes the most significant regulation on institutions (local, provincial, national). The support from the central government is the most important. 10. How significant are the direct compliance costs of these regulations? You have to follow the regulations strictly. Otherwise all the development is out of the question once you were punished. 11. In your view, are there any benefits to institutions that can be attributed to regulation? Regulation can make your school-related professional or research connect closer to the society. Supervision from internal and superior would make sure that the main purpose of private schools is not for profit, so that to service more to the community. 12. Are there any other thoughts about institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? No. Case 10 1.

Which are the institutional characteristics that make private higher education institution differ from other private and public institutions? When private colleges and universities on the fashionable decline, its survival of the system space sometimes is big otherwise could be small. Of course it is not the same mode, diversified private school system in China, has formed the following four models of development: injection, restructuring the operation type, sub regenerative and rolling. A. Injection as a mode of development to the market allocation of educational resources, the basic means to rely on various types of social investment, high-quality teaching standards for market integrity, through the marriage of education and capital, access to private capital and operation and development of the education market share. The capital injection, mainly: a. Chinese and foreign cooperative, b. Joint-stock, c. Education Group operation, d. Enterprise group investment, and so on. The internal management of the school mainly bases on the enterprise management. B. Restructuring operation is state-owned assets, with ‘separation of ownership’ system, which means while maintaining the original schools without changing the nature of the implementation of the school and the school’s legal ownership of property. The Board of Directors is under the leadership of the separation of the responsibility system.

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C. Subsidiary regenerative use of the existing university education for many years accumulated intangible assets, a country’s preferential policies for private universities to take private mechanisms. D. Rolling mode is the first model of private university development, is primarily individual autonomy or a fund-raising school.

2.

3.

The development of China’s private universities is outside the full-run higher education system. With the promulgation and implementation of, ‘Private Education Promotion Law’ and ‘Regulations for the Implementation of Private Education Promotion Law,’ the Government has given public and private colleges equal legal status. At present, China’s public schools enjoy the teaching funds from the state (central government), schools have more money to buy teaching materials and teaching equipment, teachers prefer to teach in the public schools. The private schools vary greatly, and some schools are for-profit purpose, even irresponsible for students, and school teaching facilities are backward, is not well administrated. But not all private schools are like this, some provinces and cities have very good private institutions, which even allocates work after graduation, such as Qingdao Yellow Sea Institute. Are there any external factors (local, provincial, and/or national government) associated with such differences or similarities among private higher education institutions? The private universities rely on the market to survive, establish programs and innovate curriculum to meet the market demand, the quality of teaching is the protection of its existence. Public universities are funded by the state (the central government) to undertake the mission of national higher education, which emphasize on research and teaching in basic science. Because of the differences in the nature of policies among the private universities— the existence of market factors, the main learning content, the differences among different private universities, leading to the levels in demand vary in different periods, therefore, the amount of students is different. And the employment rate is a critical factor in competition, the ‘one-time’ (firsttime) employment rates in private universities in Beijing tend to be more than 95%. Due to its being uncontrolled by the plans from its superior education authorities, majors set are very popular in the job market, is clearly biased towards the application. Which is the income source that private higher education institutions typically bank upon the most? Do you see any differences among private higher education institutions? According to incomplete statistics, as of 2000, there were more than 1,300 of private educational institutions in China, which including 43 private universities approved by the Ministry of Education, with national recognition of qualifications; more than 300 pilot institutions undertaking state’s diploma examinations were approved by the Ministry of Education. The emergence and development

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of private higher education is a product of reform and opening up the market. The growth in market economy has made a huge space for the development in private higher education. In terms of the sources of funding, most private universities are mainly relied on tuition fees as its main source in finance. Among the 38 private universities investigated, there are 14 of whose tuition fees accounting for 100% of the total revenue, 9 accounting for 90%, 8 accounting for 80%, 4 accounting for 70%, 1 accounting for 60%, and 1 accounting for 40%. (See the table following for the proportion of income in private higher education and its fees). China’s private universities tuition fees accounted for the proportion of income Name of university

Tuition fees as Name of university proportion of revenue

Tuition fees as proportion of revenue

Private Hualian College

Over 90%

China University of Science and Technology Management

100%

Central Plains College 30% (Henan Province)

private Baiyun Vocational Technical College (Guangdong)

100%

Beijing Central New College of Business Management

100%

Zhengzhou University 100% Shengda Economic Management College

Xiamen Huaxia College

100%

Zhejiang University City College

Guangzhou Lingnan Vocational and Technical College

100%

Ningbo University 100% College of Science and Technology

Nanhua Business School (Guangdong Province)

85%

Jilin Huaqiao College of foreign language

70%

Xi’an Eurasia College

100%

Yongjiang University

85%

Shandong Wanjie Medical College

80%

Beijing Geely University

50%

Hubei University of Correspondence

90%

Heilongjiang 75% University of East Asia

Haidian University

85%

Jiangxi Blue Sky 100% Private Vocational and Technical College

Tianjin United Amateur University

over 95%

Yellow River Institute of Technology

95%

Zhejiang Shuren University

80%

Fujian Yuqing Vocational and Technical College

100%

Sanjiang Institute

95%

95%

(continued)

Appendix A: Interviews

155

(continued) Name of university

Tuition fees as Name of university proportion of revenue

Xi’an Translation Institute

100%

Yangtze River College 95% (Hubei Province)

Ningxia Shizuizi Vocational and Technical College

70%

Mingda College (Jiangsu Province)

70%

Fujian Huanan Women’s College

80%

Heilongjiang Oriental College

90%

Pui Ching School of 100% Business (Guangdong)

Xinqiao Vocational and Technical College

80%

Shanda College (Shanghai)

100%

East China Private College (Shanghai)

86.90%

Tiens Vocational & Technical College

60%

Xi’an Foreign Affair Institute

100%

Xi’an Institute of East Asia and Pacific

90%

4.

Tuition fees as proportion of revenue

The current funding source for private higher education is still remained narrow. At present, most private higher education institutions rely entirely on tuition fees, which have resulted in high charges and affecting the opportunities to enter into private universities for their children from the lower income levels, and due to the over singular channel of funding, the development for private colleges and universities themselves will be restricted as well. Describe the sources of external control over private higher education institutions and what form these take? Do you see any differences in how they are externally controlled among private higher education institutions? The first of course is the public policy, the state promulgated the ‘Private Education Promotion Law of the People’s Republic of China’ which came into force since September 1, 2003. The second is the form and scale established. Regard to this, each institute is different, but the laws related to this promulgated by the central government, requires specifically on the Board of Directors from the private higher education institutions: A. The board or board of directors should be composed of five or more persons, including one director or chairman. Chairman/Director and the Board of directors should be recorded by the approving authorities. B. In the establishment of the Board of Directors for the private higher education institutions, attention should be paid to the following areas: Board members should be diverse; and to encourage outside directors to participate in its governance; to establish the evaluation and monitoring mechanism for the Board of Directors, and to improve its regulations, and so on.

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C. The construction of the board of directors for private higher education institutions should follow the principle of diversity and unification of responsibilities with capabilities, the principle of active participation, cooperation and explicit permission. 5.

Are there any incentives or penalties associated with the control of the private higher education institutions by external authorities? Yes, the state has laws and policies related to this. A. the award: the people’s governments at or above the county level can set up a special fund used to finance the development of private schools, to reward and recognize the outstanding contributions from the collective and individuals; B. to support private schools by funding, leasing, or transferring the stateowned idle assets and other measures, and enjoy state tax incentives; C. in accordance with relevant laws and regulations, private schools are allowed to accept the donations from citizens, legal persons or other organization, and the latter who has donated property to private schools, will be allowed tax concessions, and to be commended by the state; D. The central government encourages financial institutions to use the credit tools to support the development of private education; E. the local governments who entrust private schools to undertake compulsory tasks, should allocate appropriate education expenditure under the trust agreement; F. newly established or expanded private schools, according to public welfare undertakings and the relevant provisions of construction, should be allowed with concessions by the people’s governments, and education land is not allowed to be used for other purposes; G. in accordance with relevant state regulations, after the net operating cost, development funds reserve and additional necessary fee to be extracted, the investor from private schools are allowed to obtain a reasonable return on school balances. the specific measures to obtain a reasonable return are stipulated by the State Council; H. The state takes measures to support and encourage social organizations and individuals to go to ethnic minority regions, remote and poor areas to open private schools, to develop of education; There are also constraints of the corresponding laws to deal with illegal behaviors: private schools with one of the following acts, should be ordered to correct and to be warned by the approving authority or other relevant departments; with illegal income, after the fees being returned, the illegal gains would be confiscated; if the circumstances are serious, it should be ordered to stop enrollment, and its school license should be revoked; and according to the law, criminal responsibility should be investigated with constituting a crime: A. unauthorized separation, merger of private schools;

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157

B. unauthorized changing the name of private schools, level, category, and its organizers; C. publishing brochures or false advertising, fraudulent money; D. illegally issued or forged diploma, certificate, training certificates, professional qualification certificates; E. confusion in management which seriously affected education, resulting in adverse social impacts; F. submission of false documents or other fraudulent means to conceal important facts to obtain a school license; G. forging, altering, sale, lease, loan school license; H. malicious termination of school, withdrawal of funds or the misappropriation of school funds; Approving authority and the relevant departments with any of the following acts, shall be ordered to correct by the higher authorities; if the circumstances are serious, the directly responsible person in charge and other directly responsible persons shall be given administrative sanctions according to the law; for those resulting in economic losses, they should bear the compensate responsibility by law; and criminal responsibility should be investigated for being constituting a crime: A. after the application for the establishment has been accepted, it failed to reply within deadline; B. the approval of the application with conditions do not meet the provisions of this Law; C. poor management, resulting in serious consequences; D. charging fee by violating the state regulations; E. infringing the legitimate rights and interests of private schools; F. and other abuses of authority, favoritism. Social organizations and individuals without authorization of private schools, shall be ordered to make corrections within deadline by its relevant administrative department of the people’s governments above the county level, those who comply with the provisions of this Law and relevant laws and conditions of private schools, can go through approval procedures; those who fail to reach the school conditions beyond deadline, shall be ordered to stop running, for those resulting in economic losses, they should bear the compensate responsibility by law. 6.

Describe any conditions by which you must abide that are tied to the funds private higher education institutions receive from any income sources that they have to abide by and in which form such conditions are? As long as the legitimate source of funds is in line with the premise, it should be allowed, there is no relevant law provisions. The sources of funding for China’s private colleges and universities are in the following ways:

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A. Charging tuition, school fees All of the private schools in China, without exception, is largely dependent on fees to maintain operation and construction. In fact, the private schools receive funding primarily through student fees, and gradually accumulated through its operation. B. Investment from private enterprises and institutions Such as Nanjing twenty-first century Chinese language school, is invested by Nanjing Asian Hot Pot City (Group) Company. Nanjing experimental school is invested and organized by Nanjing Convoy. Nanyang International Schools in Wuxi, Taiyuan, Luoyang and other places are all organized by Nanyang Industrial Group Corporation. Wenzhou Yuying International School is invested and organized by a farmer entrepreneur from Wenzhou. Guangdong province has more private schools, such as: ‘Southern Experimental School’ in Guangzhou is held by Co., Ltd. Guangdong Family; ‘Country Garden School’ in Guangdong is held by Gu Sanhe Property Development Co., Ltd.; ‘Juhuayuan school’ in Nanhai City, is held by Guangdong Promising Educational Consulting Firms; ‘Modern Junhui School’ is held by Guangdong Nanhai Modern Market Development Company and so on. C. Investment from state-owned enterprises, public institutions Take Jinhua Vocational and Technical College as example, it is invested by the cooperation of 78 companies, the Agriculture Bureau and other government agencies and individuals in Jinhua city, of which a considerable part of the investment is from the state-owned enterprises and a number of public institutions; Shanghai Foreign Trade Institute of Continuing Education is invested by Shanghai Machinery Import & Export Group Corporation, and so on. D. Loans and financing Such as Zhugui Xiang, the headmaster from Jinhua New Century School, has paid to the private sector and relevant agencies with interest-bearing loans to organize this school; Shanghai Private JiGuang Institute, is preparing to raise funds in a faculty assembly from its supporting institution, Tongji University; and Huang Shan Medical University has raised more than RMB300 million. E. Raising funds from parents to build their savings in the form of education Represented by Guangdong Yinghao School, the mode of financing is established on its education reserves, to change the fees by semester charges for the segment by academic years, through which has concentrated a large number of funds; and the students will get their reserves returned by the time they graduate, using the rolling interest to run schools, which have adopted by many schools in Guangdong and elsewhere, F. Cooperative education or joint-stock model Some are organized by entrepreneurs, retired cadres, educators, in cooperation with other parties. Others are held by the joint-stock model, like Guangdong Private Hualian College. G. Direct or indirect, explicit or implicit financial support from the government Not all private colleges and universities can enjoy such support, such as the process of establishing Jinhua Vocational College, it has been allocated

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159

with land and exemption from the preferential construction fee; Beijing Haidian University has got government loans and other forms of support and so on. H. Community patriot or patriotic overseas Chinese donations sponsorship Small amount, most funds are limited. 7.

8.

In your view, which government policy facilitates or hinders private higher education institutions the most? Are there any different experiences among the private higher education institutions? With the founding of new China, private schools and the then political and economic system were not affordable, but after the reform and opening up, especially the establishment of a socialist market economy system, private schools has sprang up, and developed rapidly. However, the policy orientation of the private universities, the corresponding management measures cannot keep up with it, which limited the development of private universities. The development of private universities, in addition subject to social needs and national enthusiasm, more important than that is it is subject to the government’s attitude. As an important supplement to public education, private education by attracting private forces, partially offset the lack of public education, which is an important innovation and breakthrough in Chinese education system. However, in the process of development, private schools also face a series of challenges and problems, such as laws and regulations for China’s private schools is not very complete between the supporting laws and regulations; the scale of investment for it in general cannot be too large to achieve the educational benefits of scale; private schools lack of stable management team and teaching staff relatively; the quality is generally not as good as its counterpart public schools. All these problems need to be solved through system innovation and reform. For now, the greatest impact of China’s regulations on private education, is still from the ‘People’s Republic of Private Education Promotion Law’ which was promulgated on September 1, 2003. How would such policy make private higher education institutions different or similar among themselves? Describe how. The difference is that the status quo among universities. The big difference makes the students’ education in the private institutions cannot be guaranteed, and there are also many problems coming from the cash flow, educational facilities and the source of students. In terms of the actual situation on the development of private schools, are mainly in the following areas: A. A larger number of schools of varying quality. At present, some private schools, on the overall quality and school capacity is not good enough, with poor management, low qualifications of teaching staff, low level of job title and the low level of education, directly affect overall image of the private school groups, so as to affect the development of basic education, due to objective factors, some investors lack of financial strength, leading

160

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to poor school conditions, cannot achieve the goal of modern means of management and the development of modern educational technology goals. Currently, most school facilities failed. B. The lack of a set of governmental management system to regulate private schools with their management, supervision and audit, resulting in the establishment of private schools and approval system and the supervision and management functions cannot be properly implemented, leading to the failure of a small number of schools cannot conduct effective management and remediation. C. The lack of policy support. As an important supplement to public education, private education has occupied an important position, but due to a chronic lack of policy support, as well as under the pressure of market competition (private schools compete with one another, and compete with public schools), leading to part of the large investment, long-term education of good quality private schools are under tremendous market pressure, the development environment is not benign enough to enable the experts introduced by some excellent private schools, to play its due role in basic education yet. However, the enact of ‘The Private Education Promotion Law of the People’s Republic of China ‘, has helped to shorten the differences among these schools, which is reflected in the following aspects: Firstly, we suggest that the Government set up a special department or educational institution or specialized personnel in charge of private school approval, development and daily operation. Government and education authorities should be under the guidance of the ‘Private Education Promotion Law,’ introduce standard management measures as soon as possible to develop and improve all levels of private school facilities standards, strictly better off for the examination and approval procedures, establish and improve the annual appraisal system, supervision system and the rating system for private schools. Secondly, according to the regular pattern of the market management of private education, private education associations should be organized and set up by the unofficial social intermediary organizations to establish effective industry selfregulation and industry standards. According to the educational development, the guidance to private schools, the communication and cooperation among private schools and public schools should be strengthened to improve together. Thirdly, to create a relaxed and equal environment for the development of private schools. Those education authorities in charge of private schools, while in strengthening the qualification examination and approval, scale requirements, school quality assessment inspection, should lower the other thresholds for private schools, to further understand the private schools, and actively guide the private schools to take teaching and research new topics, participate in educational content, the structure of education and even the task of reforming the education system mechanisms. Such as facing the arduous reforming task in public schools, with large capital requirements, and the government find it

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161

difficult to fully complete the case, allow some high quality private schools with strong finance to participate in investment, to implement the institutional transition, or to bid to other areas beyond China to introduce foreign brand-name schools, to form and transform the weak schools. Fourthly, to effectively implement the government’s responsibilities and obligations, therefore, allow private schools, like public schools, have the same access to government financial support; the private school students, faculty and staff treatment should be treated equally; to increase their salary in proportion, teaching staff’s subsidies, job transfers, household registration (hukou) migration, assessment job title, qualifications, awards appraised, should also be included in the education system and treated equally. 9. Which level of government imposes the most significant regulation on institutions (local, provincial, national)? Each college or university is different, are mainly governed by local administration or municipal education departments, or provincial education sector, but all must comply with the policy of the state, which is the general direction. Regardless of what form and scale of private colleges and universities will be subject to the control of the Ministry of Education, and to comply with the appropriate public education policy. 10. How significant are the direct compliance costs of these regulations? This depends on the specific circumstances of each school, and not easy to talk about it. 11. In your view, are there any benefits to institutions that can be attributed to regulation? Yes, there are some, in terms of ‘teaching’ and ‘learning’. Based on the requirements of law, in management, private colleges and universities must comply the following points: The internal management strategy of the quality of private higher education, built from three aspects of internal education quality management system, which includes: the management system of teaching quality, the management system of teaching staff and the management system of education expenditure. The establishment of the system of external quality monitoring and supervising for private higher education: First, the Government should strengthen the macroeconomic management for the education quality of private higher education; Second, to achieve the quality evaluation for educational assessment evaluation agencies; Third, the introduction of supervision of and public opinion from employers, parents, the news media, therefore, to promote to enhance the quality of private higher education from both internally and externally. As the research in educational quality and the private university’s own organizational characteristics are inseparable, part of the management ideas and Higher Education and Education Management from ISO9000 principles provides private colleges and universities with the provision in organizational characteristics: they are operated with dual values and the same way of organization and management as in that of the companies, the relatively small size in their organization, the high mobility of members of the organization and the educational activities are

162

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operated in quasi-market. These features of private higher education have built a foundation for its quality management systems. In the process of building the teaching quality management system for private higher education, apart from the management for ‘teaching’, according to the characteristics of the sources of students from private colleges and universities, it also has highlighted the management for the ‘learning’. 12. Are there any other thoughts about institutional characteristics that you would like to talk about? Are there any other differences and similarities among private higher education institutions? I have told you what I know, nothing more to supplement.

Appendix B

Statistical Data

See Tables B1, B2, B3, B4, B5, B6, and B7.

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 X. Ma, The Economic Impact of Government Policy on China’s Private Higher Education Sector, https://doi.org/10.1007/978-981-33-6800-2

163

6,251

12,461

9,395

3,972

5,232

2,830

12,436

7,049

5,402

Shanghai

Jiangsu

Zhejiang

Anhui

Fujian

Jiangxi

Shandong

Henan

Hubei

6,003

Liaoning

2,523

2,150

Inner Mongolia

4,430

2,457

Shanxi

Heilongjiang

7,099

Hebei

Jilin

2,448

Tianjin

100 m Y

798

1,240

1,481

560

693

733

728

1,106

91

501

487

616

420

215

1,064

90

96

100 m Y

3,663

Beijing

Primary Industry

Gross Regional Product

Table B1 Statistical data China, 2003

2,581

3,552

6,657

1,227

2,493

1,781

4,941

6,787

3,131

2,532

1,143

2,899

974

1,389

3,657

1,245

1,312

100 m Y

Secondary Industry

2,023

2,257

4,298

1,043

2,047

1,459

3,726

4,567

3,029

1,397

892

2,488

756

852

2,377

1,113

2,256

100 m Y

Tertiary Industry

59,184

95,029

89,775

41,741

34,261

62,652

45,934

72,967

16,061

37,693

26,684

41,549

23,510

32,558

66,569

9,956

14,070

000

Population

54

20

91

34

39

14

90

156

138

10

6

28

6

17

24

24

16

100 m Y

Foreign Investment

890,687

1,311,582

1,791,484

644,665

929,670

845,575

1,642,075

1,790,766

1,313,724

810,979

536,908

983,397

543,525

674,140

1,190,712

475,804

988,222

10,000 Y

Education Expenditure

1,072,914

1,464,205

1,690,657

724,053

575,152

899,943

787,249

1,240,038

299,095

486,096

381,362

602,442

420,138

573,639

1,142,264

182,529

250,959

no

Senior Secondary Schools

3,341,801

6,040,927

4,852,715

2,286,573

1,896,759

3,383,157

1,919,386

3,703,519

463,261

1,987,827

1,196,226

1,808,303

1,123,586

1,932,486

4,294,874

432,505

453,446

no

Junior Secondary Schools

1,093,474

819,721

1,099,932

507,469

356,602

595,417

779,398

1,240,528

608,459

588,316

497,282

749,120

254,593

435,954

882,275

370,140

930,646

no

Public Higher Education enrolments

(continued)

93,475

101,321

143,514

90,034

41,315

24,153

137,232

47,128

183,577

31,217

14,726

77,928

14,391

25,462

112,711

24,113

265,217

no

Private Higher Education enrolments

164 Appendix B: Statistical Data

2,735

671

2,251

5,456

1,356

2,465

185

2,399

1,305

390

385

1,878

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunnan

Tibet

Shaanxi

Gansu

Qinghai

Ningxia

Xinjiang

413

56

46

237

320

41

503

298

1,129

336

248

652

1,094

886

Primary Industry

797

192

184

608

1,134

48

1,069

579

2,266

977

151

1,008

7,307

1,794

Secondary Industry

668

138

160

460

945

96

893

478

2,062

937

271

1,075

5,225

1,958

Tertiary Industry

Source Ministry of Education. China Statistical Yearbook

4,639

13,626

Hunan

Gross Regional Product

Table B1 (continued)

18,834

5,650

5,225

25,628

36,314

2,638

42,836

37,933

85,739

30,713

7,939

47,661

77,676

65,521

Population

8

1

2

4

18

10

6

29

9

41

15

261

27

Foreign Investment

530,261

137,830

126,319

475,673

663,304

130,664

931,733

601,258

1,089,036

429,462

147,959

790,977

2,652,474

900,570

Education Expenditure

315,178

107,479

80,310

427,011

741,329

22,076

363,368

383,052

1,130,813

407,905

88,946

585,085

1,137,234

1,065,740

Senior Secondary Schools

1,133,353

268,948

214,090

1,306,024

2,212,732

92,060

1,921,251

1,969,955

3,679,899

1,255,823

418,940

2,449,891

4,321,843

3,822,026

Junior Secondary Schools

279,087

72,522

44,592

277,847

744,888

15,579

306,394

261,925

902,674

377,360

66,813

406,360

904,667

858,421

Public Higher Education enrolments

3,167

1,645

332

19,866

105,978

0

17,292

1,102

22,848

25,757

895

4,288

59,746

90,675

Private Higher Education enrolments

Appendix B: Statistical Data 165

7,450

15,403

11,243

4,813

6,053

3,496

15,491

8,815

6,310

Shanghai

Jiangsu

Zhejiang

Anhui

Fujian

Jiangxi

Shandong

Henan

Hubei

6,873

Liaoning

2,958

2,712

Inner Mongolia

5,303

3,042

Shanxi

Heilongjiang

8,769

Hebei

Jilin

2,932

Tianjin

100 m Y

1,020

1,647

1,778

712

778

932

816

1,315

97

588

561

770

506

253

1,370

102

103

100 m Y

4,283

Beijing

Primary Industry

Gross Regional Product

Table B2 Statistical data China, 2004

2,995

4,515

8,725

1,596

2,950

2,170

6,045

8,716

3,788

3,155

1,379

3,279

1,332

1,810

4,635

1,560

1,610

100 m Y

Secondary Industry

2,295

2,652

4,988

1,189

2,325

1,710

4,382

5,372

3,565

1,560

1,018

2,824

874

979

2,763

1,269

2,570

100 m Y

Tertiary Industry

58,510

94,372

89,072

41,524

34,048

62,575

45,682

72,295

16,702

37,241

26,397

41,100

23,233

32,352

66,078

9,868

14,213

000

Population

75

55

296

91

134

32

194

626

234

13

21

93

13

35

60

102

119

100 m Y

Foreign Investment

1,045,080

1,532,898

2,048,284

737,127

1,008,963

1,055,638

2,000,797

2,143,705

1,553,500

918,029

607,409

1,210,028

662,206

802,684

1,423,523

553,991

1,213,881

10,000 Y

Education Expenditure

1,197,354

1,687,496

1,891,006

800,049

659,758

1,050,188

860,613

1,373,465

313,811

546,793

451,637

685,199

473,568

647,261

1,293,887

198,537

274,803

no

Senior Secondary Schools

3,319,842

5,906,674

4,392,406

2,178,942

1,861,259

3,540,957

1,800,749

3,677,793

522,475

1,863,607

1,148,001

1,675,350

1,092,223

1,927,068

4,035,302

400,568

386,511

no

Junior Secondary Schools

1,199,530

912,116

1,242,073

600,399

413,563

631,179

772,621

1,309,587

632,121

632,327

513,316

735,763

271,657

472,859

929,399

388,684

903,349

no

Public Higher Education enrolments

(continued)

169,956

105,341

178,637

104,477

59,124

35,893

178,587

61,167

301,105

58,649

49,460

128,231

5,706

30,534

113,151

6,252

310,751

no

Private Higher Education enrolments

166 Appendix B: Statistical Data

3,320

769

2,665

6,556

1,592

2,959

212

2,884

1,559

466

460

2,200

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunnan

Tibet

Shaanxi

Gansu

Qinghai

Ningxia

Xinjiang

445

65

58

281

395

43

604

334

1,394

431

284

811

1,245

1,156

Primary Industry

1,010

239

227

758

1,417

58

1,314

715

2,690

1,181

180

1,288

8,890

2,214

Secondary Industry

745

156

181

519

1,072

111

1,041

543

2,472

1,053

305

1,220

5,904

2,242

Tertiary Industry

Source Ministry of Education. China Statistical Yearbook

5,612

16,039

Hunan

Gross Regional Product

Table B2 (continued)

18,880

5,662

5,213

25,409

36,022

2,636

42,720

37,780

84,919

30,553

7,916

47,408

77,645

65,041

Population

9

2

3

12

21

11

9

43

48

21

36

810

60

Foreign Investment

613,943

161,044

152,629

536,579

743,497

151,132

1,118,233

737,679

1,225,217

497,847

179,249

905,379

2,879,522

1,043,285

Education Expenditure

359,147

118,009

92,122

499,609

833,275

26,740

419,758

444,031

1,295,105

452,705

102,632

651,494

1,313,116

1,190,533

Senior Secondary Schools

1,158,801

269,277

223,162

1,344,797

2,192,280

109,148

1,930,879

2,049,364

3,614,111

1,254,784

439,092

2,410,467

4,495,533

3,528,584

Junior Secondary Schools

43,111

67,469

47,585

283,552

780,128

14,848

349,707

288,398

875,552

399,783

79,205

441,382

1,022,252

844,315

Public Higher Education enrolments

0

3,747

115

23,906

123,701

0

24,464

36,123

58,409

32,022

945

8,439

128,947

87,648

Private Higher Education enrolments

Appendix B: Statistical Data 167

9,154

18,306

13,438

5,375

6,569

4,057

18,517

10,587

6,520

Shanghai

Jiangsu

Zhejiang

Anhui

Fujian

Jiangxi

Shandong

Henan

Hubei

8,009

Liaoning

3,620

3,896

Inner Mongolia

5,512

4,180

Shanxi

Heilongjiang

10,096

Hebei

Jilin

3,698

Tianjin

100 m Y

1,082

1,892

1,964

727

841

966

893

1,461

80

685

626

882

590

262

1,503

112

98

100 m Y

6,886

Beijing

Primary Industry

Gross Regional Product

Table B3 Statistical data China, 2005

2,810

5,514

10,629

1,917

3,200

2,221

7,166

10,355

4,453

2,972

1,581

3,953

1,773

2,353

5,233

2,051

2,027

100 m Y

Secondary Industry

2,628

3,181

5,925

1,412

2,527

2,187

5,379

6,489

4,621

1,855

1,414

3,173

1,533

1,564

3,361

1,534

4,762

100 m Y

Tertiary Industry

57,070

93,710

92,390

43,070

35,320

61,140

48,940

74,680

17,780

38,180

27,150

42,200

23,860

33,520

68,440

10,420

15,360

000

Population

73

64

424

96

133

128

319

793

236

20

36

128

15

26

85

122

71

100 m Y

Foreign Investment

1,188,461

1,873,208

2,487,484

879,253

1,115,121

1,174,312

2,315,489

2,582,399

1,829,415

1,065,721

741,472

1,421,954

786,645

1,020,914

1,705,374

672,034

1,458,723

10,000 Y

Education Expenditure

1,294,487

1,883,854

1,965,783

849,204

732,456

1,169,006

899,961

1,453,420

311,737

583,567

489,420

744,229

523,497

713,699

1,391,138

217,180

278,358

no

Senior Secondary Schools

3,172,392

5,698,301

3,959,117

2,012,287

1,769,284

3,439,620

1,710,877

3,462,294

466,962

1,695,823

1,057,933

1,570,269

1,031,241

1,897,840

3,704,263

359,110

321,585

no

Junior Secondary Schools

1,309,347

1,086,967

1,466,623

757,200

500,968

716,891

890,090

1,497,573

668,542

720,282

580,902

902,739

310,573

537,233

982,793

444,443

982,384

no

Public Higher Education enrolments

(continued)

232,730

75,853

179,548

160,886

27,623

42,700

172,544

125,361

69,294

43,667

58,506

97,002

783

32,270

127,858

16,625

52,095

no

Private Higher Education enrolments

168 Appendix B: Statistical Data

4,076

895

3,070

7,385

1,979

3,473

251

3,676

1,934

543

606

2,604

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunnan

Tibet

Shaanxi

Gansu

Qinghai

Ningxia

Xinjiang

510

72

65

308

436

48

670

369

1,481

463

301

913

1,428

1,274

Primary Industry

1,165

281

265

839

1,849

64

1,433

827

3,067

1,259

220

1,511

11,340

2,597

Secondary Industry

929

253

213

787

1,391

140

1,370

783

2,837

1,348

374

1,653

9,598

2,640

Tertiary Industry

Source Ministry of Education. China Statistical Yearbook

6,511

22,367

Hunan

Gross Regional Product

Table B3 (continued)

20,080

5,950

5,430

25,920

37,180

2,760

44,420

37,250

82,080

27,970

8,260

46,550

91,850

63,200

Population

11

7

2

14

18

0

18

9

60

43

25

66

843

66

Foreign Investment

726,517

195,197

203,132

674,831

993,134

203,794

1,222,810

933,707

1,405,260

606,598

242,088

1,052,608

3,292,088

1,230,010

Education Expenditure

387,763

125,472

100,511

566,168

906,256

33,342

483,054

495,193

1,384,573

481,388

118,165

699,644

1,489,863

1,318,513

Senior Secondary Schools

1,153,519

280,950

226,991

1,377,671

2,139,326

120,706

1,905,763

2,054,382

3,470,817

1,253,778

466,186

2,339,138

4,627,044

2,972,610

Junior Secondary Schools

260,877

75,153

48,785

317,180

870,400

19,209

399,133

326,977

1,050,918

460,134

92,688

485,551

1,214,246

972,841

Public Higher Education enrolments

10,232

7,084

921

22,961

51,298

7,527

35,604

25,006

67,309

49,488

2,066

20,356

124,333

96,520

Private Higher Education enrolments

Appendix B: Statistical Data 169

10,366

21,645

15,743

6,149

7,615

4,671

22,077

12,496

7,581

Shanghai

Jiangsu

Zhejiang

Anhui

Fujian

Jiangxi

Shandong

Henan

Hubei

9,251

Liaoning

4,275

4,791

Inner Mongolia

6,189

4,753

Shanxi

Heilongjiang

11,660

Hebei

Jilin

4,359

Tianjin

100 m Y

1,140

2,050

2,139

786

896

1,029

925

1,545

94

738

673

976

650

277

1,606

118

98

100 m Y

7,870

Beijing

Primary Industry

Gross Regional Product

Table B4 Statistical data China, 2006

3,365

6,725

12,751

2,321

3,744

2,648

8,510

12,251

5,028

3,365

1,915

4,730

2,327

2,748

6,115

2,488

2,191

100 m Y

Secondary Industry

3,076

3,721

7,187

1,564

2,975

2,472

6,308

7,849

5,244

2,086

1,687

3,545

1,814

1,727

3,939

1,753

5,581

100 m Y

Tertiary Industry

53,070

87,180

85,953

40,069

32,855

56,880

45,523

69,474

16,525

35,504

25,243

39,231

22,180

31,182

63,675

9,694

14,294

000

Population

69

77

483

95

144

59

388

875

270

30

60

132

22

29

77

153

76

100 m Y

Foreign Investment

1,454,723

2,331,485

2,922,839

1,037,596

1,362,444

1,520,858

2,690,418

2,982,252

2,054,600

1,337,055

912,752

1,668,888

950,332

1,208,708

1,895,526

815,828

1,751,755

10,000 Y

Education Expenditure

1,347,692

2,015,781

1,931,767

869,310

780,435

1,287,853

893,173

1,525,666

271,696

607,896

512,759

768,629

561,484

747,093

1,438,065

216,281

259,414

no

Senior Secondary Schools

3,010,769

5,406,380

3,608,673

1,807,153

1,650,310

3,414,456

1,729,981

3,187,076

440,011

1,559,789

977,306

1,499,946

990,473

1,892,237

3,368,253

335,783

288,298

no

Junior Secondary Schools

1,451,397

1,248,485

1,675,019

907,467

585,337

826,798

1,035,998

1,719,755

747,887

798,432

640,589

1,004,333

337,065

600,602

1,116,924

479,754

1,060,782

no

Public Higher Education enrolments

(continued)

268,742

115,066

223,662

223,777

93,323

58,913

205,519

190,573

81,220

58,745

70,780

107,131

2,140

48,822

161,884

29,249

65,461

no

Private Higher Education enrolments

170 Appendix B: Statistical Data

4,829

1,053

3,492

8,638

2,282

4,007

291

4,524

2,277

642

711

3,045

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunnan

Tibet

Shaanxi

Gansu

Qinghai

Ningxia

Xinjiang

528

80

70

333

488

51

750

393

1,595

426

344

1,032

1,577

1,332

Primary Industry

1,459

350

331

1,043

2,441

80

1,713

981

3,775

1,501

288

1,879

13,432

3,152

Secondary Industry

1,058

281

241

900

1,595

160

1,544

908

3,267

1,565

421

1,917

11,196

3,085

Tertiary Industry

Source Ministry of Education. China Statistical Yearbook

7,569

26,204

Hunan

Gross Regional Product

Table B4 (continued)

18,681

5,539

5,049

24,109

34,574

2,574

41,359

34,666

76,324

26,005

7,696

43,311

85,451

58,795

Population

9

9

2

15

24

0

18

14

80

28

68

49

866

94

Foreign Investment

892,786

246,179

243,755

874,820

1,280,080

205,964

1,503,948

1,119,194

1,818,699

786,380

278,479

1,354,638

3,926,235

1,422,621

Education Expenditure

402,321

131,415

103,073

603,458

960,457

37,677

545,421

530,899

1,419,794

506,077

137,974

739,666

1,634,639

1,357,102

Senior Secondary Schools

1,170,181

290,375

224,954

1,444,489

2,118,803

127,882

1,901,616

2,032,209

3,595,157

1,288,052

475,365

2,290,412

4,758,296

2,489,107

Junior Secondary Schools

284,529

90,039

50,757

370,135

948,199

28,099

463,537

339,472

1,161,427

533,278

113,756

572,189

1,462,362

1,087,456

Public Higher Education enrolments

12,910

9,943

993

29,443

143,717

Na

47,857

30,695

96,640

64,445

7,438

38,682

197,342

119,870

Private Higher Education enrolments

Appendix B: Statistical Data 171

12,189

25,741

18,780

7,364

9,249

5,500

25,966

15,012

9,231

Shanghai

Jiangsu

Zhejiang

Anhui

Fujian

Jiangxi

Shandong

Henan

Hubei

11,023

Liaoning

5,285

6,091

Inner Mongolia

7,065

5,733

Shanxi

Heilongjiang

13,710

Hebei

Jilin

5,050

Tianjin

100 m Y

1,378

2,218

2,509

906

1,002

1,200

986

1,816

102

915

784

1,133

762

270

1,805

110

101

100 m Y

9,353

Beijing

Primary Industry

Gross Regional Product

Table B5 Statistical data China, 2007

3,967

8,283

14,777

2,841

4,549

3,289

10,148

14,306

5,679

3,696

2,475

5,853

3,155

3,439

7,242

2,893

2,509

100 m Y

Secondary Industry

3,886

4,512

8,680

1,754

3,698

2,875

7,646

9,619

6,409

2,454

2,025

4,037

2,174

2,025

4,663

2,048

6,743

100 m Y

Tertiary Industry

52,408

86,460

85,696

39,945

32,754

56,247

45,844

69,503

16,708

35,193

25,067

39,317

22,066

31,069

63,501

9,896

14,554

000

Population

82

76

418

101

207

85

252

1,098

229

37

46

238

30

53

74

160

80

100 m Y

Foreign Investment

2,171,988

3,661,231

4,533,574

1,738,076

1,836,550

2,129,665

3,838,886

4,928,972

2,833,335

1,997,524

1,444,160

2,521,317

1,535,674

1,812,182

2,833,938

1,100,248

2,630,041

10,000 Y

Education Expenditure

1,328,398

2,126,251

1,834,835

853,766

776,819

1,351,541

870,763

1,531,183

228,970

607,254

505,258

742,391

561,400

770,812

1,408,566

209,319

243,818

no

Senior Secondary Schools

2,840,700

5,072,021

3,368,280

1,697,941

1,560,270

3,217,399

1,794,725

2,981,844

427,037

1,462,655

941,553

1,478,469

918,851

1,851,469

3,062,442

320,840

332,959

no

Junior Secondary Schools

1,527,394

1,366,295

581,359

915,854

636,114

907,048

1,118,633

1,919,466

783,453

843,743

678,879

1,066,778

361,161

628,841

1,181,222

494,547

1,079,156

no

Public Higher Education enrolments

(continued)

303,622

139,724

94,981

198,270

117,922

83,366

240,090

351,067

88,324

71,976

85,082

123,466

5,219

64,116

199,959

41,399

74,845

no

Private Higher Education enrolments

172 Appendix B: Statistical Data

5,956

1,223

4,123

10,505

2,742

4,741

342

5,466

2,702

784

889

3,523

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunnan

Tibet

Shaanxi

Gansu

Qinghai

Ningxia

Xinjiang

629

98

83

386

593

55

837

446

2,032

482

361

1,241

1,696

1,627

Primary Industry

1,648

452

418

1,279

2,965

98

2,051

1,148

4,641

1,892

364

2,425

15,939

3,916

Secondary Industry

1,247

339

282

1,037

1,909

189

1,853

1,147

3,832

1,748

498

2,289

13,450

3,657

Tertiary Industry

Source Ministry of Education. China Statistical Yearbook

9,200

31,084

Hunan

Gross Regional Product

Table B5 (continued)

18,872

5,560

5,045

23,990

34,383

2,587

41,269

34,587

75,201

25,850

7,696

43,442

85,649

58,382

Population

10

10

7

11

28

0

16

15

84

95

26

80

784

92

Foreign Investment

1,427,688

473,068

348,523

1,239,653

1,845,157

335,699

1,905,371

1,662,714

2,928,602

1,215,466

403,268

1,893,837

5,758,977

2,285,201

Education Expenditure

413,452

135,569

107,497

613,906

963,316

44,215

576,448

545,873

1,421,989

517,666

146,411

754,690

1,724,319

1,307,313

Senior Secondary Schools

1,115,640

283,505

219,542

1,422,734

2,037,632

135,995

1,941,244

2,014,110

3,632,702

1,316,698

474,705

2,219,760

4,829,437

2,235,833

Junior Secondary Schools

289,828

2,157

50,969

403,454

1,002,051

32,990

484,806

339,612

1,224,942

573,786

133,907

600,940

1,598,323

1,165,485

Public Higher Education enrolments

17,740

11,248

1,558

34,768

179,171

Na

61,202

37,364

126,612

72,502

28,137

62,670

269,400

82,502

Private Higher Education enrolments

Appendix B: Statistical Data 173

13,698

30,313

21,487

8,874

10,823

6,480

31,072

18,408

11,330

Shanghai

Jiangsu

Zhejiang

Anhui

Fujian

Jiangxi

Shandong

Henan

Hubei

13,462

Liaoning

6,424

7,762

Inner Mongolia

8,310

6,939

Shanxi

Heilongjiang

16,189

Hebei

Jilin

6,354

Tianjin

100 m Y

1,780

2,659

3,003

1,060

1,158

1,418

1,095

2,100

112

1,089

917

1,302

907

302

2,035

123

113

100 m Y

10,488

Beijing

Primary Industry

Gross Regional Product

Table B6 Statistical data China, 2008

4,964

10,478

17,702

3,415

5,416

4,137

11,580

16,664

6,236

4,366

3,065

7,512

4,271

4,266

8,777

3,821

2,693

100 m Y

Secondary Industry

4,587

5,271

10,367

2,005

4,250

3,319

8,811

11,549

7,350

2,855

2,443

4,647

2,584

2,370

5,377

2,411

7,682

100 m Y

Tertiary Industry

51,697

84,906

84,970

39,623

32,484

55,498

45,900

69,168

16,854

34,688

24,764

38,988

21,816

30,779

62,981

10,114

14,813

000

Population

51

95

516

157

206

97

302

1,404

257

36

76

380

47

36

104

166

80

100 m Y

Foreign Investment

2,841,940

4,440,264

5,509,929

2,068,578

2,332,923

2,862,557

4,539,902

5,926,032

3,260,628

2,566,199

1,880,346

3,063,600

2,064,017

2,349,868

3,769,819

1,416,985

3,162,957

10,000 Y

Education Expenditure

1,321,990

2,072,588

1,683,530

821,984

748,828

1,337,132

848,152

1,498,712

192,583

611,287

488,871

724,152

541,084

782,937

1,351,197

195,004

219,163

no

Senior Secondary Schools

2,612,455

4,841,994

3,337,815

1,744,883

1,512,936

3,098,582

1,849,851

2,782,784

425,141

1,393,338

905,738

1,437,573

862,276

1,772,798

2,741,801

303,492

325,117

no

Junior Secondary Schools

1,552,477

1,542,574

1,940,036

900,670

693,518

1,014,248

1,175,922

2,042,893

812,165

899,323

725,926

1,126,297

396,769

671,611

1,257,066

505,562

1,102,269

no

Public Higher Education enrolments

(continued)

315,171

176,507

290,141

162,254

140,290

109,766

261,790

387,614

94,835

88,206

96,438

138,000

10,764

78,141

234,644

75,010

75,010

no

Private Higher Education enrolments

174 Appendix B: Statistical Data

7,172

1,459

5,097

12,506

3,333

5,700

396

6,851

3,176

962

1,099

4,203

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunnan

Tibet

Shaanxi

Gansu

Qinghai

Ningxia

Xinjiang

691

120

106

463

754

61

1,021

548

2,366

575

438

1,454

1,970

2,007

Primary Industry

2,087

581

529

1,471

3,842

116

2,451

1,409

5,790

2,433

434

3,038

18,403

4,933

Secondary Industry

1,426

397

327

1,242

2,256

220

2,228

1,377

4,350

2,088

587

2,680

15,324

4,216

Tertiary Industry

Source Ministry of Education. China Statistical Yearbook

11,157

35,696

Hunan

Gross Regional Product

Table B6 (continued)

19,004

5,533

5,007

23,739

33,999

2,576

40,947

34,126

73,722

25,545

7,665

43,252

85,714

57,648

Population

9

3

9

13

30

23

14

100

71

25

81

780

91

Foreign Investment

1,992,132

540,553

488,084

1,829,256

2,649,055

470,800

2,419,508

2,297,665

3,692,812

1,534,951

556,331

2,512,210

7,033,269

3,112,601

Education Expenditure

418,701

137,208

108,140

618,253

946,919

44,093

594,703

562,138

1,411,178

557,405

154,774

757,048

1,817,646

1,195,442

Senior Secondary Schools

1,064,849

291,970

207,231

1,420,194

1,941,810

139,920

2,000,076

2,055,674

3,615,083

1,350,451

463,780

2,119,362

4,978,825

2,143,743

Junior Secondary Schools

296,176

98,225

57,035

441,445

1,079,391

36,329

529,999

364,572

1,330,333

617,404

152,140

644,413

1,720,203

1,249,253

Public Higher Education enrolments

21,941

14,509

2,042

39,280

214,618

Na

78,180

44,758

161,224

80,856

35,108

85,790

341,148

183,568

Private Higher Education enrolments

Appendix B: Statistical Data 175

176 Table B7 Consumer Price Index 2000 = 1.000, China, 1991–2008

Appendix B: Statistical Data 1991

0.516

1992

0.549

1993

0.629

1994

0.781

1995

0.915

1996

0.991

1997

1.018

1998

1.010

1999

0.996

2000

1.000

2001

1.007

2002

0.999

2003

1.011

2004

1.050

2005

1.069

2006

1.085

2007

1.137

2008

1.204

Source China Statistical Yearbook