A public debate on how to improve China’s public university finances

As already indicated when initially discussing China’s public universities’ financial situation, a plan to overcome underlying problems is not in sight as yet. After analysing some of the most critical cases, however, key reasons for failure – most of them related to planning and control mechanisms – can be named:

• Dwindling enrolments due to the end of the baby boom: In 2009, university entrance examiners saw nearly half a million fewer high-school graduates compared to the year before.
• Economists attribute the debt problem to financial inexperience among university administrators and missing academic budgeting systems.
• Other than tuition fees, universities had no access to additional revenue streams, some entrepreneurial academics say.
• Risk managers see loans granted without control mechanisms in place as main contributor to the problem.
• Blind university industrialisation without having sought out areas of strengths is named by leaders of financially healthy higher education institutions.
• According to some, the fact that society paid too much attention to quantitative development helped create a university bubble and eventually debt entanglement.
• Others argue that the funding provided to universities was insufficient causing universities to face financial difficulties.

The topic at hand seems to be another good example of China’s approach to solving societal issues, particularly when related to education, namely, to wait for a discussion to arise in public before molding a plan. Below is an excerpt of the discussion held in the Chinese media.

• Zhou Ji, former Minister of Education, suggests that universities should resolve their crises through “land replacement” resulting in government-owned land becoming available to the private sector.
• Wuhan University Principal Gu Hailiang calls for universities to develop areas of strengths and maintain programs and enrolment rates matching the respective target industries’ demands. And he sees a possibility to adopt the “foundation” model utilised by many private universities in the US.
• The “foundation” model is also favoured by National Party Congress (NPC) deputy Hong Kezhu, who further proposes for all universities to introduce a sound budget and control system and to build roads to  additional revenues.
• Applying Darwin’s theory of evolution, renowned populist Xiong Chuandong suggests that “only the fittest should survive” and that university bankruptcy was a valid means of building a strong and mature higher education system in China.
• According to Sun Yat-sen University President Huang Daren and NPC deputy Zhao Han, the federal government should bail out universities fighting bankruptcy.
• And from within the Ministry of Education (MoE), Planning Department Chief Han Jin says that universities’ financial risks could not only be mitigated by proper planning but by an increased investment from the federal government.

Until a sound budget and control system is in place, resolving the situation by further consolidation does not seem to be a solid path. To attract foreign partners, however, could kill two or even more birds with one stone: firstly, it could contribute to speeding up the process of maturing the teaching methodology. Then, it could help create additional revenues from both local and, increasingly, international students. Adopting the financial control mechanisms of a mature foreign academic partner could further stimulate the financial risk awareness of the academic leadership in China.

To induce a discussion on this topic with our readership, we asked one of the nation’s future leaders, a Tongji University MBA student with a professional career prospect in the education sector, to come up with suggestions on how to improve China’s public university finances.

Please find the student’s suggestions and join a constructive discussion at our Facebook page.

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