Financing China's higher education expansion

Abstract

China's higher education has experienced a huge surge since 1998. The number of annual new student intake did not reach one million until 1997. In less than one decade, it expanded to 5.4 million in 2006, growing at 22.2 percent per annum, much higher than 4.4 percent between 1985 and 1998. Most public discussions surround the consequences of this explosive growth; a more fundamental yet underexplored question is how this boom is possible in the first place. This is more puzzling given the declining contribution of government as a share of total expenditures on higher education. We address this issue in this article, highlighting "innovative" ways that universities employ in financing their explosive expansion. We identify a number of ways that either lower the cost of expansion or provide much needed financial resources. First, local governments provide land at prices well below the market ones; second, state banks provide loans in huge amounts; third, universities create new colleges or programs that charge much higher tuitions for lower entrance requirements. Behind such financing mechanisms are strong financial interests in higher education. Local governments develop "university towns" not only for promoting higher education but also for commercial and business purposes; state banks view loans to universities as high return investments; even universities see revenue-generating opportunities in the process of expansion. Building on the momentum of rapid expansion generated by diversified financial resources, China's higher education is set to expand further while paying more attention to the quality issue. © 2008 by Nova Science Publishers, Inc. All rights reserved.