Walter Hutchens’ Blog

The PRC Ministry of Education (MOE) has issued an Opinion that supplements existing regulations on Chinese-foreign educational ventures.

I’ve translated the Opinion here. It’s an Adobe PDF file, with the Chinese and English text side-by-side.

Comments on the translation are welcome. I tried to be faithful to the meaning and the spirit of the Chinese, but I didn’t try to render it word-for-word or “literally.” I’ll write separately about some translation issues I encountered.

The document is short but not a model of pithy legal drafting.

Much of the text is aspirational. There are exhortations for officials to strictly enforce existing rules. This seem redundant. It’s like a reminder, not a regulation.

Indeed, the Opinion is addressed to officials, not to the public (the people and institutions affected by the regulation). Chinese law in the dynastic era, I understand, was also addressed to officials, not “citizens.”

But it’s not only a reminder to officials to enforce existing rules. The Opinion also includes some new substantive matters.

It announces for instance that a special approval is required if an educational joint venture uses a “dual campus model.”

This is the first explicit notice that 1) a “dual campus model” is possible and 2) that a special approval is needed to use that approach.

However, the Opinion does not define a “dual campus” approach. The context suggests it means one foreign and one Chinese campus (as opposed to multiple PRC campuses), with students attending them sequentially. The animating concern of this section of the Opinion seems to be that in such dual campus arrangements it will be hard for the PRC party to “absorb” the curriculum of the foreign partner (and such absorption is explicitly part of what educational joint ventures are supposed to accomplish). Thus the Opinion says that teaching should mainly be done on the PRC partner’s campus (without defining “mainly”). When a dual campus approach is used (with approval), the PRC partner is reminded to be vigilant about absorbing the foreign curriculum.

Another substantive part of the Opinion is the creation of a list of factors to be considered by government agents when approving tuition rates (the notion that tuition is subject to approval is not new—that’s in existing rules).

I’ve been following China’s enactments in this area for a while. I’ve compiled a basic guide to the regulatory structure at chinaeducationlaw.com.

There’s a lot of educational “FDI” coming to China now. I’m currently working in one such venture. Overall, I think Chinese-foreign educational cooperation is a splendid thing. However, I sense a lot of institutions are coming to China, like waves of investors before them, enthralled with some kind of “China dream” that makes them drop their guard.

I suspect what often happens is that a foreign educator falls in love with China, becoming excited about the enormous potential here (a familiar story in other sectors, of course). Then, after a few rounds of friendly visits and talks, a deal is signed between the foreign intuition and a PRC university—without the foreign party ever having actually read (or being advised by somebody who has read) the relevant regulations.

If they did read the rules, it might give them pause. China’s rules governing this sector codify the government’s role in setting tuition, reviewing teaching materials and making sure the PRC party has mechanisms to control the venture. Probably no toasts are made to any of that at the banquets celebrating these deals.

The PR staff at the business school where I teach wrote a brief story for the school’s website about the travel course I led to Hong Kong in January. Teaching that class was great fun.

The forthcoming issue of the Chronicle of Higher Education includes an article about foreign institutions of higher education operating in China. Paul Mooney, the writer, is an experienced journalist and China hand. He talked to a lot of people (including me—I’m quoted a bit in the article) and gathered a lot of facts. It’s a very helpful introduction to the participation of foreign institutions in China’s higher education sector.

A couple of minor quibbles:

• As the article indicates, in China the University of Maryland charges only about half of the US tuition for an executive MBA. However, the article suggests that’s because in China we are using technology to dramatically reduce costs. Someone in our shop—not me—told the writer something that suggested this, but actuallyour EMBA programs in China are the same as the program in the U.S. (the professors and curriculum are virtually identical). Our China EMBA is not a distance education program. Not to cast aspersions on distance eduction—I just mean we aren’t dramatically economizing through technology. I think our PRC price reflects our (relatively high) costs, what we think the market can bear and what our competitors are charging.
• The article accurately quotes me opining that the PRC State Council rules on JV schools “flagrantly violate” something China promised to abide by when joining the WTO; however, they violate a specific WTO accession commitment on higher education, not some general GATT or WTO principle. The details are posted on my site chinaeducationlaw.net.

I’m working on an academic article about foreign educational institutions operating in China. Here’s the draft abstract:

Should Foreign Educational Institutions
Operate in China?
Analysis of the
Legal, Political and Competitive Landscape

This article is about foreign involvement in higher education in the People’s Republic of China (PRC or China). Many higher education institutions now see China as an important place for expansion. This study shows that although China presents an exciting opportunity, foreign institutions seeking to operate in China face myriad legal, political and competitive challenges. Before deciding to expand in China, institutions should thoroughly consider this daunting environment and, if they choose to proceed, take affirmative steps to protect their interests and values while operating in China.

I have pasted the Chronicle story after the jump.

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As a companion to the 15-year national science & technology development plan China released yesterday, a decision of the State Council has been released concerning implementation of the plans’ objective of developing China’s independent capacity for innovation. (law-lib.com distributed it today, though it is dated January 26).

In customary PRC fashion, it begins by invoking a string of set phrases (“in accordance with Deng Xiaoping theory and the important “three represents” thought, and in accordance with the spirit of the 15th Party Congress and the 3rd, 4th and 5th plenum sessions of the 16th Central Committee . . .”).

Its jest is to affirm the goal of developing an independent innovative capacity as a “basic line” for national policy in the years ahead.

There is nothing subtle about the nationalism underlying the policy. This State Council document proclaims developing China’s independent capacity for innovation is part of “the great revival of the Chinese race (中华民族的伟大复兴).”

I’ve put the full Chinese text of this State Council decision after the jump.

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China’s State Council today issued a plan for the development of science and technology in China through 2020.

In it China announces its intention to improve dramatically by 2020 its capacity for independent innovation (自主创新能力 zizhu chuangxin nengli). They declare an intention to become one of the world’s leaders of innovation—among the top 5 nations of the world in terms of scientific articles published and patents licensed—and decrease Chinese dependence on foreign technology. They plan to increase spending on R&D to 2.5% of GPD and “develop a group of technological achievements that have enormous influence.”

China certainly has the human talent to do all these things, and though there’s something a bit unnerving about China’s hyper-determined, nationalistic plan to become a S&T superpower, the planet could benefit from the unleashing of all that potential. But meeting China’s goals will require ongoing reforms.

Some of the needed reforms are in the legal sphere. For example, the US has no comprehensive national S&T plan but leads the world in innovation. Government funding for education and basic research (and tax breaks for R&D) all play a part in the US’s astounding success, but another critical factor is a supportive legal system. Venture capitalists and entrepreneurs can make enforceable contracts (rather than depending on guanxi or faith in some government actor), and they have the hope of getting rich through stock markets not controlled by government planners. Intellectual property rights are protected sufficiently (some argue too sufficiently) so that firms have incentives to invest in R&D.

PRC economist Wu Jinglian aruges, “Systems are More Important than Technology” [制度重于技术, Zhidu zhongyu jishu] To meet its science and technology goals, Chinese leaders need to heed that lesson.

PRC press reports on the plan are here and here.

The plan is titled Outline of the Long-term National Plan for the Development of Science and Technology (2006-2020) [国家中长期科学和技术发展规划纲要（２００６－２０２０年）Guojia zhong-changqi kexue he jishu fazhan guihua gangyao)]. The full Chinese text is available here.

Here Xinhua collects related speeches by Hu Jintao and Wen Jiabao and offers commentary on the plan’s highlights.

Xinhua reports:

China launches RMB interest rate swap transaction

www.chinaview.cn 2006-02-10 00:06:20

BEIJING, Feb. 9 (Xinhuanet) — China Development Bank and China Everbright Bank completed the country’s first RMB interest rate swap transaction here Thursday.

The interest rate swap transaction refers to periodic payments under agreement calculated, based on fixed and floating interest rates. It is an important indicator of the maturity of the financial market.

Experts believe that the service will reduce borrowers’ risk in the financial market, for example, with the housing loans.

Chinese banks long only provided floating mortgage rate. As the central bank raised the interest rate in October 2004, many consumers now have to pay more than they expected for the housing loans.

Based on the interest rate swap transaction, China Everbright Bank launched the country’s first fixed mortgage rates service for housing loan borrowers. The bank transfer the consumer’s risk to the capital market.

The Chicago Mercantile Exchange organized a conference on derivatives in Shanghai in September of last year.

China has cautiously begun to diversify its portfolio of financial instruments. Over recent years they’ve added mutual funds, exchange-traded funds, warrants and now are experimenting, at least among banks, with derivatives.

The disaster wrought by a China Aviation Oil employee who lost USD 500 million trading derivaties in Singapore (why is it always Singapore?) hasn’t been an inducement to rapid progress.

I’ve put the Chinese text of the PBOC’s regulations allowing experimentation with interest rate swaps after the jump.
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