Walter Hutchens’ Blog

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.

Chronicle of Higher Education

From the issue dated February 17, 2006

Section: International

Volume 52, Issue 24, Page A46

http://chronicle.com/weekly/v52/i24/24a04601.htm

 

The Wild, Wild East

Foreign universities flock to China, but are there riches to be made, or just fool’s gold?

By PAUL MOONEY

Beijing

The past few years have seen explosive growth in the number of foreign colleges and universities that have poured into China.

The country first opened its doors to such ventures in 1995. Today more than 700 foreign academic programs operate here, according to the International Finance Corporation, an arm of the World Bank. American institutions — ranging from large publics such as the University of Maryland to smaller private colleges such as Lakeland College, in Sheboygan, Wis. — are leading the charge, with more than 150 programs. Australia, Britain, Canada, Japan, and Singapore also have a visible presence here.

With the lure of the size of the market — more than one billion Chinese — some American college officials compare the entrepreneurial environment to the 19th-century gold rush in the American West. “China is clearly the Klondike of higher education at the moment,” says Kermit L. Hall, president of the State University of New York at Albany, who is working closely with Chinese, Canadian, and American counterparts to develop a new campus near Nanjing.

The demand for education is enormous, as is the potential for profit. Fewer of the country’s students are willing or able to travel abroad, in part because of new visa restrictions instituted in the wake of the September 11 terrorist attacks. And the country itself, American academics say, is a useful laboratory for students and professors in all sorts of disciplines.

But as many of the entrepreneurs who came before them learned the hard way, foreign educators are finding that the road to success in China is paved with failed partnerships — victims of unrealistic expectations, bad planning, and what the Chinese call “same bed, different dreams.”

The Chinese government, too, has become more cautious. Burned by some questionable foreign partners, they are now evaluating all existing foreign degree programs here, and are reviewing new applications more carefully.

Opening the Doors

The Chinese government is in a dilemma, higher-education experts say. Faced with a growing demand for postsecondary education and limited resources, it is looking to foreign universities to help close the gap. At the same time, the Communist Party, which still controls many aspects of society, fears losing its grip.

Xu Yongji, director of the Division of Policy and Planning in the Ministry of Education, says that while 19 percent of the college-age population is enrolled in an institution of higher education, demand still outstrips supply. “We have a one-child policy, and parents pay a great deal of attention to education,” he says. “But we still can’t meet the needs of the people.”

The Ministry of Education estimates that 124 million Chinese will reach college age by 2008. “In the next 15 years, China has to establish at least 800 colleges to meet the need,” Hu Ruiwen, president of the Shanghai Academy of Educational Sciences, a government research organization, told the official newspaper China Daily. “An estimated capital of 550 billion yuan [$68 billion] is needed. Obviously, it exceeds what the public coffers can offer.”

The government has announced that public-education spending over the next five years will focus mainly on rural primary education, which means that higher education will have to resort to private companies and foreign universities to finance its development.

To be sure, the government has made major higher-education investments. Between 1998, when President Jiang Zemin announced a plan to create 100 world-class universities, and 2003, the last year for which figures are available, the government has doubled its spending on higher education to $10.4 billion. But much of that money has gone to improving existing universities rather than creating new ones. The Ministry of Education also hopes that competition from new foreign universities will help spur its own top universities to excel.

“The Chinese understand the need for foreign universities to come to China for capacity building,” says Ian Gow, provost of a branch campus of England’s University of Nottingham, in Ningbo, 100 miles south of Shanghai. “Every Chinese province is desperate to attract one major university and one middle-level university,” he says. “It’s the internationalization of the province.”

Educators say that for many Chinese students, earning a foreign degree without leaving the country makes good sense. “If they all had the choice, they’d be packing their bags and coming to Hoboken,” says Maureen Weatherall, vice president for university enrollment and academic services at Stevens Institute of Technology, which is based in New Jersey and runs several academic programs in China. “But in terms of cost and getting visas, that’s not possible.”

Just Like Home

The foreign higher-education ventures sprouting up in China take many forms. Some are little more than a few classrooms in rented office space that rely heavily on distance-education technology. A handful are full-blown campuses. Most common are graduate-degree programs — typically M.B.A.’s — sometimes offered in partnership with a local university. Indeed, with M.B.A. programs accounting for about 36 percent of overseas programs in China, and the numbers still rising, many observers are worried about a glut.

The American universities that want to start academic programs here have significant competition. The University of Nottingham’s Ningbo campus, which opened in 2004 at a cost of $35-million, is one of the most impressive foreign campuses in China. It offers a British-style curriculum and degrees, with classes taught by lecturers brought from Britain. Courses include finance and business management, international communications, and international studies.

In an effort to duplicate the atmosphere of its home campus, Ningbo’s designers reproduced the university’s tall Trent Tower, complete with big clock and chimes. The campus includes a busy pedestrian mall packed with small coffee shops, grocery stores, and bookstores. The BBC — typically banned in China except for top hotels and foreign-designated residences — is broadcast in the cafeteria on overhead televisions.

Demand was so strong last year that the campus, which enrolls 930 students, had to limit admissions to residents of Zhejiang province, where Ningbo is located. By 2009 it hopes to enroll 4,000 students from China and other countries.

Foreign programs like Nottingham emphasize that they offer the same quality education as in their home institutions, and many students are attracted by their freewheeling Western style.

Michelle Gu, 19, says she chose Nottingham because of the opportunity to receive an international education. “I really wanted to learn English, and if I went to a Chinese university, the chance to use English would be much less,” she says, adding that she also appreciates the lively discussions she has with professors and other students in and out of the classroom. “In the Chinese way of teaching,” she explains, “the teacher stands in front of the class talking and the students just take notes.”

Robert Ubell, dean of the School of Professional Education at Stevens and head of the institute’s China ventures, believes this is one of the programs’ major selling points. “In Asia the hierarchical structure of education gives students very little latitude to have an open discussion in class or to challenge professors, and some of the other things done in advanced countries,” he says.

Stevens runs two degree programs with the Beijing Institute of Technology, in telecommunications management and in photonics and microelectronics, and one at the Central University of Finance and Economics. The institute is also awaiting approval for two degree programs at Shanghai Jiaotong University.

One of the more active foreign institutions here is the University of Maryland at College Park, which offers programs in Beijing, Tianjin, and Shanghai. It started an executive-M.B.A. program with the University of International Business and Economics in Beijing in 2003. The university also offers a master’s-degree program in criminology and criminal justice at Nanjing Normal University, and plans to extend it to universities in Beijing and Shanghai.

For-profit institutions are also jumping into the market. CIBT School of Business and Technology Corporation, which is owned by Canadian-based Capital Alliance Group Inc., offers degree programs at three campuses in Beijing; two in Weifang, in Shandong province; and what its Web site calls “a host of alliance schools spread across China.” Its partners in some of these ventures include Apollo Group Inc. and ITT Educational Services, Inc.

Chasing an Illusion?

But are foreign universities blinded by perceived opportunities? While many universities see revenue in China, it is still an open question as to whether there is money to be made.

“For some reason, the word out there is that this is a gold mine for educational programs,” says the Rev. Ronald Anton, dean emeritus at Fordham University and an adviser to the university’s M.B.A. program in Beijing, which it runs with a consortium of other Jesuit universities, Peking University, and the China Center for Economic Research at Peking University. “I think that schools just barely make it here.”

Father Anton says the education market in China is becoming increasingly competitive, and that local programs are improving fast. “The idea that this is a huge market waiting for foreign partners to come in is just wishful thinking,” he says.

“The name-brand equity of a Tsing-hua, Peking, or Fudan University is much stronger than universities overseas would realize,” concurs Walter Hutchens, an assistant professor of business at the University of Maryland who teaches at the College Park campus and in China. He also advises the university about its academic ventures in China. “Your name brand may not be as prestigious in China as it is in the United States.”

Foreign universities hoping to compete with local ones must also pay their foreign faculty members salaries and benefits equivalent to what they would earn back home, while Chinese universities can pay far less. In addition, there is the added cost of bringing professors to China and keeping them comfortable.

As a result, foreign operations have to look for ways to minimize costs. Many use a combination of traditional classroom instruction and distance learning. Some, for example, fly in professors for short stints, and students take the remainder of their classes through the Internet.

The Stevens Institute of Technology teaches many of its courses online and does not have more than one or two faculty members in China at a time. “It would be very expensive to send our professors to teach here,” says Mr. Ubell.

The University of Maryland is able to charge the students in its executive-M.B.A. program here less than half of what its costs to earn a degree in Maryland by making use of the Internet, video conferencing, and software products like Blackboard. Professors fly in to spend short, but intensive, periods of time with students.

The University of Texas at Arlington, which enrolls about 400 students in various executive- M.B.A. programs in China, says it has made the programs profitable by enrolling about 50 students in each class. “We could not afford to have a class with just 20, 30 students,” says Daniel Himarios, dean of the College of Business Administration. In addition, the university relies on three local faculty members to assist with course work.

Foreign universities looking to make a buck may also run up against Chinese government regulations limiting profit. These regulations, says Mr. Xu of the Education Ministry, stipulate that cooperative programs should be for the public interest, and run like nonprofit organizations. The Education Ministry understands there must be some profit incentive if it wants to attract foreign ventures, Mr. Xu notes. “We don’t expect people to lose money, but this is also not supposed to be like an enterprise,” he says.

Virtually every university here, though, says it sees China as more than a cash cow. Ms. Weatherall, of the Stevens Institute of Technology, says that while the institute hopes to get significant revenue from its China ventures, they also represent an opportunity for professors to gain firsthand knowledge about the Chinese economy and Chinese business practices.

Mr. Gow, of the University of Nottingham, notes that foreign universities are heavily dependent on Chinese students at their home campuses, and that a branch in China could feed graduate students into the institution back home. Although coming to China “has to be a business decision,” Mr. Gow says, “I think harvesting Chinese brainpower is much more important than making a buck.”

Political Controls

The questionable potential for profit is but one stumbling block, however. Another potential problem is China’s arcane political environment. “China is open and accepting of foreign education methods coming to China and contributing to the work force,” says Mr. Hutchens, of the University of Maryland, “but they are also aware that this could lead to things that they don’t like, and they have endeavored to control this.” Government rules on joint-education programs, formulated by the State Council in 2003, are “a flagrant violation,” Mr. Hutchens says, of the commitments to fostering an open market China made when it joined the World Trade Organization.

While the WTO agreement says that foreign universities will be permitted to enter the market here, and that the foreign party may hold majority ownership, the State Council regulations state that half the board of directors must be Chinese, development plans must be approved by two- thirds or more of the board members, and that the chief administrative officer responsible for hiring and firing staff must be a Chinese national, approved by the Ministry of Education, who “ardently loves the motherland.” The Ministry of Education says that it is now in the process of bringing universities that came here prior to 2003 into line with those State Council regulations.

The rules further state that the venture must have a Chinese partner, foreign religious institutions cannot be partners, and the programs must follow China’s educational policy and be in line with Chinese public morals and ethics. In addition, 2004 ministry regulations require that a curriculum outline and list of teaching materials be submitted to the ministry for approval.

Mr. Hutchens, the Maryland professor, says that few foreign university faculty members have bothered to read the State Council regulations, and few seek outside counsel when setting up joint ventures.

“I think that there is a substantial risk that foreign universities will repeat the mistakes of previous victims of China fever,” he says, “who were motivated by China’s economic growth, but underestimated the challenges of establishing a presence in China and capturing a share of this elusive market.”

Problems on Both Sides

Foreign universities have also run into sticky problems with their Chinese partners. Last November the University of Technology, Sydney, said that it had been locked out of its own facilities at the Beijing Language and Culture University for five months — while the monthly rental of $75,000 piled up — after getting into a dispute with its local manager. The Sydney Morning Herald reported that the Chinese manager had used funds from Insearch, the university’s commercial arm, to purchase a Mercedes Benz. The university also found unknown people on the payroll. And when it tried to oust the manager, it failed. The university did not respond to requests for interviews.

One Midwestern state university pulled out of an arrangement with a Chinese university several years ago because of conflicts with their Chinese partner. The Americans found that English- language test scores of students who had been admitted to the program were fraudulent, with people other than the students taking the exams; textbooks arrived late; and Communist Party monitors sat in on classes, pressuring students to toe the party line. (This information was provided by a third party to The Chronicle on the condition that the university not be named.)

China also has its share of complaints about these joint ventures. According to several foreign university officials involved in setting them up here, the Ministry of Education is concerned about the quality of some of the foreign programs they initially welcomed. Many of the programs the ministry is concerned about are run by for-profit companies. Some students have complained of shoddy academic quality or degrees that they later discovered were not recognized in the institution’s home country.

Toby Chu, president and chief executive officer of Capital Alliance Group, who works closely with education officials here, says the ministry’s current review of existing partnerships is designed to “screen out the bad weeds.” He says he was told by members of the Beijing Municipal Education Commission that no new programs will be approved until that review is completed, around May.

Mr. Ubell, of Stevens Institute of Technology, says the two degree programs Stevens wants to offer in Shanghai have been in limbo for nearly a year as he waits on the ministry to approve new rules for evaluating proposals.

While the delay has been frustrating, he says, he understands the ministry’s position. “I think it’s actually respectful of the students. The Chinese were being cautious in defense of their students in providing as much government oversight and protection as possible,” he says.

Two ministry officials — Yang Jun, director of American relations, and Xu Yongji — say no such moratorium exists. Mr. Yang confirmed, however, that current programs are being re-evaluated and that the ministry is being much more thorough in evaluating new applications.

Delay or no, foreign partners say they have every expectation that China will keep welcoming these joint ventures. “The Chinese have an issue,” says Mr. Hall, of Albany, “but they really want people there.”

Beth McMurtrie contributed to this article.