Education Dollars--The Call of the Mainland

Leaving behind the sleek, modern high-rise buildings of Shanghai's high-class Xujiahui district, our driver heads for the suburb of Baoshan. Construction crews are busy all along the route, building roads and bridges. Big construction vehicles roar by, kicking up clouds of dust. After an hour or so, we reach our destination, Hong-Wen International Commercial High School. A big, eye-catching banner hanging from the school's sign reads: "Shanghai-Taiwan Cooperation." Hong-Wen is a secondary vocational school jointly established by a consortium of interests from Taiwan and Shanghai, and is the first educational institution of this sort in Shanghai.

Established in 1993, Hong-Wen is what would be called a vocational high school in Taiwan. Over 1,000 students here study computer system management and business management. The students, teachers, and principal are all from the PRC. The only "outsider" here is the man who put up the money, executive director and vice principal Chou Chao-hsiung. He greets us in Taiwanese and escorts us into his office.

"There are only 20 million or so people in Taiwan, so there's a limit to how big you can get there. But the main-land's got over a billion people. This is a huge market!" The size of the market, says Chou, is what has prompted him and others to set up schools on the mainland. A former principal of two vocational schools in Hsinchu and Hualien, Chou and his family emigrated to Canada in 1994. It was also at that time that he put up part of the money for a friend who was planning to set up a school in mainland China. Chou was only one of 11 shareholders at first, but in 1996 he upped his stake to 35% and decided to get personally involved in the running of the school. He and his partners eventually spent more than RMB20 million to acquire 13 hectares of land, build the administrative and classroom buildings, construct lab facilities, dormitories, and cafeterias, and outfit the structures with all the necessary equipment.

200 million illiterates

What advantage is there to having a school set up by a joint venture involving investors from overseas? For the answer to that question, one must consider the educational environment in China.

After mainland China was "liberated" in 1949, it came under a communist system in which private enterprise was not allowed. Long-established private schools like Nankai University in Tianjin and St. John's University in Shanghai became state- owned and operated. But after more than 40 years of taking total responsibility for education within the framework of a centrally planned economy, the authorities in Beijing started realizing that the financial burden of educating 1.3 billion people was just too heavy for the government to shoulder on its own.

A poorly educated public has long been a big headache for China. Statistics compiled in the early 1990s indicate that more than 200 million people there are illiterate, which means that one of every four illiterate people in the world is Chinese. Of China's 220 million students, about one-third will only reach elementary school. Another third will only make it to junior high school. Less than 30% will attend high school.

After the mainland authorities opened China to increased contact with the outside world, Beijing stopped trying to hide the seriousness of the illiteracy problem, and they had the China Youth Development Association organize young students to go and teach literacy to people in remote villages and mountain districts. Over the past decade or more, many NGOs, companies, and individuals from Hong Kong and Taiwan have participated in China's "Project Hope," a program for funding the education of children who were falling through the cracks of the educational system. And many of the Taiwanese residents who started visiting mainland relatives in the late 1980s ended up donating money to schools in their hometowns to help them buy books and teaching materials.

These developments sparked new hope, and many began calling for the state to relinquish its control over a single, uniform system of university education.

Section 4, Article 19 of the Constitution of the People's Republic of China (promulgated in 1982), put an end to ambiguity by stipulating: "The state encourages collective economic organizations, state enterprises and institutions, and other sectors of society to establish educational institutions of various types in accordance with the law."

In 1993, the third plenary session of the 14th Central Committee of the Communist Party formulated a policy document regarding education reform, which included the following guiding principles regarding privately run schools: "Actively encourage. Strongly support. Correctly guide. Closely supervise." This was followed in 1997 by the promulgation of a law concerning the establishment of private schools, and in 1998 by a law on higher education which stipulates: "The state encourages... other social organizations and citizens to establish institutions of higher education in accordance with the law." For the first time since 1949, the state had dropped its insistence on maintaining total control over education.

Taiwanese schools hit the mainland

Ever since the 1980s, when the ROC government first started allowing residents of Taiwan to visit relatives on the mainland, ROC residents have been shuttling back and forth across the Taiwan Strait in large numbers, and many of these have been people from the educational establishment. Taking note of the deregulation taking place in education, they began to think big, setting their sights on the establishment of their own tertiary institutions.

In 1988, Hsing-Wu College president Ku Huai-tzu and his younger brother Ku Chien-tung returned to the hometown in northern Jiangsu Province that they had not seen in decades. Sheyang County, in Yan-cheng Municipality, is located on the coast of the Yellow Sea, and borders on the west with Yangzhou, a city steeped in culture. With a population of close to 8 million, Yancheng is strong in both agriculture and fisheries, but the level of education there lags behind other big municipalities. At the request of the people of Yancheng, the Ku family donated US$1 million to set up a series of schools with "Mingda" in the name (in memory of a noted ancestor). The Mingda group was to include five middle schools, three elementary schools, and one kindergarten.

After donating the money to build the schools, however, the Ku brothers got to thinking that it would make sense to take the educational expertise that had been built up over several decades in Taiwan, and transplant it to their hometown. Local authorities in northern Jiangsu greeted the idea with enthusiasm.

But problems cropped up. While the county and municipal authorities were enthusiastic about the project, any applications by outside parties to set up schools on the mainland are closely scrutinized by the authorities in Beijing. Among other requirements, Beijing requires that the principal be a PRC citizen.

Ku Huai-tzu passed away before the preparations were finished, but his brother carried on with the project. An experienced veteran in the field of education, Ku Chien-tung was well aware that the person chosen as principal would have a huge impact on the school's success. After much consideration, he asked his cousin from the PRC, Gu Xiang, to take the job.

Gu, now 71, was formerly on the staff of the Central Committee of the Communist Party. Although now retired, he is still a member of the China Writers' Association, and often travels back and forth between Beijing and northern Jiangsu. This past May when Ku Chien-tung took a group of friends on a tour of the Mingda schools, Gu Xiang returned to Jiangsu to see his cousin.

Gu confides that he felt quite ambivalent at first about serving as school principal. Although the political gulf between family members was perhaps not as wide as it had been in previous decades, he was worried that a scholar like himself might not have what it took to do a good job as principal after a lifetime of operating within a socialist system and enjoying powerful political backing. But his cousin had set an inspiring example: "There was my cousin, over 70 years old, catching a flight to Shanghai via Hong Kong, and from there he takes an eight- or nine-hour car ride over bumpy roads to get back to our hometown." If a member of the Kuomintang could show such dedication to his hometown, how could a member of the Communist Party feel reluctant about serving the people?

Once the post of principal was settled, the next problem had to do with diplomas. PRC regulations allowed privately-run schools to obtain land, put up buildings, hire teachers, buy books, procure equipment, and recruit students, but until the National Education Committee of China had given its approval, the school would not be allowed to issue diplomas under the name of Mingda College. The diplomas awarded to the first three classes to graduate from Mingda College bore the name of Yangzhou University. Mingda was in effect subordinated to Yangzhou University. It wasn't until 1999 that Mingda passed review by the National Education Committee and started awarding its own diplomas.

No wildcats in education?

Overseas organizations and individuals are not allowed to act alone in establishing independent universities in the PRC; if they don't establish a local joint venture, the only thing they are allowed to do is establish departments or schools within an existing university. That is why most overseas parties have opted to set up joint ventures with a local partner. In order to get authorization to set up an institution of higher education, a foreign party will often choose to operate under the auspices of a famous university.

During the three years when Mingda College was part of Yangzhou University, it had to hand over 15% of tuition revenues to the latter, which was quite a steep price. According to Gu Weiqin, another relative involved with the running of Mingda, "The only advantage for Mingda was that Yangzhou University had been around for a long time and had a very good reputation. A diploma from Yangzhou University carried considerable cachet, and was more attractive to students. A graduate from the Chinese Department of Fudan University in Shanghai, Gu Weiqin is a former department head at a vocational school in Nanchang, capital of Jiangxi Province. He now serves as executive assistant principal at Mingda. After much careful consideration, the Gu clan decided it would be better to go independent as soon as possible, because it takes time to build name recognition.

A three-year vocational school, Mingda has five different departments (including foreign languages, international trade, tourism, and computer science), and successfully went independent three years after first opening its doors. The situation is rather different at Sheng Da College.

Located in Zhengzhou, capital of Henan Province, Sheng Da was established by Wang Kuang-ya, principal of Taipei's Yu Dah Senior Commercial Vocational School. Like the Ku brothers, Wang was acting out of a desire to make a contribution to his homeland. He received approval in 1994 to cooperate with Zhengzhou University in establishing Sheng Da. The new school had three departments (tourism management, real estate management, and secretarial studies). Soon thereafter the school added four-year university programs in management, foreign languages, and business. Sheng Da sits on a 600-hectare site and has over 5,000 students.

Gu Weiqin has visited the campus of Zhengzhou University and reports that, perhaps because Zhengzhou is located quite far inland, where institutions of higher education are few, the Henan provincial government has been very supportive of overseas parties seeking to establish schools there. Says Gu: "All the students are sent to the school by Zhengzhou University, which doesn't collect any fees at all for allowing Sheng Da to operate under its banner. Sheng Da only pays fees for classroom use. It's a very unique situation."

A Taiwanese educator familiar with the mainland education market is less impressed. He points out that although Sheng Da operates its campus and classes independently, it is still not an independently incorporated organization. The top administrator and all faculty appointments are determined by Zhengzhou University, which also grants the diplomas. In effect, Sheng Da has been donated to Zhengzhou University.

I am private, hear me roar

Generally speaking, there are two types of privately-run institutions of higher education in mainland China. One type comprises those which do not grant formal degrees, such as cram schools and training centers. The other type grants formal degrees which are officially recognized once the school has been accredited by the National Education Committee.

In the decade since mainland authorities started encouraging the establishment of privately-run schools, the number of such institutions has risen sharply. In Jiangsu Province, for example, when Mingda was established in 1993 there was not a single privately-run institution of higher education in all of China north of Yangzhou. There are now 15, however, including three involving Taiwanese participation. In addition to Mingda, there is also Yanhuang University in Nanjing, and Jianghai College in Yangzhou.

China Education Daily reports that in 2000 there were 43 privately-run institutions of higher education in mainland China authorized to grant formal degrees in their own name, up by six from the year before. Among the better known are Yang En University in Quanzhou, Fujian Province (established by overseas Chinese from Myanmar), Shanda College in Shanghai (established by alumni of Peking University, Jiaotong University, and Tsinghua University), and Yellow River Technical College in Zhengzhou. At the same time, there were 1,282 non-degree institutions, mostly concentrated in the coastal region, up by 42 from the previous year. The Shanghai area alone is home to nearly 200 of them, many of which naturally involve Taiwanese participation.

Wang Yuan-sheng, president of Hwashing Books, a Taiwanese publisher of textbooks for vocational high schools, bought a floor in a building in Shanghai's Xujiahui district for US$1 million. In league with Shanghai's Pudong Continuing Education Center (PCEC), he has established Hong-Wen College. Most of the students there come from the ranks of those who failed to test into a university, and the courses focus primarily on practical subjects like marketing and business management. The school has 200 students enrolled in its daytime and evening courses.

Jointly founded by Fudan, Tongji, and Jiaotong universities, PCEC is similar to the extension centers run by universities in Taiwan. Most overseas parties that establish schools in Shanghai do so in cooperation with PCEC, but apart from charging a management fee, PCEC plays only a supporting role.

Wang Yuan-sheng concedes that the inability to award degrees limits a school's drawing power, and says that he was once considering the option of operating under the wing of East China Normal University, but the other side wanted to maintain control over funds and the appointment of instructors. "They wanted to take our money and have carte blanche as to how to spend it." So he pulled out of negotiations with East China Normal University and decided instead to concentrate on building up Hong-Wen by hiring retired professors from Shanghai and Jiaotong universities to take administrative and teaching positions at the school. The professors concentrated on improving the students' academic abilities, and helped them to prepare to take tests for university equivalency degrees. The college also began selling itself as a good way to prepare for finding work at a foreign company.

Making ends meet

Outsiders who set up schools in mainland China invariably do so thinking naively that "big population equals big market." What they don't realize is that students in poverty-ridden areas can't afford to attend school, while in booming Shanghai the competition for students is intense.

There are 200,000 students graduating from high school this year in Shanghai, and 70,000 graduating from elementary school. As a result of China's long-running one-child policy, the age demographics of Shanghai have taken the form of an inverted pyramid-the younger the age bracket, the fewer the people. In another six years, there will only be 70,000 people seeking to enter university. When that time comes, even universities may find themselves competing for students.

Mingda executive assistant principal Gu Weiqin says: "We originally wanted our school to be in Yancheng City, but the land there cost over RMB40,000 per mu [about RMB26,700 per hectare]. In the meantime, the authorities in Sheyang County, an hour away by car, were working hard to get us to locate there. The head of the county government said we could have all the land we wanted for RMB3,000 per mu." Gu notes that northern Jiangsu is quite rural. There is little industry there, and the average annual income is about RMB6,000. Some 80% of the school's students are from rural villages. The school charges tuition fees of only RMB5,000, the lowest in northern Jiangsu. "But that's still a heavy burden for many of the farmers around here. We have a big problem with students getting into arrears."

The school's rural location is another factor that makes it less attractive to potential students. Mingda has capacity for 4,000 instructors and students, but it only has 1,300 currently. Gu Weiqin is nevertheless very optimistic: "There aren't any other three-year vocational school offering their own diplomas. We're out in front."

According to Chou Chao-hsiung, executive director of Hong-Wen College, "We're just getting established, and now we have to deal with a shrinking vocational education market on the mainland. It's the same problem that vocational schools in Taiwan are facing. All the students are working like mad to get into university." Chou saw the crisis brewing three years ago, and has been working hard to convert his institution into a comprehensive high school focusing on university-bound students.

Although Chou is feeling very apprehensive about the many students that the school lost last year, everyone in Baoshan nevertheless knows of him, and knows that he comes from Taiwan. That is a consolation which makes him proud. Says Chou, "Actually, we can keep the school running with cash infusions from the main school in Taiwan, but it might take us eight years to recoup our investment, whereas the original plan was to break even in five years."

Several schools have reacted to the shortage of students by recruiting out of town, offering as an enticement the fact that students might well end up staying on in Shanghai after graduation.

Go west?

Shanghai's popularity among Taiwanese businesses as a destination for investments has soared in recent years, and many have been very successful there. But are there still any opportunities for anyone thinking of entering the Shanghai education market?

Wang Yuan-sheng visited Pudong in May to look at some land to expand his school. Although the going rate for school-use land in Pudong is under RMB200,000 per mu, the seller asked for RMB300,000. He was clearly asking an exorbitant price. Says Wang: "I'm in this for the long haul. Among the dozen or more institutions working with PCEC, we're one of the biggest. We used to get VIP treatment, but now people hardly take any notice of us. The change has cooled his enthusiasm for continued investments "from 80% to 60%."

Chou Chao-hsiung is more confident about his school's campus in Huludao City, Liaoning Province. It is a small but very attractive campus with 160 students and big potential. Taiwanese parties hoping to set up schools in mainland China may follow the lead of many business firms and start looking beyond Shanghai, to places like Xi'an, Chongqing, and Wuhan.

Says mainland writer Yu Qiuyu: "The thing about Shanghai that makes the biggest impression on me is the endless stream of humanity." No doubt this is precisely what has lured many a Taiwanese business person to the city. But it takes a lot of money to run a school in Shanghai. Anyone who would embark upon the market had best take out his abacus and do some careful bean counting!

p.068

Mingda College, located on a spacious campus on the outskirts of Yancheng City in northern Jiangsu Province, was founded by the family of Ku Chien-tung. Ku, formerly head of Hsing-Wu College, is a native of Yancheng who wanted to do something for his hometown.

p.069

Mingda College is a three-year vocational school offering courses mainly in practical subjects like international trade, foreign languages, and tourism. The school has turned out three graduating classes since its founding in 1995, and many of its former students now work in firms run by Taiwanese.

p.070

There are about 1,300 students and instructors at Mingda College. Most of the students are from rural villages, and all of them live on campus. The students are pictured here taking their thermos bottles during the noon hour to fill up with hot water at the school cafeteria.

p.071

The mainland authorities closely scrutinize applications by overseas parties to establish schools in the PRC, and require that the top administrator in all such schools be a Chinese citizen. Mingda College is headed by Gu Xiang, a former official in the PRC's Ministry of Culture with a broad network of contacts.

p.072

Many Taiwanese have established private non-degree tertiary schools. As at Taiwan's private cram schools (buxiban), their computer and foreign language courses are especially popular.

p.072

Discipline is strict at Hong-Wen International Commercial High School. Besides being required to maintain a proper appearance, students must have the lights out by 9:30 p.m. and are not allowed to eat just wherever they please.

p.073

Hong-Wen International Commercial High School is what would be called a vocational high school in Taiwan. It is the first secondary school in Shanghai run in cooperation with a Taiwanese partner. Many residents in Baoshan, the Shanghai suburb where Hong-Wen is located, are aware that the school's vice principal, Chou Chao-hsiung, is from Taiwan.

p.074

Is there money to be made in a market with over 200 million students? Anyone thinking of establishing a school on the mainland must first study the market and gain an understanding of demographic trends in China. Before long, schools in the big cities will be forced to compete for students.