Debt Crisis Looming for Chinese Higher Education

A staggering debt load has now become the most pressing problem for Chinese universities and could bring them to the brink of bankruptcy. Of the 10 trillion yuan (US$1.5 trillion) debt owed by various levels of Chinese authorities, the nation’s 1,164 universities are on the hook for 3 percent.

The Chinese Audit Commission recently disclosed that higher education collectively owes US$40 billion, mostly to banks. The National Radio Network reported on July 3 that, as of the end of 2009, Shaanxi province’s 40 universities had a total debt of over US$1.5 billion.

Due to the recent increase in bank reserve requirements and rise in interest rates, banks are pressuring these universities to pay down the debt. Some schools are using tuition fees to pay the banks.

Another source of funds is land sales. Beijing Evening News has reported that a university in Hebei sold off several acres which had been designated for education, thus infuriating local farmers.

A former Minister of Education said, in 2007, that the debt owed by Chinese universities is the result of corruption. Officials, bureaucrats and Party members use various means to siphon off funds including pocketing rebates, construction graft and non-transparent accounting.

Though the West believes that China invests judiciously in higher education, with the anticipated benefits from research and development, the dreams of young Chinese to advance via education may soon face the reality of higher tuition that will be used to cover deficits and debts.

Read the original Chinese article.

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