Many Chinese Universities Facing Bankruptcy

By Lin Yuguo, Central News Agency
March 14, 2007 12:00 am Last Updated: March 14, 2007 12:00 am

CHINA—National People's Congress (NPC) Deputy Hong Kezhu pointed out recently that Chinese universities are carrying a collective debt load of 280 billion yuan (approximately USD 36.1 Billion) in bank loans. In 2008, the number of universities required to pay back their loans will reach its peak. Because many universities will not have the funds to meet their financial obligations they could face bankruptcy.

Deputies in the educational field and commissioners of the Chinese People's Political Consultative Conference (CPPCC) gave an interview with Nan Fang Daily. During the interview, they admitted that because universities have expanded without control, many are currently insolvent saying, “The annual income of some schools is not enough to pay off the interest on their loans.”

Hong Kezhu cautioned that, “In fact, the total loan debt is possibly several times 280 billion.” Many universities that faced insolvency have already gone bankrupt. Data from the Chinese Academy of Social Sciences (CASS) shows that public universities have borrowed in total approximately 150 to 200 billion Yuan (approximately USD 19.4 to 25.8 billion) in bank loans. Some schools have borrowed as much as 1 to 2 billion Yuan (approximately USD 129 to 248 million) alone. Among those schools, some will not even be able to meet the interest payments.

Gu Hailiang, an NPC Deputy and Wuhan University Party Chief emphasized that Chinese institutions of higher learning need to establish a more rational financial system. Otherwise, while money is so scarce, and unforeseen financial hardships occur, it's quite possible that the schools will have to close.