China’s reform could strengthen control of private HE

There is a Chinese saying, “When a storm is about to come, the wind fills the building.” This means that there can be indications on the eve of an event that significant changes are to come.

In the last year we have witnessed the wind of education reform in China which could signify big changes to come in relation to the scrutiny facing off-campus education and training institutions.

On 16 June, the Ministry of Education announced the establishment of the Department of Supervision to oversee off-campus education and training. This office is under the administration of a former (but now expanded) education supervision department.

Although the storm has not yet arrived, turbulence has already begun on the internet.

Over the days and weeks that followed the announcement, the online community has been full of rumours about the possible responses or countermeasures that might be taken by some leading companies in the education business, such as New Oriental, TAL (Tomorrow Advancing Life) Education and Genshuixue.

In response to the online rumours, the founder of New Oriental, Minhong Yu, has had to issue a ‘solemn statement’ to clarify any misunderstandings and to explore potential legal action against the rumour mongers.

Although the rumours may not be true, the capital markets have reacted. On 17 June, Chinese education stocks plunged collectively, with TAL Education (TAL.NY) down 14.06%, New Oriental (EDU.NY) down 5.99% and Genshuixue (GOTU.US) down 8.24%.

As a result, the online community sprang into action again, with speculation about privatisation increasing.

Privatisation concerns

Why such a strong reaction? Although the newly established department publicly and via its policies has been keen to stress the importance of closely monitoring the off-campus education industry, the public continues to speculate on the changes.

That is because many Chinese believe that a holistically planned economy distributes its resources fairly and that a free market cannot achieve this goal.

The general public has witnessed and experienced the uneven allocation of resources as public schools have become increasingly collectivised, while the number of private schools has been increasing and elite schools around the country have set up their own private experimental schools.

A belief in the existence of a fair distribution of resources makes some parents and students assume that education should not be left to the financial market.

A mixed economy

However, according to the China Business Journal, the real intention of the reform is not to deny funding to education companies or to education per se, but to strengthen the way the market is managed.

That is to say, the operation of the free market or investment should be carried out under the supervision of the government. This is no longer about one particular economic system – a state monopoly versus the free market – or some other dualistic opposition. What we are seeing is a mixed economy, a ‘free market’ under monopoly supervision.

As early as February last year, Chen Baosheng, minister of education, stressed that the focus of the governance of after-school education and training institutions will be on cracking down on behaviours such as mere profit-seeking, improper teacher ethics and false advertising as well as ensuring that education and training institutions are solely about education.

Although the phenomenon of the privatisation of education may be confusing to the general public, the purpose of the reform has been consistent with other macroeconomic trends.

However, it is true that the reform will mean many education enterprises will face the most severe storm since 1994, when the first batch of private colleges and universities engaged in diploma education appeared, such as Beijing Haidian Day University.

Whether or not the public can fully understand it, this regulation is timely and perhaps necessary in the current circumstances.

The magnitude of the change will be comparable to the proposal by the United States government to regulate businesses in the 19th century when it saw the need to usher in different forms of social regulation.

This was considered a radical idea when political leaders first proposed it. However, with the passage of time, the radical ideas of that era have proven to be vital and have become today’s accepted norms. The general public has come to accept – and even expect – such restrictions.

Regardless of the differences between two opposing yet somehow very similar economic systems – those of China and the Western world – their efforts with regard to social regulation seem to have some common features.

A good outcome for regulation will rely on proper enforcement. However, given that the Chinese government is good at overcontrolling situations, it is often the case that over-enforcement and restrictions occur during the implementation of reforms.

Since each state has a different interpretation and implementation of central government policies, it remains to be seen how the reform will play out. While we anticipate a positive result, we expect first-tier cities to see the fastest response and to adjust more smoothly to the process of implementation.

Sabrina Y Wang is a consulting educator specialising in overseas college test preparation. She is also a LinkedIn Career Mentor of 2020 and founder at Aslan Education Planning. Xin Wen is an MA student of comparative literature at Sichuan University, China.