National legislators discussed a draft law on the promotion of non-state schools at the weekend but were divided on whether China should allow non-state schools to make a profit while enjoying preferential policies for public-welfare undertakings.

The draft legislation says that the owners of non-state schools should be allowed to make a "reasonable return" and that non-state schools should enjoy the same preferential policies regarding taxation, financial loans, land purchases and school renovations as schools funded by the government.

But the current Education Law, which took effect in 1995, stipulates that no individuals or organizations are allowed to set up educational institutions for the purpose of making a profit.

In the second round of deliberations on the draft legislation, legislator Wang Jialiu said: "Granting profits to owners of non-state schools will encourage more investors to devote their efforts to the cause of education and it responds to the real needs of the current situation."

As of the end of 2000, there were more than 60,000 non-state educational institutions on the Chinese mainland, including 44,000 kindergartens, 4,300 primary schools, 7,316 ordinary high schools and 999 vocational high schools, according to the National People's Congress Education, Science, Culture and Health Committee.

This only accounts for 4.1 percent of schools of all kinds.

Wang qualified her remarks by saying that the law should prevent the owners of non-state schools from making an exorbitant profit.

Legislator Gu Songfen said that all educational institutions should be regarded as public-welfare undertakings and so non-state schools should be incorporated into the state educational system.

The draft law will make it more difficult to implement preferential policies on education as it does not distinguish between profit-making schools and those run for the public good, according to sources with government departments including the Legislative Affairs Office under the State Council, the Ministry of Finance and the State Administration of Taxation.

Worldwide, schools for public welfare are registered as non-profit institutions.

Their accounting systems are different from corporate accounting systems; they enjoy taxation benefits, and can receive donations.

But their investors cannot gain any cash return.

On the contrary, profit-seeking educational institutions have to register as corporations, exercise corporate accounting systems, have no taxation benefits and cannot receive donations, said sources with the State Council Development Research Center.

The government sources suggested that the draft law divide non-state schools into profit-making and non-profit schools.

(China Daily August 26, 2002)