Universities' debts rocketing as they expand

China Daily, July 8, 2011

Many of the nation's universities are struggling with mounting debts, according to a recent ranking of their financial health by ifeng.com.

"It will become a bit of a gamble when people choose which university they want to go to because they will have no idea whether their choice of university might disappear from the national college entrance exam enrollment list," said Luo Yi, a Beijing resident who graduated from Jilin University. "I was surprised to see my university at the top of the debtors' list for Chinese universities."

Jilin University in Changchun, the capital of Northeast China's Jilin province, has 3 billion yuan ($464 million) of debts that are largely down to an expensive expansion project in 2000, according to the ifeng.com ranking.

Jilin University is closely followed by Guangdong University of Technology, which owes 2.3 billion yuan, and Zhengzhou University, which has debts of 2.1 billion yuan.

A total of 1,164 universities around the country have heavy debts that together are worth around 263.5 billion yuan, according to Liu Liyun, a senior official from the National Audit Office, who was quoted on China National Radio.

Fast-rising interest rates have exacerbated the problem but the main reasons why the universities have been performing poorly financially are the fact that fewer students are enrolling and the decisions by many universities to undertake ambitious campus expansions.

More than 9.3 million students took the national college entrance examination this year, 240,000 fewer than last year. It was the third consecutive year that there has been a decrease.

"Many Chinese universities have spent too much money on acquiring more land and erecting more buildings and overambitious expansion projects have pushed them into debt," said Xiong Bingqi, deputy director of 21st Century Education Research Institute.

Lao Kaisheng, an education policy researcher from Beijing Normal University, suggested that universities should concentrate on improving the quality of their teaching instead of their size.

In some provinces, including Shaanxi and Guangdong, local governments have been paying some of the debts accrued by universities.

Shaanxi government is setting up a 1.65 billion yuan fund to help its universities get through their financial crises.

The central government has also strengthened its financial support for education. China's Medium- and Long-term Plan for Education Reform and Development (2010-2020) calls for spending on education to equal 4 percent of the nation's GDP each year, starting in 2012.

Experts said Chinese universities can expect the government to invest more in their development but they also cautioned that the institutions should cut back on excessive expansion plans if they hope to become profitable.