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1 of 19 Education Policy Analysis Archives Volume 8 Number 26June 5, 2000ISSN 1068-2341 A peer-reviewed scholarly electronic journal Editor: Gene V Glass, College of Education Arizona State University Copyright 2000, the EDUCATION POLICY ANALYSIS ARCHIVES. Permission is hereby granted to copy any article if EPAA is credited and copies are not sold. Articles appearing in EPAA are abstracted in the Current Index to Journals in Education by the ERIC Clearinghouse on Assessment and Evaluation and are permanently archived in Resources in Education From Manpower Supply to Economic Revival: Governance and Financing of Chinese Higher Educatio n Chengzhi Wang University of Illinois at Urbana-ChampaignAbstractWith an introduction to the overall underdevelopmen t of higher education in China compared with the American count erpart, this article briefly examines the main trends of over two decade s of development of the governance and financing systems of China's hig her education sector. This article analyzes the resource allocation from governments and revenue generation in institutions under the reform policies of administrative decentralization and financing diver sification. The new "Great Leap Forward" in higher education in 1999 an d beyond, i.e., the radical and, to a certain extent, desperate mass hi gher education policy and practice of expanding enrollments in order to s pur domestic consumption, is critically analyzed. By examining t he ongoing institutional merging and "co-building" and the mos t recent enrollment expansion, the writer points out the economic signi ficance for higher education of overcoming diseconomies of scale and i nefficiencies. However, the long-range outcomes of the seemingly e xciting investment in and consumption of mass higher education are dif ficult to predict.

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2 of 19IntroductionThe significant issues such as reform, privatizatio n, access, efficiency, equality, and equity are closely related to Chinese higher educat ion administration and financing systems that are experiencing radical changes and r estructuring 2 (Note 2) In this article, I try to make a brief macro analysis of the case of Chinese higher education in the reform era from 1978 until the present primarily from the perspectives of governance and financing. From meeting modernization manpower requ irements and producing technically qualified and politically correct human resources for about two decades, higher education in China now orients itself to sti mulating investment and consumption, primarily on the demand side, in order to help the state revive the slumping economy. First, I introduce Chinese higher education by comp aring it with the well-known practice (e.g., long history, large scale, and high-level de velopment) of American higher education. Second, I examine the main policy shifts of a more than two-decade development and general governance and financing op erations in higher education. Third, I analyze the resource allocations of govern ments and revenue generation of institutions under reform policies of administrativ e decentralization and financing diversification. Fourth, I critically introduce and analyze the recent appearance of radical policy and practice to expand enrollment. Through s timulating the nationwide family investment and consumption of higher education, the state decision-makers hope that the move of mass higher education will help reinvigorat e domestic consumption and help regain the state's sustained economic growth. In co nclusion, by reflecting on institutional merging and "co-building" and the most recent radic al enrollment expansion, I emphasize the economic ramifications of overcoming diseconomies of scale and inefficiencies of higher education for the developm ent of Chinese economy. Meanwhile, I point out the results of the ongoing radical poli cies and practices of mass higher education remain very difficult to predict.Overall UnderdevelopmentFor about two decades since the late 1970s, higher education in China has been experiencing tremendous changes and reforms. The re forms such as policy shifts toward decentralization of administration and diversificat ion of financing have resulted in a great development in a number of fronts in the high er education sector. The rapid expansion in enrollments, reported to have increase d to about 10 percent (Plafker, 1999) at the end of the century, was hailed as transition toward mass higher education (Hayhoe, 1993) 3 (Note 3) However, compared with the general pract ice in the American higher education system 4 (Note 4) the first impression of the Chinese high er education system appears, among others, small in sc ale, short in history, and immature in development. There were only 1,000 public regular colleges and u niversities in China, with a total enrollment of less than four million before 1999, w hich is the start of what I call the new "Great Leap Forward" in higher education when the e nrollment ratio reached 10 percent. According to most recent Chinese official statistic s, the number of these public institutions with an enrollment of 5,000 or more is less than one-seventh (CSSB, 1996, pp. 112-113). The average enrollment increased from 2,927 in 1996 to 3,112 in 1997 (CEY Editorial Board, 1998). Obviously, there exist diseconomies of scale in the higher

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3 of 19education sector. In terms of history, the first university (now Peki ng University) in the modern sense was established in 1898. After that, sociopolitical ins tability and turbulence in China in the first half of twentieth century largely precluded s erious development of higher education 5 (Note 5) After the founding of the People's Repub lic in 1949, the higher education sector, though it soon gained great devel opment under strong influence of the Soviet model, was nearly abolished during the most radical years of Cultural Revolution (1966-1976) (Cleverly, 1985; Lofstedt, 1980). After 1978, the American model of higher education was the one copied in China (Pepper, 1996 ). Still in a stage of immature development, the highe r education system in China is now more likely to be hyperpoliticized and ideologized even in the reform era. The typical examples are the nationwide compulsory three-monthto-one-year military education for students in colleges and universities in the years after the 1989 student movement and the alleged school-organized student demonstration after the NATO bombing of the Chinese Embassy in Belgrade in 1999. In addition, s till struggling to grow out of the political control and command plan, higher educatio n institutions are not well prepared for either the opportunities or the challenges of t he free market. Besides, most institutions do not have clearly defined missions, performance-based management, or financing mechanisms. Few institutions have long-ra nge institutional development goals. Internal and external inefficiencies and res ource waste are still prevalent. Furthermore, after the policy of tuition and fees w as applied in all public regular institution in 1996, effective and adequate financi al aids from governments are generally unavailable, nor is the perfect market available wh ere students and parents of poor families can obtain loans to invest in higher educa tion. It is very difficult for students from poor families to obtain equal higher education al opportunities. Compared with the fully developed American counterp art, higher education in China, to a certain extent, is still fumbling toward institut ional autonomy, academic independence, and professional development. Chinese higher educat ion institutions are making efforts to overcome inefficiencies, inequities, and underde velopment (World Bank, 1997) through, for example, obtaining World Bank loans an d following its recommendations. The new "Great Leap Forward" in the enrollment expa nsion in 1999 is the radical move that the policy decision-makers deem as a new way t o develop higher education and, more importantly, to help revive the nation's econo my (Note 6).Development TrendsIt is known that social and private benefits and mo netary and non-monetary returns help drive the development of higher education (McMahon, 1974; Leslie & Brinkman, 1994). In addition, politicization of education has a spec ial role in Chinese educational development, which is marked by hyper-politicizatio n, politicization, and de-politicization at different periods of time (Sau tman, 1991). Social and private benefits and monetary and non-monetary returns are also the driving forces for higher education development in China. In the reform of the 1980s, h owever, the state's manpower requirements for modernization and the pressure for international parity were among the immediate driving forces to expand, reform, and dev elop higher education. Since the new state development policies of reform and "opening to outside world" were

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4 of 19implemented in 1978, the Chinese government has pla ced top priority on education, in particular on higher education in order to produce urgently needed skills and talents for economic reform and national modernization. Two maj or measures were taken in the higher education sector to achieve these goals: enr ollment enlargement and institutional multiplication. The period between 1978 and 1985 witnessed a rapid growth in the number of enrollments and institutions (Table 1). Most of the growth in the number of institutions occurred between 1982 and 1985. The total number of institutions grew from 715 in 1982 to 1,016 in 1985 (Cheng, 1993, pp. 201-214). I n 1985, the central government promulgated the "Resolution on Education Reform," w hich became the Education Act in 1996, initiating sweeping reform in all education s ectors including higher education. In 1993, to speed up the reform and transformation fro m a planned economy to a market economy, the central government enacted new policy guidelines, namely "Guidelines of Chinese Educational Reform and Development." These new legislation and policies advocated decentralization of institutional adminis tration and management, and diversification of educational financing while the central and upper level governments maintained managerial oversight and policy regulati on (Lewin et al., 1994). Reforms in the higher education sector after 1985 f eatured a rapid increase in enrollments and with a growing effort to participat e in market economy, rationalize specializations, and restructure curriculum and ins truction, among others. But the total number of institutions did not increase significant ly. In addition, the higher education sector has since been evidencing Westernization and globalization. The American model of a higher education system is gradually replacing the Soviet model for Chinese colleges and universities (Pepper, 1996). Table 1 Development in Institutions and Enrollments, 1977-2 000YearInstitutions FTE Enrollments a (In millions) Annual Increase(In thousands) 2000<1,020>4.90>3311999<1,0204.50>=33119981,0203.415819971,0203.3516719961,0323.1811519951,0643.0512019941,0802.9329019931,0652.6436019921,0532.2815019911,0642.13-30

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5 of 191990 b 1,0752.16-20 19891,0752.18019881,0752.1810019871,0632.089019861,0541.9920019851,0161.7934019849021.4514019838051.3113019827151.18-12019817041.3013019806751.1713019796331.0417319785980.862421977 c 4040.63 Note. From Asian Times (1999); CEY Editorial Board (1997; 1998); Ministry of Education (MOE) Department of Development and Plann ing (1998); China State Statistic Bureau, Education Statistics Yearbook of China, 1992-1995; World Bank (1997); Zhao (1995).a FTE Enrollments in associate, bachelor and graduat e degree programs. Inconsistent statistics may be found in different official Chine se sources.b 1990 and 1991 enrollments shrank from previous yea rs probably because of the negative enrollment policy in response to the 1989 nationwide student movements.c The Higher Education Entrance Examination System, which was abolished for several years during the Cultural Revolution (1966-1976), w as reinstated in 1977. As reported in Table 1, public regular higher educa tion institutions increased to 1,080 in 1994. In 1995, the number of institutions decreased to 1,054. In 1996, 1997, and 1998, the numbers of regular public colleges and universi ties are 1,032, 1,020, and 1,020, respectively. According to Zhao (1995), the ongoing remarkable trend of institutional merging and amalgamation and establishment of cross institutional consortia has resulted in a decrease in the total number of insti tutions. The merging trend in Chinese higher education is in sharp contrast with difficul ties in institutional merging in the United States. In 1997, 162 colleges and universiti es merged into 74 institutions (CEY Editorial Board, 1998). Zhao (1998) explored instit utional merging and amalgamation as a remarkable aspect of restructuring Chinese higher education, but could not adequately explore this phenomenon. The merging and amalgamati on actually were accompanied and facilitated by policies that upgraded instituti on's rankings in the higher education hierarchy and increased their share of resources. I n addition, institutional merger and amalgamation were the only option other than closur e for institutions owned by several central ministry-level departments that were cut of f during Premier Zhu Rongji's bold governmental restructuring and downsizing in 1998. The merging is still going on, and I

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6 of 19believe it will further reduce the numbers of colle ges and universities. In 1999, the central government decided to increase enrollment by 44 percent over the previous year (Liaowang News Weekly 1999, p. 33), making the enrollment incidence as high as 10 percent for the first time in Chinese history. It was hoped that this radical enrollment expansion would satisfy the longstanding high demand for college education by families and students. More importantly, after m any other attempts to revive the national economy proved unsatisfactory, decision ma kers hoped that the expected large-scale consumption and investment in higher ed ucation by households would stimulate domestic economic development (Plafker, 1 999). Enrollments will continue to increase by 300,000 or more each year beyond 1999 a ccording to the education authorities (Asian Times 1999). Thus, the average unit cost in higher educ ation is expected to be lower with the production of a large r volume of graduates, services, and research. Economies of scale in Chinese higher educ ation sector are being sought.Governance and Financing SystemsHigher education institutions are vertically admini stered and financed by one of the three types of administrative authority: (a) The MOE (Min istry of Education, which was renamed the SEC, State Education Commission in 1985 and renamed MOE in 1998), (b) the non-education ministry-level departments in the central government, and (c) provinces and province-level municipalities. The in stitutions of MOE and the central ministry-level governments are funded with budgetar y allocations from the Ministry of Finance through MOE. Generally, the financial alloc ations are based simply on head-count enrollments, plus irregular, special-pur pose funding. The provincial institutions are funded by the department of financ e in each province and province-level municipality through MOE's provincial branches, plu s irregular "encouraging" funding from the central government.In 1995, there were 36 national "keypoint" universi ties funded through the SEC, with enrollments accounting for 11 percent of the total (Table 2). The average size was about 6,680 students. There were 331 ministry-funded inst itutions with enrollment taking 34 percent of the total. The average size was only abo ut 2,100 students. There were 687 provincial and municipal institutions with enrollme nts of 55 percent of the total. The average size was about 1,600 students. In 1997, the average enrollment size of the three types of higher education institution grew to 3,112 All of the colleges and universities (except for a few recent amalgamated ones such as t he Zhejiang University and the Sichuan Union University) are similar to very small U.S. colleges, according to American higher education enrollment numbers. But b ecause of their diseconomies of scale, excessive high unit costs, ineffective organ ization structures, mismanagement, high student subsidies, and limited revenue sources (Hartnett, 1993), Chinese colleges and universities lack the economic efficiency, acad emic vitality, professional development, affirmative action, and democratic par ticipation apparent in colleges and universities in the U.S.A.Table 2 Number and Enrollment in Regular Colleges and Unive rsities, 1995 (Enrollment in 1,000)

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7 of 19 # Institutions Undergrad.enrollm. Short-cycleenrollm. Total enrollm. Undergrad.enrollm. Totalenrollm. SEC/MOE 362234726915%11% Central Ministries 33162932895641%34% Provincialor municipalauthorities 687666907157344%55% Totals 1054151812822799100%100% Note. From China State Statistics Bureau (1996, pp. 112-123) and World Bank (1997), with the author's modification.Of the total enrollments in these public regular in stitutions, 52 percent were enrolled in degree-earning undergraduate studies, 44 percent in short-cycle (associate degree) programs, and 4 percent in postgraduate studies in 1995. These institutions employed 1.04 million staff, of whom 38 percent were faculty 44 percent were administrative and supportive staff, and 18 percent were employed in o rganizations and companies affiliated with the institutions. Of the total facu lty and staff, only 2 percent had a doctoral degree, 19 percent a master's degree, 49 p ercent a bachelor's degree, and 30 percent held shortcycled diplomas or equivalent e ducational attainment (World Bank, 1997, p. xiii). In 1997, the total enrollments in colleges and univ ersities reached 3.35 million. The higher education sector employed 1.0315 million sta ff, of whom 405,000 people, about 40 percent were faculty, all others were administra tive and supportive staff, and employees in organizations and companies affiliated with the institutions (CEY Editorial Board, 1998). The number of faculty is slowly incre asing while the number of administrative staff is decreasing. Despite the fac t that student numbers in both regular public and adult higher education institutions were included, the officially published student-faculty ratio increased from only 8.91:1 in 1995 to 9.81:1 in 1997 (CEY Editorial Board, 1997, 1998).It should be pointed out that some central ministri es, for instance the Ministry of Finance and the Ministry of Foreign Economic Relations and Trade, are more powerful and richly funded than other ministry-level departments Some provinces and municipalities, in particular those in the east and south coastal r egions, are much more economically developed than those in the hinterland. Consequentl y, there exist inequalities in allocation of financial resources among institution s from the three types of authority. In recent years, in order to mobilize resources to better manage and finance institutions and improve institutions' internal and external eff iciencies, MOE has encouraged gongjian ("co-building") colleges and universities in colla boration with provincial and municipal governments and/or industry. Collaboratio ns between MOE and other ministries, between MOE and provinces, between univ ersities and corporations, and among different institutions have been increasing g reatly in hopes of achieving better management and financing of colleges and universiti es. In 1997, 100 universities had

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8 of 19officially announced their "co-building" partners r anging from provincial governments, and central level ministries to corporations. In al l, 228 colleges and universities had signed official collaborative contracts with "coope rators" and "partners" including provincial governments, central ministry-level depa rtments, and other institutions. For instance, a total of 129 employers and organization s participated in the "cobuilding" of, or in cooperation with, the Inner Mongolian Univers ity in north China (CEY Editorial Board, 1998, pp. 155-180)Resources Allocation and GenerationChina has experienced sustained economic growth for about two decades in the reform era since 1978, with an impressive average growth r ate of about 9 percent per year in real terms. In recent years, economic growth has sl owed because of multiple reasons. Given domestic economic growth and the perceived in ternational parity, spending on education in China is a mixed picture. Great progre ss has been achieved but there is great room to improve.Because a market economy gradually replaced the rig id centralized planning, and localities and employers could retain much of their earnings without including them for taxes, the growth of government revenues fell far b ehind that of GDP, increasing at an annual average of only 2.6% (World Bank, 1997). How ever, government expenditures increased at 3.3% per year higher than revenue, res ulting in budget deficits almost every year. Public expenditure on education increased by an annual average of 10 percent between 1978 and 1994, far exceeding the growth rat es of the total government revenues and expenditures. Though overall public spending de creased over the years, public spending on education in proportion to total govern ment spending rose from 6.2 percent in 1978 to 17 percent in 1994 (World Bank, 1997), a nd stayed about 16 percent during 1995-1997. Yet, public spending as a percentage of GDP rose from 2.1 percent in 1978 up to 3.1 percent in 1989, fell to 2.2 percent in 1 994, and gradually fell to 2.47 percent in 1996, and then rose to 2.54 percent in 1997 (MOE De partment of Development and Planning, 1998). This level of spending is very low in comparison with the average of 2.8 percent of leastdeveloped countries, 4.1 perc ent of developing countries, and 5.3 percent of developed countries (UNESCO, 1995, pp. 2 28). Some researchers have criticized this low level of public spending from i nternational parity (Tsang, 1994). Spending on education as a percentage of GDP would probably be slightly larger if the community's support for education at village and to wnship levels were taken into account. It is very hard to calculate the nationwid e local and community contribution and investment in education in both physical and fi nancial resources. The public allocation to higher education grew by a n annual average of 9.7 percent between 1978 and 1994. Public spending on higher ed ucation rose from 20 percent of the total expenditure on education in 1978 up to 29 percent in 1984, then fell to about 17 percent between 1989 and 1992, and rose to 19 perce nt in 1994. The budgeted public allocation accounted for 95.9 percent in 1978, 86.9 percent in 1990 and 81.8 percent of the total revenues in the higher education sector i n 1992 (Table 3). Given a very low enrollment ratio in higher education, pubic spendin g in higher education was high in comparison with its Asian neighbor countries. Asian countries and regions including Japan, Korea, Malaysia, and Taiwan spend only 11 to 17 percent of total public education expenditures on higher education (World B ank, 1997). Unlike Japan, the United States, and many other countries, China has not sufficiently utilized private

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9 of 19 resources to support public higher education. Thoug h booming in 1990s, private higher education in China is still under strict government al control and scrutiny. The reasons for this practice stem from the government's politi cal and ideological considerations, the profit orientations and the low quality of educatio n in private colleges and universities. In 1990, public spending per student in higher educ ation was 193 percent of GDP per capita. Public spending per student in secondary ed ucation was 15 percent, and in primary education was five percent. In 1994, public spending in higher education was 175 percent, still considerably higher than the ave rage of 98 percent in East Asia (World Bank, 1997, pp. 41-42). In other countries in East Asia and the United States with mass higher education, the large sizes of enrollments an d efficient utilization of resources result in the economies of scale and reduced unit c osts. Table 3 Financing Sources: Public Allocation from Governmen ts and Revenue Generation in InstitutionsSources: 1978198819901992 1. Total Budgeted Allocation95.9%87.7%86.9%81.8% Recurrent Expenditure74.864.965.361.4 Capital Expenditure21.122.921.620.42. Total Institution-Generated Revenues4.112.313.11 8.2 Total of 2.1 and 2.24.110.511.413.6 2.1 Revenues from institution funded activi ties 10.310.712.8 From institution-affiliated enterpr ises 2.83.13.7 From commissioned training 2.11.92. 3 From education services 0.91.11.1 From commissioned research andconsulting 1.01.21.3 From other funded activities 2.73.0 3.7 2.2 Donations and Gifts 0.20.70.8 2.3 Student tuition and fees 1.82.94.6Total 100%100%100%100% Note. From Chen Liangkun (1994) in (World Bank, 199 7), p. 46, with the writer's modification. The published data for most recent ye ars are not available. Under the centralized command plan system before th e reform started, higher education institutions were exclusively financed through gove rnmental appropriation according to budgetary planning. The previous year's allocation was used as basis for the next year's allocation, with possible incremental adjustment ac cording to the situations of the institution and the whole sector. Unused funds, if any, had to be returned to governments by institutions at the end of the year. The central ized, tightly controlled budgetary system

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10 of 19did not provide incentives and initiatives for effi cient utilization of funds and institutional efficiency improvements. The higher education financing system has been rest ructured through educational reforms. The major financing restructures include t he following. First, along with decentralization in administration and management, decentralization in financing has been achieved. The central government delegated fin ancing responsibilities to provinces and central ministries to finance institutions. Sec ond, institutional autonomy and a simple formula-based approach (i.e., head-count of enrollment) were introduced in funding institutions. The institutions are given au tonomy in spending money, and the governance authorities exercise the supervisory fun ctions to hold institutions accountable in addition to overseeing their politic al correctness. The institutions are not required to return the unused funds at the end of t he budgetary year. Third, financing is diversified in order to mobilize resources. The ins titutions are encouraged to generate and mobilize resources in any possible way.As for diversification in financing, generally the following principal sources of financial resources have been tapped and expanded: (a) Instit ution-affiliated economies such as enterprises and companies, which accounted for 3.7 percent or more of total higher education revenue in 1992 and beyond. It is the lar gest share of the generated revenues (Table 3). (b) Commissioned training for companies, which accounted for 2.3 percent of total higher education revenue in 1992. (c) Researc h and consulting services, which accounted for 1.3 percent of total revenue in 1992. (d) Donations and gifts, which accounted for only 0.8 percent of total revenue in 1992 compared with zero in 1978. (e) Tuition and fees, which account for an increasingly large portion of revenues since 1996, though published official statistics are unavailabl e. Again, there exist different types of inequalities. Inequalities exist between institutions in cosmopolitan areas and small cities, between mar ket-oriented and traditional departments, between liberal arts institutions and institutions of engineering and business, and between key institutions of large alu mni and new local institutions with little bases for attracting donations and gifts. In addition, the enthusiastic pursuit of revenues in many institutions has resulted in the p henomenon of "running schools, running business," and negatively affected learning teaching, and research (Kwong, 1997). Special mention should be made of tuition and fees. Before 1978, college students paid no fees and were assigned jobs upon graduation. The 1985 education reform allowed institutions to admit students outside state plan b ut sponsored by enterprises or self-financed. Institutions have charged a low leve l of fees to students under the state plan since 1989. In 1992, students in the state pla n were charged an annual tuition fee of 300-600 RMB, or $36-72 USD, and room and board of 1 00-200 RMB, or $12-24 USD. There are regional and sub-sector disparities in fe e levels. In 1994, the distinction in fee level among students under the state plan, enterpri se-financed students and self-financed students was abolished. In 1995, the tuition fees f or students in most institutions were about 1,300 RMB, or $157 USD per student per academ ic year. Some institutions could charge more but were ordered not to exceed 2,700 RM B, or $324 USD (World Bank, 1997). Students in teachers' institutions were exem pted from tuition fees because of the chronic shortage of teachers. In 1996, the MOE requ ired all public regular institutions to charge tuition and fees. The MOE fixed the price of tuition in regular programs at 1,200

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11 of 19RMB, or $145 USD per student per academic year, wit h 10 percent adjustment by local higher education authorities based on local economi c conditions (CEY Editorial Board, 1998). According to visiting professors from five C hinese universities at the University of Illinois at UrbanaChampaign that I have interv iewed, tuition at their universities was in the range of 2,700-3,100 RMB per student in 1999 -2000 academic year, far exceeding the MOE regulated prices. Tuition and fees were the very important components of private participation in investment in higher education. However, sufficient and diverse financial aid, in particular the financial mechanisms to adequately t ake care of students from poor families, were not available. The poor would be den ied higher education opportunities because of their inability to pay the growing tuiti on and fees. Because of the imperfect market, it is very difficult for the poor to borrow money to invest in higher education. A new student loan program was launched by the MOE, the Ministry of Finance, and the People's Bank of China with the endorsement of the State Council (Guangming Daily 1999a). It was reported that in September 1999, the Commercial Bank of China would provide loans to college students with the subsidy of five percent interest from the government. My interviews with visiting professors from the five universities revealed that this program had not been implemented at their universities in early spring 2000. They responded that a few banks under the encourage ment of local governments did try to make loans to students from poor families, but i n very small amounts, usually several hundreds of RMB. What was worse, banks required bor rowers to pay the loans before their graduation for fear that lenders could not re ach borrowers after their graduation.New "Great Leap Forward" in Higher EducationAccording to the Chronicle of Higher Education in July 1999, MOE officials and the State Development Planning Commission announced tha t China's public regular colleges and universities would be allowed to enrol l a total of 1.53 million new students, or 331,000 more than originally planned. The move s tarted in 1999 was another attempt by the Chinese government to find new ways to reviv e the slumping economy. As pointed out, the perceived economic significance of family consumption and investment in higher education by the central authorities woul d help facilitate the pursuit of economies of scale in the higher education sector. But policy-makers' expectations to help reboot economic growth are the direct driving force for higher education to radically expand enrollments. Calculating that the typical Chinese student spends some 10,000 RMB, or about $1,200 USD each year on tuition, housing, and expenses, it was expected the move would generate a wave of domestic consumption worth an es timated $400 million USD to the Chinese economy (Plafker, 1999). In 1999, 450,000 m ore university freshman students than the previous year were admitted than originall y planned. This constitutes a 44 percent increase over the new enrollment in 1998 (L iaowang News Weekly 1999, p.33). In addition, recruitment to adult higher education institutions increased by 100,000 above the previous year. Some regarded the new enro llments in the whole higher education sector as the largest increment since 194 9 (China Youth Daily, 1999). The proportion of high school graduates going on to pos tsecondary education grew from 1.4 per cent in 1978 to 9 per cent in 1997. The fig ure in 1999 was about 10 per cent, which the government hoped to gradually increase to 15 per cent by 2010 (Plafker,

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12 of 191999). The China Education Daily (1999b) reported: "Enrollment in higher education will further increase next year, MOE has announced that higher education institutions will recruit 3 million freshmen in the year of 2000, an increase of nearly 10 percent over the 2.8 million admitted in 1999." The numbers of new e nrollments in 1999, including the new enrollments of regular public, adult and privat e higher education institutions, are probably larger than previously thought. Many citie s and provinces made their own enrollment expansion plans. For instance, Shanghai has planned to enlarge access to higher education and to raise the gross enrollment to 40 percent of the age cohort (China Education Daily 1999a), an unprecedented higher education enrollm ent ratio in Chinese history.In my interviews, visiting professors from Chinese universities expressed unanimously that their universities enrolled more students than expected. Presidents of colleges and universities, professors, as well as students and p arents, were excited about the news of enrollment expansion. But as higher enrollment quot as were assigned to each institution, presidents and professors knew there would be diffi culties in absorbing the unexpected increase. One professor from a university in north China said that, to his knowledge, in the provincial enrollment meeting with the governor and education officials in late summer 1999, presidents had to agree to enroll the given quota before the conference could be dismissed.An MOE official explained that the effect of the in crease on the economy is three-fold. First, the enrollment of more students in universit ies creates a demand for more buildings and equipment, which, in turn, will stimu late the development of some relevant sectors of the economy, such as constructi on and service industries. Second, there is a shift of over 300,000 high school studen ts to tertiary education institutions each year (in the expansion). This will relieve pre ssure on the employment sector (by over 300,000 positions) at least for the next three or four years. Third, household money savings will flow out of the banks as more universi ty students pay their tuition fees (Asian Times 1999). Obviously, the expanding enrollments is int ended to immediately stimulate consumption and reinvigorate domestic dem and. Many questions arise about the radical enrollment e xpansion. First and foremost, is there any significant empirical evidence to support the h ypothesis that radical enrollment expansion will stimulate economic growth? After car eful studies by Professor Wei Xin (1999) and his research group at Peking University, conservative answers were provided. On the side of supply of higher education, regular higher education institutions do not have the potential for expansion to the degree that policy-makers assumed. Nevertheless, it is almost impossible for the private institution s to expand enrollment under the current strict control of state regulations and rules. On t he side of demand, the ability of the general public to pay tuition and fees is questiona ble. The total number of household bank savings in China with a population of about 1. 2 billion reached 5,300 billion RMB, or about $640 billion USD at the end of 1998. Howev er, the money was not equally distributed among households. The richest 20 percen t of the households owned over half of the total household income. The Gini coefficient in China increased from 0.288 in 1995 to 0.388 in 1998, and over 0.400 in 1999. What is more important, it is difficult to expand the capital infrastructure of colleges and u niversities. If one million more students are admitted each year and if the MOE inst itution infrastructure standards are

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13 of 19followed, a total of 100-300 billion RMB will be ne eded to invest in infrastructure construction within the four-year cycle. Currently, it is almost impossible for the governments to make such a huge investment. If this financial burden is transmitted to students and families through rising tuition and fe es, higher education then becomes even more unaffordable for the low-income majority.Second, what about the quality of education after c olleges and universities expand their enrollments, some even beyond their capacities? The visiting professors from China that I interviewed expressed their concerns by comparing their own tutoring experiences and the educational achievements of their students befo re and after the enrollment expansion. Education authorities also worry about t he deteriorating quality of education. According to China Education Daily (1999c), the Department of Higher Education of the MOE has issued a directive to require colleges and universities to ensure the quality of teaching and learning after the expansion of enr ollments in 1999. To improve teaching and learning is a challenge for all instit utions. For instance, specialized colleges normally offer 2-3 year certificate courses. But wi th the expansion of higher education in 1999, many 2-3-year colleges that are allowed to of fer certificate courses are also providing bachelors degree courses. Guangming Daily (1999b) warned that this trend would threaten the quality of education.Third, what about employment after four years of ed ucation? The National Coordination Workshop for Employment of University Graduates 199 9 stated that the employment situation was not satisfactory in some ways because of the aftermath of the Asian financial crises and downsizing of governments and state-owned enterprises. MOE urged the relevant government agencies to offer opp ortunities to new graduates and it also asked universities to encourage students to en ter non-government organizations and selfemployment enterprises (Southern Daily May 23, 1999). After three or four years, when the graduates are ready for employment, can th e unemployment pressure be relieved? Can the economy recover and labor markets be reinvigorated to take in the large number of college graduates? Without other ca utious and compatible prevention measures, it is possible for Chinese university gra duates to repeat the unemployment or underemployment experienced of higher education gra duates in some developing countries such as Sri Lanka and India.ConclusionLarge numbers of small institutions are one charact eristic of the Chinese higher education system for over two decades. In addition, Chinese higher education has relatively low internal and external efficiencies. The low efficiencies are typically represented by the under-utilization of personnel a nd physical resources, and over-specialization and rigidity in instructional p rograms. Rationalization of specializations and units within the institution, j oint production of neighboring institutions, institutional merger or consolidation and increasing the size of institutions are the four ways for Chinese higher education to h elp overcome diseconomies of scale (Tsang & Min, 1993). Fortunately, recent trends and practices evidence t he following: curb the institutional multiplication, encourage merger and amalgamation a nd "co-building," increase enrollments without growth of institution numbers, rationalize institutional programs and management, and other types of reform measures. These trends and practices are

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14 of 19aimed at achieving economies of scale and efficienc ies of higher education. The new "Great Leap Forward" in higher education ex pansion in 1999 and beyond, on the demand side, satisfies families' strong desire for higher education for their children, and, indeed, stimulates household consumption of an d investment in higher education in the short run. Yet, such a radical move also brings questions and concerns about its impact on student achievement and the quality of ed ucation, on graduates' employment, and on economic growth in the long run. Chinese pol itical and educational authorities should look to both international experiences and d omestic educational and socioeconomic realities in implementing the new "Gr eat Leap Forward" policies, before it is too late.NotesI wish to acknowledge helpful comments from Profess or King Alexander of the Department of Educational Organization and Leadersh ip at the University of Illinois at UrbanaChampaign, who carefully read t he first draft. I wish to thank the EPAA Editor and anonymous referees for their he lpful advice and comments. In this article, I concentrate my discussion and an alysis on mainstream higher education in China, i.e., regular public higher edu cation. Adult higher education and private higher education are two other types of higher education. The former is part-time, aimed at upgrading educational attain ment of workers, teachers, and other groups in the workforce who wish to seek high er education without interrupting their employment. The latter appeared after the education reform that was officially initiated in 1985. Though many appla uded the appearance and quick expansion of private education, only 20 private col leges and universities had been accredited by the central educational authorities a s of 1997 (Zhang, 1997). In 2000, there are only 37 non-governmental private co lleges and universities that are authorized to issue associate degrees (China Youth Daily 2000). The development of private higher education cannot main tain its momentum. The major reason, perhaps, is the lack of governmental subsidies, which leads to institutional autonomy and independence but, meanwh ile, hinders the communication and cooperation between the policy de cision-makers and the private institutions. Furthermore, the lack of gove rnmental subsidies leads the private institutions to seek quick investment retur ns at the expense of satisfactory and healthy institutional growth. 1. For these issues, see, for example, K. Lewin, A. Li ttle, H. Xu, and J. Zheng (1994), J. Henze (1984), pp.93pp153, M. Tsang & W Min (1992), and World Bank (1991; 1996; 1997). 2. Hayhoe (1993) predicted that the higher education e nrollment rate in China would reach 10 percent at the end of the century. From wh at was reported by Plafker (1999), Hayhoe was correct in her prediction. Plafk er reported that the total number of higher education institutions was 1,032 i n 1999. Actually, that was the number of institutions in 1996. In 1999, the number must have been smaller because of increasing institutional mergers. 3. For the American higher education system and financ ing policy shifts, see, for example, M. Mumpher (1996) and P. M. Callan, and Fi nney, J. E. (1997). 4. It should be noted that mission colleges and univer sities, of which many were established by American missionaries, experienced m ost impressive progress and development between 1910-1937 (Deng, 1997, pp. 67-9 0). These mission 5.

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15 of 19institutions meanwhile also stimulated, directly or indirectly, the development of Chinese national colleges and universities before 1 949. For the "Great Leap Forward" in education, the hype rpoliticized, frenetic, radical, and unrealistic education expansion movement in 195 8, see, for example, J. Kwong (1979). 6.ReferencesAsian Times (1999). August 2-8, 1999. Callan, P. M. & Finney, J. E. (Eds., 1997). Public and private financing of higher education: Shaping public policy for the future Phoenix, AZ: Oryx Press. CEY Editorial Board (1998). China education yearbook 1998 Beijing: People's Education Press.Cheng, K. M. (1993). Zhongguo dalu jiaoyu Shikuang (The Educational Realities in Mainland China). Taibei: Taiwan Commercial Press.China Education Daily (1999a). September 7. China Education Daily (1999b). September 24 China Education Daily (1999c). December 10. China Youth Daily (1999). June 25. China Youth Daily (2000). March 8. Cleverley, J. (1985). The schooling of China Winchester, MA: George Allen & Unwin. CSSB (China State Statistic Bureau), Education stat istics yearbook of China, 1992-1995 Beijing: China Statistics Press. CSSB (China State Statistics Bureau, 1996). The abs tracts of China statistics yearbook 1996 Beijing: China Statistics Press. Deng, P. (1997). Private education in modern China Westport, CT: Praeger. Guangming Daily (1999a). June 29. Guangming Daily (1999b). October 21. Hayhoe, R. (1993). An Asian multiversity? Comparati ve reflections on the transition to mass higher education, Comparative Education Review, 39 (3), 17-32. Hartnett, R. A. (1993). Higher education funding in open door China, in P. Altbach & D. B. Johnstone (Eds.), The Funding of Higher Education: International Pers pective (127-149). New York: Garland.Henze, J. (1984). Higher education: The tension bet ween quality and equality, in R. Hayhoe (Ed.), Contemporary Chinese education Kent, England: Croom Helm.

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16 of 19Kwong, J. (1979), The educational experiment of the Great Leap Forward, 1958-1959: Its inherent contradictions. Comparative Education Review (23, October), 443455. Kwong, J. (1997), The New Educational Mandate in Ch ina: Running Schools Running Business, International Journal of Educational Development, 1 6 (2), 185-194. Leslie, L. L. & Brinkman, P. T. (1994). The Economic value of higher education Phoenix, AZ: Oryx Press.Lewin, K., et al. (1994). Educational innovation in China: Tracing the impact of the 1985 education reform Harlow, UK: Longman. Liaowang News Weekly (1999), August 16. Lofstedt, J. (1980). Chinese educational policy: Changes and contradicti ons 1949-1979 Stockholm: Almqvist & Wiksell International.McMahon, W. W. (1974). Investment in Higher Education Lexington, MA: Lexington Books.MOE Department of Development and Planning, Educational Statistical Yearbook of China 1997, 1998. Beijing: People's Education Press. Mumpher, M. (1996). Removing College Price Barriers: What Government Ha s Done and Why It Hasn't Worked Albany, NY: SUNY Press. Plafker, T. (1999). China Increases University Enro llments, Hoping Student Spending Will Revive Economy, The Chronicle of Higher Education September 3, 1999. Sautman, B. (1991). Politicization, hyperpoliticiza tion, and depoliticization of Chinese education, Comparative Education Review November 1991, 669-689. Pepper, S. (1996). Radicalism and education reform in 20 th century China Cambridge: Cambridge University Press.Plafker, T. (1999). China increases university enro llments, hoping student spending will revive economy, The Chronicle of Higher Education September 3. Southern Daily (1999). May 23.Tsang, M. (1994). Costs of education in China: Issu es of resource mobilization, equality, equity, and efficiency, Education Economics, 2 (3), 287-312. Tsang, M. C. & Min, W. (1993). Expansion, efficienc y, and economies of scale of higher education in China. Higher Education Policy, 5 (2), 61-66. UNESCO (1995). Statistical Yearbook Wei, Xin (1999). On contributions of scale expansion of higher educa tion to short-run economic growth Available at: http://www.hedu.pku.edu.cn/kuozhao/kzhkt.htm

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17 of 19 World Bank (1991). China: Provincial education planning and finance st udy Washington D. C.: the Writer.World Bank (1996). China: Management and finance of higher education Washington D. C.: the Writer.World Bank (1997). China higher education reform Washington D. C.: the Writer. Zhang, D. C. (1997). A brief introduction to China Minban higher educati on institutions Beijing: China Agricultural Science and Technolog y Press. Zhao, F. (1998). A remarkable move of restructuring : Chinese higher education. Education Policy Analysis Archives, 6 (5). Available at: http://epaa.asu.edu/epaa/v6n5.html.About the AuthorChengzhi Wang 218 Coble Hall801 South Wright StreetChampaign, IL 61820 Email: cwang2@uiuc.edu Chengzhi Wang is a Ph.D. candidate in Comparative E ducation and Social Sciences in the Department of Educational Policy Studies and a research assistant with the Graduate College at the University of Illinois at Urbana-Cha mpaign.Copyright 2000 by the Education Policy Analysis ArchivesThe World Wide Web address for the Education Policy Analysis Archives is epaa.asu.edu General questions about appropriateness of topics o r particular articles may be addressed to the Editor, Gene V Glass, glass@asu.edu or reach him at College of Education, Arizona State University, Tempe, AZ 8 5287-0211. (602-965-9644). The Commentary Editor is Casey D. C obb: casey.cobb@unh.edu .EPAA Editorial Board Michael W. Apple University of Wisconsin Greg Camilli Rutgers University John Covaleskie Northern Michigan University Alan Davis University of Colorado, Denver Sherman Dorn University of South Florida Mark E. Fetler California Commission on Teacher Credentialing Richard Garlikov hmwkhelp@scott.net Thomas F. Green Syracuse University

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18 of 19 Alison I. Griffith York University Arlen Gullickson Western Michigan University Ernest R. House University of Colorado Aimee Howley Ohio University Craig B. Howley Appalachia Educational Laboratory William Hunter University of Calgary Daniel Kalls Ume University Benjamin Levin University of Manitoba Thomas Mauhs-Pugh Green Mountain College Dewayne Matthews Western Interstate Commission for HigherEducation William McInerney Purdue University Mary McKeown-Moak MGT of America (Austin, TX) Les McLean University of Toronto Susan Bobbitt Nolen University of Washington Anne L. Pemberton apembert@pen.k12.va.us Hugh G. Petrie SUNY Buffalo Richard C. Richardson New York University Anthony G. Rud Jr. Purdue University Dennis Sayers Ann Leavenworth Centerfor Accelerated Learning Jay D. Scribner University of Texas at Austin Michael Scriven scriven@aol.com Robert E. Stake University of Illinois—UC Robert Stonehill U.S. Department of Education David D. Williams Brigham Young UniversityEPAA Spanish Language Editorial BoardAssociate Editor for Spanish Language Roberto Rodrguez Gmez Universidad Nacional Autnoma de Mxico roberto@servidor.unam.mx Adrin Acosta (Mxico) Universidad de Guadalajaraadrianacosta@compuserve.com J. Flix Angulo Rasco (Spain) Universidad de Cdizfelix.angulo@uca.es Teresa Bracho (Mxico) Centro de Investigacin y DocenciaEconmica-CIDEbracho dis1.cide.mx Alejandro Canales (Mxico) Universidad Nacional Autnoma deMxicocanalesa@servidor.unam.mx Ursula Casanova (U.S.A.) Arizona State Universitycasanova@asu.edu Jos Contreras Domingo Universitat de Barcelona Jose.Contreras@doe.d5.ub.es

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19 of 19 Erwin Epstein (U.S.A.) Loyola University of ChicagoEepstein@luc.edu Josu Gonzlez (U.S.A.) Arizona State Universityjosue@asu.edu Rollin Kent (Mxico)Departamento de InvestigacinEducativa-DIE/CINVESTAVrkent@gemtel.com.mx kentr@data.net.mx Mara Beatriz Luce (Brazil)Universidad Federal de Rio Grande do Sul-UFRGSlucemb@orion.ufrgs.brJavier Mendoza Rojas (Mxico)Universidad Nacional Autnoma deMxicojaviermr@servidor.unam.mxMarcela Mollis (Argentina)Universidad de Buenos Airesmmollis@filo.uba.ar Humberto Muoz Garca (Mxico) Universidad Nacional Autnoma deMxicohumberto@servidor.unam.mxAngel Ignacio Prez Gmez (Spain)Universidad de Mlagaaiperez@uma.es Daniel Schugurensky (Argentina-Canad)OISE/UT, Canadadschugurensky@oise.utoronto.ca Simon Schwartzman (Brazil)Fundao Instituto Brasileiro e Geografiae Estatstica simon@openlink.com.br Jurjo Torres Santom (Spain)Universidad de A Coruajurjo@udc.es Carlos Alberto Torres (U.S.A.)University of California, Los Angelestorres@gseisucla.edu


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