China’s New NGO Law and its Impact on FDI into the Higher Education Industry

​China’s recently released law to regulate the activities of foreign non-governmental organizations (NGOs) has raised fresh doubts regarding foreign investment into China’s higher education industry. Set to come into effect in January next year, the law contains provisions that will further regulate education institutions with operations in the country and affect the entry strategy of new players looking to enter the market.

Powered by China’s economic development and a rapid increase in university student enrollment, there has been a sharp rise in interest from foreign education providers to invest in China since the turn of the century. The industry is potentially hugely profitable, with China’s increasingly affluent population willing to pay more in tuition fees to enroll at foreign education institutions, which are generally seen as more prestigious. However, Sino-foreign education institutions have long been subject to special scrutiny in China, resulting in 70 percent of Sino-foreign education applications being rejected in 2011. The new law is set to further complicate the industry for foreign education providers, raising questions of how best foreign investment can be channeled.

The Sino-foreign Education Industry

As of March 9, 2015, there were 60 Sino-foreign institutions and 1, 052 projects active in China’s higher education industry, with a total of 30 countries contributing to foreign education resources in the market. According to the Ministry of Education (MOE), the UK is the biggest source of foreign education investment, with 233 joint programs with Chinese universities, while the U.S. takes second place with 169 programs. Approximately 94.5 percent of foreign investors chose to form education projects in Chinese universities, within which computer science, accounting, and global economics are the three most popular undergraduate programs. Provinces with a high GDP per capita, such as Beijing, Shanghai, Zhejiang and Jiangsu province, rank highest for the number of Sino-foreign education programs.

Current Regulations on Foreign Investment

There are currently three ways to enter the Chinese higher education industry: an independent institution in cooperation with a Chinese university, a college affiliated to a Chinese university, or a joint education program. Upon establishment, both the foreign and Chinese parties must submit several different kinds of official documents, including identification, criminal records, and sources of funding.

According to the Regulations on Foreign-Chinese Cooperation in Running Schools, the president or principal administrator must be a Chinese national, who will decide and manage the board of trustees, implement financial budgets and acti

vities, and take charge of quality control. The MOE oversees any changes made by the joint institution, and any imported teaching materials must be scrutinized and receive government approval.

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