Debt warning for universities

(China Daily)
Updated: 2007-03-13 07:06

Chinese universities, which boast the largest number of students in the world, are on the brink of a financial crisis because of the rapid growth in enrollment since 1999, deputies to the National People's Congress (NPC) warned yesterday.

To cater to the many students who pursue higher education in the hope of improving their job prospects, universities have to borrow huge sums of money to keep afloat.

"I have heard that there is one university that owes banks 5 billion yuan ($641 million). This means it has to pay 300 million yuan ($38.46 million) in interest every year," said Hu Sishe, an NPC deputy.

"I don't know how many students they have to enroll if they want to repay the money using only tuition fees," he added.

Hu is also the president of the Xi'an Foreign Studies University, in Northwest China's Shaanxi Province.

Hu declined to name the debt-ridden university.

Other NPC deputies said universities in Shandong and Jiangsu provinces had amassed debts worth more than 10 billion yuan ($1.28 billion).

No figures are available on the combined debt of China's universities, though it has been reported that short-term loans account for more than 60 percent of universities' debts.

Universities in China have expanded rapidly since the government decided to enroll more university students in 1999. Five million new students are admitted each year, compared with less than 1 million a decade ago, according to the Ministry of Education.

The number of colleges and universities doubled during the period, from about 1,000 to nearly 2,000.

To cope with the influx of students, many universities turned to banks for huge loans to pay for the construction of dormitories, dining halls and classrooms, said Wang Bintai, an NPC deputy and director of the Jiangsu Provincial Education Department.

Universities had to cover 90 percent of the construction costs on their own, noted NPC deputy Wang Wu, who also serves as vice-president of the Southern Yangtze University.

Southern Yangtze University, which is based in East China's Jiangsu Province, has seen its enrolment grow from about 4,000 to 40,000 in just a few years.

Under the mounting financial burden, many universities are unable to focus on teaching and research, which poses a threat to their future development and even to the quality of the country's higher education as a whole, deputies at the NPC annual session said.

Hu Sishe expressed concern that some colleges and universities, especially understaffed schools in remote areas, risked going bankrupt, as has happened with debt-ridden state-owned enterprises.

"The government must take the issue seriously and work out measures to solve the problem as soon as possible," said the university president.

NPC deputy Zhou Hongxing, who is also a professor at Shandong University, called on the government to pay off the debts of heavily indebted universities.

"Colleges and universities in China have made great contributions to the overall improvement of education in the country, and they deserve financial support from government," said the professor.

Some local governments have taken action to deal with the crisis.

In Jiangsu, the provincial government recently allocated 3 billion-4 billion yuan ($385 - $513 million) to bail out indebted universities in the province.

China Daily-Xinhua

(China Daily 03/13/2007 page7)