Research on Investment Scale and Allocation Structure of Chinese Higher Education Finance

Yongmei Hu, Yipeng Tang

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000533644
• Edition: 1
• Topic: Éducation
• Subtopic: Recherche dans l'éducation

Based on a systematic literature review, the book aims to forecast the investment scale of Chinese higher education and the allocation structure of different types of higher education institutions in the next decade.

The authors first introduce the complex setting of Chinese higher education finance, including the background and theoretical foundation, as well as an in-depth literature review. Via international comparative data, they explore the adequacy and equity of the financial resources. By applying quantitative methods, such as panel data analysis and time series analysis, they forecast the public investment scale in higher education and the allocation structure and proportion among different types of higher education institutions. In addition, the book investigates the standards of teaching funding and teacher research funding, which are considered the main funding resources of Chinese universities and individual teachers.

As China has become the world's largest country of higher education, "how to provide adequate and equal funds to meet the increasing demand" is of great interest to scholars and policymakers both from China and abroad. The book will also appeal to postgraduate students who would like to know the overall status of Chinese higher education finance.

1 Introduction

DOI: 10.4324/9781003250524-1

1.1 Research background

The “Outline of China’s Education Reform and Development” issued in July 1993 clearly pointed out that by the end of the 20th century, China’s fiscal education expenditures will account for the important goal of 4% of the gross domestic product (GDP). This index was set by the domestic academic circles with reference to the level of government investment in education in major developed countries. But it was not until 20 years later that the proportion of national fiscal expenditure on education in GDP exceeded 4% for the first time. However, the tardy 4% puts the formulation of China’s public education fiscal policy into a new dilemma. Some domestic scholars begin to focus on the topic of “post-4% era” to discuss the trend of China’s public education fiscal expenditure in the future, as well as the establishment of a long-term guarantee mechanism for education investment (Bao, 2012; Zeng & Long, 2013; Zhang & Lan, 2014; Hu & Tang, 2014). The scale and allocation structure of financial investment in higher education is a very important research topic.

Through reading the existing relative research papers, we find that there are three main problems in the financial investment system of higher education in China: First, the allocation of investment in different “identity” universities is unbalanced, and the operating cost of local colleges and universities is far higher than the standard of financial allocation per student. Second, the internal funding structure of colleges and universities has not reached the optimization state, and the lack of quota of teachers’ average in the financial allocation based on the average student comprehensive quota leads to the lack of stable sources for basic scientific research activities of teachers. Third, the university should make beneficial practical exploration and personnel training system reform in accordance with the changes of the demand specification of talents in accordance with the economic and social development under the “new normal” in economic development, which needs the support and guarantee of the government financial funds.

1.1.1 Imbalance of investment allocation in colleges and universities with different “identities”

The “211 Project” and “985 Project” debate in the media around 2015 reflects the imbalance of government investment in different “identity” universities in the era of popular higher education. On August 18, 2015, the meeting of the central leading group for comprehensively deepening reform deliberated and approved the “Overall Plan for Promoting the Construction of World-Class Universities and First-Class Disciplines”, including the 211 Project, 985 Project, and “Innovation Platform for Advantageous Disciplines” into the construction of world-class universities and first-class disciplines. In January 2017, the Ministry of Education, the Ministry of Finance, and the National Development and Reform Commission issued “The Implementation Measures for Promoting the Construction of World-Class Universities and First-Class Disciplines as a Whole (Provisional)”. On September 21, 2017, the Ministry of Education, the Ministry of Finance, and the National Development and Reform Commission jointly issued the notice on publishing the university lists of world-class universities construction (hereafter WCUC) and world-class discipline construction (hereafter WCDC), officially announcing the list of 140 “double first-class” construction universities, including 42 WCUC universities and 95 WCDC universities. In October 2018, the Riseqi Think Tank published statistics on the annual budget of 42 WCUC universities from 2016 to 2018. More than 60% of the double first-class universities had a budget of more than 5 billion yuan, and Tsinghua University ranked first. The budget of Tsinghua University in 2018 was close to 27 billion yuan. The budget of most colleges and universities increased significantly, especially for Tongji University, Lanzhou University, Ocean University of China, and Yunnan University in 2018 showed a larger increase than the previous year, and the total budget for Tongji University and Yunnan University even doubled, which is related to the local government’s support for the double first-class policy (Wang, 2018).

Not only is there a huge difference between the central and local finance in the financial allocation of double first-class and non–double first-class universities, but also the gap between the central and local universities has been widening for a long time. Through sorting the data of higher education funds from 1998 to 2015, Xu (2018) found that compared with the central universities, local universities are seriously insufficient in average funding and average student funding. In 1998, there were 263 central universities and 759 local universities. The average funding of central universities was 4.28 times that of local universities. By 2015, there were only 111 central colleges and universities, while the number of local colleges and universities had increased to 2734. However, the average funding of central colleges and universities had expanded to 10.52 times that of local colleges and universities. From the perspective of average student funding, before 2011, the gap between central universities and local universities had been expanding, from 1.75 times to 2.5 times. The data of 2015 shows that the average student funding of central universities is 51,600 yuan, while that of local universities is only 24,500 yuan, and the gap is still very obvious.

Under the situation that the average funding level of local colleges and universities is at a low level, the budget expenditure of local colleges and universities is constantly improving, and the financial allocation is far lower than the actual operating cost of colleges and universities, which has become an obstacle for ordinary colleges and universities to improve the quality of higher education.¹ In fact, some researchers have noticed the operating cost of local colleges and universities and pointed out that the operating cost of local colleges and universities far exceeds the average student funding level from the finance. For example, Fan’s (2015) analysis shows that the income and expenditure of education funds in local colleges and universities are becoming increasingly unbalanced, and many colleges and universities even try to seek loans from banks to alleviate the problem of funds shortage. Li (2016) pointed out that the original limited financial support cannot be fully realized. About 27.38% of local universities said that the government funding is difficult to fully meet, which further improves the difficulty of raising education funds. On the other hand, based on the principle of educational equity, colleges and universities also need to ensure that poverty does not keep students from low-income families out of school. The communique of the 2009 World Conference on Higher Education put forward that

while expanding the enrollment opportunities of higher education, higher education must pursue the three goals of fairness, appropriateness and quality at the same time. Equity is not just a simple issue of access — it also means that to ensure the smooth participation and completion of the goals of their studies, while ensuring the treatment of students, it is necessary to provide appropriate financial assistance to poor and marginalized groups.

(Xiong, 2009)

According to the research of Jin and Lou (2019), the average tuition fees of Zhejiang University in 2017 reached 27.8% of the disposable income of rural residents and 18.32% of the disposable income of urban residents. It can be seen that the tuition fees of local colleges and universities still exceed the affordability of some rural families. In addition, the study also points out that the tuition fee of public colleges and universities in Zhejiang Province has only increased by 15.4% in the past ten years, which is very limited compared with the increase of average student expenditure (102.7%). However, we still need to pay attention to the design of a tuition fee reduction system for rural and urban low-income students while maintaining a reasonable increase in tuition fees. Therefore, in the process of improving the financial system of higher education, we need to pay attention to improving the tuition standard setting and student financial assistance system.

1.1.2 The internal funding structure of colleges and universities has not been optimized

At present, the investment allocation of finance at all levels to different “status” universities is not balanced, and the financial funds obtained by central universities and local universities are quite different.² There is also a big gap in the average financial allocation of colleges and universities students in different provinces. Moreover, the internal funding structure of colleges and universities has not been optimized, and the financial allocation based on the average student comprehensive quota lacks the quota per teacher, which leads to the lack of a stable source of teachers’ basic scientific research activities.

Yingsheng Zhao, director of the Department of Comprehensive Reform of the Ministry of Education, pointed out at the first National Symposium on University Development, Fund Raising and Investment that “in recent years, the central government has increased the investment in per student funds, and the scientific research funds have also increased by a large margin. It seems that our universities are not short of money, but it seems that the fund structure hasn’t been optimized” (Li, 2014). This kind of unreasonable structure not only exists in the large difference between the aforementioned universities under the administration of China’s Ministry of Education (MOE) and local universities in the proportion of financial allocation but also in the universities directly under the Ministry of Education based only on the average student comprehensive quota (the average student comprehensive quota does not cover teachers’ scientific research expenses, only teachers’ wages and welfare expenses). Lacking the average teacher quota, as a result, there is no stable source for teachers to carry out basic scientific research activities. At present, among the six categories of “project expenditure budget” implemented by the universities directly under the Ministry of Education, the “basic research business expenses of Central Universities and special funds for top innovative talents in basic disciplines” in the “other categories” are also competitive funds in the internal allocation of universities, rather than noncompetitive funds to guarantee all teachers to engage in basic scientific research activities.³

1.1.3 Under the “new normal” of China’s economic development, the support of financial funds for talent cultivation in colleges and universities is insufficient

As China moves toward becoming a high-income country, its economic development depends on industrial upgrading, technological progress, and talent dividends. This puts forward higher requirements for higher education. Colleges and universities have a long way to go in the work of high-quality talent cultivation and scientific and technological innovation. In 2010, the “Excellent Engineer Education and Cultivation Plan” was implemented. In August 2012, the Ministry of Education promulgated the “Basic Requirements for Entrepreneurship Education for Ordinary Undergraduate Students (Trial)”, comprehensively promoting the scientific, institutionalized and standardized construction of entrepreneurship education in colleges and universities. In November 2013, the Ministry of Education, together with the Ministry of Human Resources and Social Security, formulated and promulgated the “Opinions on Further Promoting the Reform of the Cultivation Mode of Professional Degree Postgraduates”. The “opinions” proposed to establish a cultivation mode of professional degree postgraduates with Chinese characteristics, which is suitable for economic and social development. The basic principles include guided by professional needs, focusing on the training of practical ability, and taking the combination of production and learning as the way. The “5 + 3” mode of the comprehensive reform of clinical medical education in China, jointly implemented by Fudan University, Shanghai Jiaotong University, Tongji University, Shanghai University of Traditional Chinese Medicine, and the Second Military Medical University, and the “three-three system” undergraduate talent cultivation system reform of Nanjing University are beneficial practical explorations made by colleges and universities to adapt to the changes in the talent demand specifications of economic and social development. In recent years, the construction of “New Engineering” has become an important starting point of engineering talent cultivation. Under the guidance of the Ministry of Education, it has successively carried out many discussions and formed the “Fudan Consensus”, “Tianda Action”, and “Beijing Guide”, aiming at speeding the construction of New Engineering. In 2017, the Ministry of Education issued the notice on carrying out New Engineering research and practice, and in 2018 issued the notice on publishing the first batch of New Engineering research and practice projects, which identified the first batch of 202 comprehensive reform projects and 410 professional reform projects. By the end of 2019, nine engineering universities (Harbin Institute of Technology, Tianjin University, Southeast University, Tongji University, Beijing Institute of Technology, Chongqing University, Dalian University of Technology, South China University of Technology, and Northwest Polytechnical University) jointly issued the “New Engineering Education Quality Declaration of Excellent Universities Alliance”, forming the excellent universities alliance, to explore the New Engineering talent cultivation system of “three complete education” and “five education simultaneously” with the New Engineering construction as the carrier. The rapid development and reform of China’s higher education need sufficient funds. However...