China s Higher Education Market. I General Scale and Structure of China s Higher Education

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1 DIFID-WB Collaboration on Knowledge and Skills in the New Economy China s Higher Education Market January, 2004 I General Scale and Structure of China s Higher Education China s higher education is mainly composed of three parts: regular higher education, higher education for adult and private higher education or non-government higher education, of which, regular higher education plays a dominant role in the overall structure of China s higher education. Meanwhile, private higher education has also been experiencing a rapid trend of development over the recent years. 1.1 Scale of Regular Higher Education In the end of 1990s, China s higher education system experienced a rapid expansion. Whether in terms of the absolute number or the growth rate of currently enrolled students, their speed of expansion is unprecedented. Table 1 and Chart 1 reflected the trend of overall scale changes of the regular higher education in China since the 1990s. Table 1: Scale Changes of Institutions of Regular Higher Education in China from (Unit: 10,000 Person, set) 1

2 Year Faculty and Enrolled Regular Number of Graduates Recruits Staff Students Teachers Schools Members Source of Data: Educational Statistics Yearbook of China of the past years. Scale Changes of Enrolled Students in Institutions of Regular Higher Education Number of Enrolled Students (Unit: 10,000 People) Number of Enrolled Students Year It is clear from Table 1 and Chart 1 that scale changes of the enrolled students in 2

3 institutions of regular higher education in China have experienced unprecedented expansion since the 1990s. Table 2: Graduates from Institutions of higher learning in China by Field of Study ( ) (Unit: Person) Total Regular Specialized Total Regular Specialized College Course Subject College Course Subject (3 Years) (3 Years) Total Philosophy Economics Law Education Literature History Science Engineering Agriculture Medicine Management (100%) (100%) (100%) (100%) (100%) (100%) (0.09%) (0.15%) (0.01%) (0.08%) (0.13%) (0.02%) (5.52%) (6.21%) (4.69%) (4.93%) (5.72%) (4.17%) (5.93%) (5.34%) (6.65%) (5.98%) (5.54%) (6.40%) (5.07%) (3.16%) (7.39%) (5.97%) (3.49%) (8.35%) (15.23%) (11.09%) (20.25%) (14.85%) (11.85%) (17.73%) (0.99%) (1.07%) (0.88%) (0.87%) (1.07%) (0.68%) (11.18%) (11.19%) (11.17%) (9.83%) (11.06%) (8.65%) (33.69%) (38.67%) (27.65%) (34.39%) (38.43%) (30.49%) (2.75%) (3.35%) (2.04%) (2.71%) (3.43%) (2.03%) (6.04%) (7.30%) (4.52%) (5.94%) (7.22%) (4.58%) (13.50%) (12.47%) (14.76%) (14.45%) (12.06%) (16.74%) (Note: Values in the brackets refer to percentage of the graduates by field of study over the total number of graduates) 3

4 Source of Data: Educational Statistics Yearbook of China 2003 Table 2 indicates that, in 2001 and 2002, graduates in the fields of engineering science, literature and management science etc. have relatively greater scale; whereas graduates in the fields of philosophy, history and agronomy etc. have relatively smaller scale. Table 3 is the list of average educational expenditure per student of regular institutions of higher learning in China over the past two years. Table 3: Average Educational Outlay Expenditure Per Student of Institutions of higher learning in China ( ) (Unit: RMB yuan) Educational Expenditure Total Recurrent Expenditure Capital Sub-total personnel Non- Construction personnel Expenditure 2000 Institutions of higher learning Of which: Institutions of Regular Higher Education, Institutions of higher learning for Adult 2001 Institutions of higher learning Of which: Institutions of Regular Higher Education, Institutions of higher learning for Adult Source of Data: Educational Outlay Statistics Yearbook of China 2001 and

5 1.2 The Scale of Higher Education for Adult in China Table 4 is the scale of higher education for adult in China in 2000 and Table 4: Scale of Institutions of higher learning for Adult Nationwide ( ) (Unit: Establishment, 10,000 Person) Number of Number of Number of Number of Numbers of Schools Graduates Recruits Enrolled Students Faculty Members Overview of Scale of Private Higher Education For a long time, the China s higher education system has been dominated by public institutions of higher learning. However, due to the enormous market demand to higher education by the public, private institutions of higher learning have become a more and more non-negligible force for development of higher education. In 2002, there were 1202 private higher learning institutions with various kinds of enrolled students totaling 1,403,500, an increase of 273,100 against the previous year, of which, 311,200 were students at the experimental units 1 for educational diploma, and 530,500 were students at classes assisted for self-study examination. It should be noted that, among the private 1 Main features of the higher educational experimental unit establishment for diploma through self-study examination: targets for recruits are mainly regular senior high school students whose score of college entrance examination below the line; adhering to the principle of easier enrollment but rigid requirements for graduation ; form of examination consists of three levels: national examination, provincial and municipal examination as well as school examination, with relatively rigid requirements. Quite a number of private higher education establishment experimental units for diploma through examination are able to accumulate a great deal of school operation experiences through examination for educational qualification diploma and create favorable school operation conditions, and have finally developed and become private regular institutions of higher learning with qualified for independent conferment for higher education diploma. 5

6 higher learning institutions, there were 133 private colleges and universities 2 with diploma educational qualifications, enrolling 319,800 students (Source of Data: Table 5: Basic Conditions of Private Regular Higher Education Nationwide from (Unit: Establishment, Person) Number of Schools Number of Graduates Number of Recruits Number of Currently Enrolled Students Number of Regular Teachers With Formal Higher Education Ranking (Note: These private regular institutions of higher learning have all been approved and officially established by the Ministry of Education, qualified for independent conferment of educational diplomas recognized by the state). Source of Data: China Education Statistics Yearbook of the past years Table 6: Basic Conditions of Graduates by Field of Study in Private Regular Institutions of Higher Learning from (Unit: Person) Total Philosophy ( 100%) ( 100%) ( 100%) ( 100%) ( 100%) ( 100%) ( 0%) ( 0%) ( 0%) ( 0%) ( 0%) ( 0%) Economics Private institutions of higher learning qualified for conferment of educational qualification diploma, that is, the oftstated private regular institutions of higher learning. 6

7 ( 47.79%) ( 47.43%) ( 53.14%) ( 48.64%) ( 49.73%) ( 17.41%) Law Education Literature History Science Engineering Agriculture Medicine Management ( 2.53%) ( 0%) ( 5.00%) ( 2.25%) ( 0.03%) ( 7.07%) ( 2.45%) ( 3.62%) ( 3.02%) ( 2.31%) ( 1.36%) ( 3.46%) ( 21.26%) ( 17.75%) ( 17.66%) ( 19.06%) ( 20.26%) ( 21.04) ( 0%) ( 0%) ( 0%) ( 0%) ( 0.96%) ( 0.31%) ( 0%) ( 0%) ( 0%) ( 0%) ( 0.37%) ( 0.25%) ( 23.24%) ( 30.70%) ( 20.40%) ( 26.41%) ( 23.36%) ( 26.38%) ( 1.39%) ( 0.93%) ( 0.62%) ( 0.41%) ( 0.32%) ( 1.35%) ( 0%) ( 0.41%) ( 0.71%) ( 0.28%) ( 0.24%) ( 0.50%) ( 23.51%) (Note: Values in the brackets refer to percentage of the number of graduates by filed of study over the total number of graduates; blank in the table indicates absence of data) Source of Data: China Education Statistics Yearbook of the past years As far as the scale of students by field of study of the private regular institutions of higher learning is concerned, private institutions of higher learning tend to offer such specialties as finances and economics (Economics), politics and law (Law), linguistics (Literature) and engineering science etc.; whereas, as far as the average cost per student is concerned, the education expenditure of private institutions of higher learning is also generally lower than that of the public institutions of higher learning. 7

8 II Requirements and Objectives of Development of China s Higher Education 2. 1 School Age Population Trend Variation Analysis A forecast concerning the future scale of population of China as well as the scale of school age population for higher education (18-22 years of age) according to data of the fifth demographic census has been conducted as shown in Chart 2. Result of the estimate indicates that, compared with other various levels of school age population for education, the school age population for higher education displays a trend of obvious increase before Therefore, a considerable part of effect of the growth of enrollment scale for higher education might be offset by factors of school age population growth, that is, growth of the school age population in the coming few years will generate an enormous pressure to the higher education system in China. 8

9 Chart 2: Tend of Variation of School Age Population for Higher Education in Scale of Population Year Objectives of China s Higher Education Until 2020 From the overall point of view, the percentage of population with higher education in China is still very low. According to calculation of data of all previous demographic censuses, the percentage population with higher education in China has long been lagging behind the level of world development. As of 2000, population with higher education in China among those 15 years and above accounts for only 4.7%, equivalent to 5.0% of the world average before 1970; compared with the average of the developing 9

10 countries, this figure was 10 years behind, and with the average of the developed countries, the gap was about 50 years or so 3. Considering the rapid recruitment expansion of students for higher expansion over the recent year, the percentage of population with higher education will slightly increase in the years to come, though there is still a great gap compared with the developed countries. Whether in the primary, the second or the tertiary industries, the percentage of population with higher education among the labor market in China is still relatively low. In 2000, the average period of education of employees in the primary industry as dominated by agriculture, forestry, livestock and fishery in China, was only 6.79 years, equivalent to the level of only primary school graduates, of which, those with junior college and above education level account for only 0.14%. The average period of education of employees in the second industry as dominated by manufacturing and building industry was only 9.44 years, equivalent to the level of only junior higher school graduates, of which, those with junior college and above education level account for only 6.0%. Although the education level of employees in the tertiary industry is relatively higher, compared with the finance and insurance industry with the longest period of years of education, those in the tertiary industry with undergraduates course and above account for only 10.86% 4. To realize the advancement of China From a Big Populous Country to a Great Country of Human Resources as quickly as possible and to alleviate the pressure by the 3 Project Group on China Education and Human Resources Problem Report, From a Big Populous Country to a Great Country of Human Resources, Higher Education Press, 2003, p Ibid, 2003, pp

11 sustained peak of statutory age population to higher education, the scale of China s higher education must be further expanded. The Group Project on China Education and Human Resources Problem Report, organized by the Ministry of Education of China, has marked out the staged development objectives of China s higher education in the 21 st century 5 : (1)That to steadily develop higher education and continuously increase enrollment opportunities for higher education to adapt to China s social and economic development and demand by residents will be the basic objective of China s higher education before In view of the enormous increase of recruitment by institutions of higher learning in China from as well as the enormous pressure by the peak of school age population for higher education during the period, the overall scale of enrolled students by various categories of higher education in China will reach 26 million or so and gross enrollment rate for higher education will reach 23% or so by 2010, calculated according to 3%-4% annual growth rate for recruitment by institutions for higher learning during this period. (2) From , continue to expand the scale of higher education and realize the transition of higher education from the primary stage of popularization to the medium and higher stage of popularization. By 2020, the number of enrolled students for various categories of higher education will reach 33 million or so. With the scale of school age population for higher education decline during this period, the extent of popularization for 5 ibid, 2003, pp

12 higher education will achieve rapid increase. By 2020, the gross enrollment rate for higher education will reach 40% or so. 2.3 China s Higher Education Outlay Requirement Analysis by 2020 It is clear, through the present condition analysis of the percentage of population for higher education and target analysis of the scale for higher education development, that China s higher education demand will continuously flourish. At the same time, this also poses rather higher demand for support to higher educational development. A forecast towards China s higher education outlay requirement until 2020 based on the foregoing objectives of China s higher education scale development on has been conducted. Comprehensive consideration to such factors as school age population, gross enrollment rate for higher education, average higher education expenditure increase per student as well as economic growth etc. indicates that the enormous higher education system requires huge fund support. According to the forecast, its proportion over GDP will be increased from 2.02% in 2004 to 3.22% in Higher Education Private Rate of Return Analysis Concomitant to China s economic development and education scale expansion is the obvious increase of the rate of return of various levels of education. A Study 7 on education return in the 1990s in China come to discover that: in the early 1990s, the urban 6 Please refer to From a Big Populous Country to a Great Country of Human Resources (Higher Education Press, 2003) pp for the entire process of requirement analysis. 7 Chen Xiaoyu, Chen Liangkun, Xia Chen, Changes and Inspiration of Urban and Township Education Rate of Return in the 1990s in China, <Peking University Education Review>, 2 nd Issue, 2003, pp

13 and township education return in China was only 3% or so, far below the 10% world average. However, by 2000, the education return in China had already edged closer to that of the world average, albeit still lower. Of which, the Mincerian rate of return of higher education had consistently been maintained the highest among all levels of education. In 2000, the rate of return of regular college graduate had reached 13.1%, the rate of return of college for specialized subjects (3 years) 9.97%, which were obviously higher than the rate of return of senior high school 6.53% and the rate of return of junior high school 4.86%. The private economic benefit for higher education is also embodied in that there is less possibility of unemployment with higher education. Some scholars, using the nationwide survey data in 2001, have conducted researches on the effect of different cultural and educational levels over the probability of labor unemployment, and discovered that, in the cities, the probability of unemployment with senior high school educational background was 3.54 times, junior high school 5.17 times, primary school 7.51 times and those below primary school 8.17 times 8 higher compared with the probability of unemployment with higher education. The private benefit of higher education has been one of the main driving factors to affect investment to higher education by students, families and the public. However, there are different views concerning the future trend of private return of China s higher 8 Li Chunling, How Cultural and Educational Background Affect People s Economic Income Review on the Economic Return of the Current Education, Sociological Studies 3 rd Issue 2003, pp

14 education as well as the impact of such trend to the higher education demand. One view holds that with improvement of the extent of general adoption of the market principles in China, higher education return will be further enhanced, the result of which will be that the public will continue to maintain strong demand to higher education; another view believes that due to higher education scale expansion, especially the impact of the large scale expansion for recruitment of higher education in the end of 1990s, the relationship between market supply and demand for graduates with higher education will experience a great change, which may limit further increase of the rat of return of China s higher education, or even result in decline of the rate of return, and therefore affect enthusiasm of the public for pursuit of higher education. III Financial Conditions of Institutions of Higher Learning and Student Loans 3.1 Financial Conditions of Institutions of Higher Learning Prior to the mid of 1980s, expenses of China s higher education had been assumed entirely by the national finance, students enrolled in colleges and universities were not only exempted from payment of all tuition fee and miscellaneous, but also obtain certain quota of life subsidies. Since the mid 1980's, higher education institutions have been permitted to admit commissioned (or enterprise-financed) students and self-financed students, except public financed students. The public financed students have to get higher scores in nationwide examination for university entrance, while the other two types 14

15 students can be admitted with lower scores. Since 1989, fees began to extend to public financed students, but the fee level was much lower than those of the commissioned students and the self-financed students. Students studying in the areas of agriculture, forest, mining, education etc. not only are exempted from tuition and fees, but also can receive monthly subsidies because the government encourages people to work in these sectors which are considered harder working areas with lower salaries. In 1994, some pilot institutions eliminated the distinctions among the public-financed, commissioned and self-financed students. It means that all the students enrolled in the pilot universities and colleges had to pay same tuition and fees for their studies. Since September, 1997, free higher education in China has been a history. All the higher education institutions in China began to charge students tuition and fees. Since then, tuition fees of institutions for higher learning in China have been rising year by year. Rising of tuition fee has resulted in two effects. On the one hand, income structure of the colleges and universities had experienced an obvious change. For instance, ratio of the public education outlay over the gross income in the higher education units accounted for 73.29% in 1995, the figure however dropped to 55.23% in 2000 and further to 52.92% in 2001, whereas the ratio of income from tuition fees and miscellaneous over the gross income in the higher education units had increased from 11.89% in 1995 to 21.09% in 2000, which further increased to 24.66% in On the other hand, ratio of tuition fee expenditure over the gross expenditure of the students has 15

16 been rising year by year, from merely 6% in 1990 to 16% in 1995 and further to 31% in Table 7: Composition of Sources of Outlay for Regular Higher Education across the Country from (Unit: %) Year Total Input Budget Educational Tax Public Donation Tuition Fee School-run Schools run Social Others Appropriation and Fundraising Industries by Organizations Enterprises Source of Data: Educational Outlay Statistics Yearbook of China for the past years 3.2 Student Loans The earliest practice of student loan system in China could be traced back in 1986 when the state implemented at that time student loan program to undergraduate students and students with specialized subjects (3 years) in regular institutions of higher learning. However, this loan method was not able to generate much social values due to a number of defects, such as small loan amounts, narrow coverage, complex application formalities, without term of redemption, which usually requires repayment at the time of graduate, or else, the diploma will be withheld etc. The genuine student loan system was launched officially only in the end of 1990s along with the continuous rise of level of higher education charges. 16

17 In the summer of 1999, with the continuous rise of the level of tuition fee for higher education, the level of cost recovery also rose accordingly in a great margin. To alleviate the pressure from tuition fee and miscellaneous charges to poor students for higher education and fully realize the fairness of opportunities for higher education, with approval from the State Council and the People s Bank of China, and also in accordance with the Regulations on State Subsidized Student Loan Management (Trial Implementation) jointly established by the People s Bank of China, the Ministry of Education and the Ministry of Finance, the Chinese government had issued the Measures for Trial Implementation on State Subsidized Student loan of the Industrial and Commercial Bank of China. It has been clearly stipulated in these measures that: 50% of the loan interests is to be subsidized by the national finance, while the remaining 50% assumed by the individual student. However, targets of the beneficiaries were limited only to institutions of higher learning of the central government and the form of loans should be of secured loans, thereby, to a great extent, slamming the door against those potential borrowers. Moreover, in case there is circumstances wherein a student delays payment of loans, the universities to which the student studied should allocate their own fund to repay 60% of the loans in arrears. To lessen the possible loan repayment risks confronting the school, it is natural that these schools will play it safe in granting of these loans. As a result, the act of granting of loans in 1999 was not that ideal. In August 2000, the People s Bank of China issued the Measures on Student loan Management. These measures had made important adjustment to the previous student loan policies, for instance, from the previous 17

18 secured loan to unsecured loan or credit; from the previous 8 selected cities for experiment to experiment across the country; the handling banks expanded from the Industrial and Commercial Bank of China to the four leading state-owned commercial banks, namely, the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the China Construction Bank. The series measures adopted have also greatly improved granting of student loans. And yet, due to the imperfection of individual credit standing system in China, these loans were all faced with considerable credit risks. Afraid of a new round of bad loans resulting from difficulties in loan recovery, these banks were not enthusiastic in the granting of student loans. Statistical data by the Ministry of Education indicate that only about 38.92% of student loan applications were approved. Data of the Bulletin on State Subsidized Student loan Operation compiled by the Student Loan Management Center of China show that information for granting of the state subsidized student loans in China in 2002 is indicated as in Table 8. Table 8: Overview of Student loan In China in 2002 (Unit: RMB 10,000 yuan) Departments Number of Students Applied for Student loans Ratio over Total Number of Enrolled Students Number of Students with Approved Student loans Ratio Approved over Total Number of Application Amount of Student loans Applied Contracted Loan Amount Already Approved Verified Public Financing Discount Interest Amount Discount Interests Amount Already Paid Local Affiliated Institutions of Higher Learning Ministry Affiliated Institutions of Higher 18

19 Learning Total Source of Data: obtained from the Student Loan Management Center of the Ministry of Education of China Even though, implementation of the student loan system in China was still able to solve the schooling problems for a great number of poor students in the process of its practical operation, therefore, to a great extent, alleviated the problem of unfair opportunities for higher education due to higher education charges. At present, the current stage student loan system in China has mainly had the following problems. (1) While expanding its scale, the structural contradictions began to show its prominence. Of which, the foremost structural contradiction includes the uneven loan granting structure between banks; uneven loan distribution between regions, the poorer the region is, the lower the ratio of students obtaining the loan; uneven loan distribution between institutions, the more concentrated the institutions of higher learning by poor students are, the lower the ratio of students obtaining the loan. (2) The over-concentrated risks of loan repayment in arrearage. According to policy regulations, student loan is of commercial loan in nature. However, its practical operation has far exceeded the practice of commercial banks in operating ordinary commercial loans. Although the government has assumed 50% of the market interest subsidy, it hasn t borne the risks of loan repayment in arrearage. Therefore these risks have to be 19

20 shouldered entirely by the loan issuing party. If the practical conditions have to be taken into account, such as imperfection of the individual credit system and lack of monitoring and supervision mechanism of household income declaration etc., these risks that commercial banks have to bear in granting student loans will far greater than the risks of ordinary commercial loans. Because of this, the motivity for these banks to participate in the student loan program has considerably been weakened. (3) The time limit for loan repayment is not that reasonable. In the present student loan system of China, the time limit for loan repayment is, in uniform, to be made within four years after graduation; during which period, both the principal and the interests (50%) have to be paid off in lump sum, or else, it shall constitute an act of default. As such, there is no room for any alternative choice for the student himself/herself in terms of the time limit for loan repayment. If the special circumstances of the student himself/herself are incorporated into the time limit for loan repayment, it will not only take into account of the specific circumstances of each and every student, but also greatly strengthen and enhance the consciousness of the students for loan repayment. (4) Unreasonable means of punishment for breach of contract. Starting August 2003, institutions of higher learning with ratio of breach of contract by the borrowers reaching 20% and the number of graduates in breach of contract reaching 20 shall be listed by the lending bank in the blacklist - temporarily not to be listed in the state subsidized student loan credit plan. Correspondingly, the freshmen enrolled in these institutions in the 20

21 autumn of 2003 will have no way to enjoy the state subsidized student loan program. Consequently, a new round of injustice will appear in the state subsidized student loan system, though its original intention is to eliminate the unequal opportunities for higher education. To improve the student loan system of China s higher education, key emphasis should be given to the following factors: (1) Establish and gradually improve the public credit standing system and reduce, from the maximum extent, the possible risks for breach of contract confronting the student loan program. (2) Actively plan the teaching and subsidized student guarantee fund. Source of the fund may be financial appropriation, banks, schools, enterprises, and various types of social organizations and individuals etc. This part of fund will mainly be used for arrearage for breach of contract within moderate range of risks. (3) Fully strengthen coordination and cooperation between banks and higher institutions in student loan system program, and fully realize the mutual complementation of advantages between banks and schools in execution, monitoring and supervision of student loans. However, to realize this objective, it is still necessary for promulgation and implementation of relevant state supporting policies. 21

22 (4) Establish financial institutions such as student loan surety companies by making full use of financial innovation tools. These surety companies shall, on the one hand, examine data of the borrowers and be responsible for the follow-up prompting for their collection on behalf of the banks; while on the other, provide the borrowers with loan security, thereby, to the maximum extent, reducing the loan risks that commercial banks may be possibly confronted with. As the student loan program is an important form of cost recovery in the field of China s higher education as it is also an important measure to ensure realization of fair opportunity for education, therefore, to continually improve the student loan system in China will be of great and profound significance. IV The Issue of Justice of Enrollment Opportunities for Higher Education Because of the uneven economic development across China as well as the considerable differences on the level of income of residents, many scholars are very much concerned about the issue of social justice that may possibly arise due to charges of higher education. The rising of tuition fee year by year may have a great impact on investment decisions by individuals for pursuit of higher education. A study carried out by on composition of students in institutions on higher learning in the end of 22

23 1990s indicate that family economic condition is an important reason affecting the choice of students in the types, levels and means of their pursuit for higher education. Students with family background in disadvantageous positions are more inclined to choose institutions for higher learning, such as normal schools and schools of agriculture and forestry disciplines where tuition fees are lower or students enrolled be exempted from such payment, with also life subsidies. With control of such variables as sex and scores obtained in college entrance examination considered to have great impact upon the act of students in their selection of schools, it is discovered that the possibility of students from low income families to choose normal schools and schools of agriculture and forestry disciplines is 1.57 times of that of students from other families. 9 In her article entitled Studies on Higher Education Demand by Residents in China (Doctorate dissertation of the Education and Economic Research Institute of Peking University, 2000), Li Wenli has also conducted analysis over the elasticity of higher education demand by urban and township residents in China. Result of studies of this paper indicate that, under the current level of the private education cost in China, the cost elasticity of private demand for higher education by urban and township residents in China is 0.562, that is, when other conditions remain constant, for every 1% increase of private cost for higher education, the ratio of the number of people pursuing for higher education, capable of being supported by the students themselves or their families, over the total number of students pursuing for higher education will drop by 0.562%. The cost elasticity for demand of higher education will drop with increase of the level of income. The lower the level of household income is, 9, An Survey Report to Student Groups with Different Households Income in Institutions of Higher Learning in China, Tsinghua Education Studies, 2 nd Issue,

24 the sensitive the students themselves and their families are to changes of the private cost. Moreover, has also analyzed China s higher education distribution in the 1990s through data of household survey towards urban and township residents in China. The result clearly shows that, from the variation of distribution of students with higher education, whether from survey of the family economic conditions or from the family education background, distribution of opportunities for higher education among urban and township residents in 1990s had been in a clear trend of improvement. From survey of family economic conditions, the gini coefficient, reflecting the equality of higher education opportunity, had dropped from in 1991 to in 2000, that is to say, the equality of higher education had displayed an obvious trend of improvement. From the growth rate point of view of the number of people pursuing for higher education, the growth rate in 2000 were 2.87 times (low level income households account for 25% of the total number of households), 2.58 times (medium level income households account for 50% of the total number of households) and 1.34 times (high level income households account for 25% of the total number of households) compared to the growth rate of the low level income households, medium level income households, high level income households as well as the growth rate of That is to say, from the point of view of household economic conditions and parent educational background, the rate of participation to higher education by household groups with low-level income of urban and township residents in China had obviously been increased compared with Factors causing this result may be: firstly, the rapid expansion of the enrollment scale for higher 24

25 education has brought along more and more opportunities for higher education; secondly, although the tuition fee for higher education has risen year by year, the rate of return for graduates with higher education in China has also experienced rapid growth as just mentioned earlier, which aroused enthusiasm for private investment in higher education; thirdly, with the continuous rising of tuition fee for higher education, China began to introduce student assistant policies (such as, student loan, scholarship and subsidized loan system etc.), which are also important measures to realize fairness for higher education. It has to be noted however that due to limit of data, result of this research did not take into account of the higher education opportunity of residents in rural China, nor different qualities of higher education opportunities. V Labor Market of Graduates from Institutions of Higher Learning Along with the rapid expansion of scale of China s higher education, the supply and demand relationship of the employment market confronting the graduates with higher education is also under current changes. Understanding to the job search and work employment conditions of the first batch of graduates after expanded recruitment for higher education, their expectations to the higher education and the labor market, will not only be of critical importance for development of the higher education itself, but also of profound significance to various aspects of the labor, personnel and the entire education system of the country. For this purpose, in the first half of 2003, the project group of Scale Expansion of Higher Education and the Labor Market of Peking University had carried on 25

26 survey researches pertaining to selection for employment by graduates to 47 institutions of higher learning in 7 provinces and municipalities including Beijing, Guangdong, Guangxi, Hunan, Shaanxi, Yunnan and Shandong etc., and had finally collected 18,722 pieces of questionnaires returned from graduates from institutions of higher learning in the end of June The following are some of the results after analysis of the questionnaire, from which, we can have a view on the current labor market conditions of China s higher education. (for statistics description of the sample, see tables and figures in the end of this paper.) 5.1 Employment Conditions and Commencing Salary of Graduates from Institutions of Higher Learning in 2003 As of the end of June 2003, graduates from institutions of higher learning already employed accounted for 61.6%, of which, graduates already signed employment contract accounted for 31.9% over the total number of graduates; while the ratio of graduates with employment not yet been realized counted still very high, being 38.4%, of which, graduates without prospective employing work units accounted for 27.3% of the total number of graduates. Review over the income conditions of the sample graduates with employment discovers: the average monthly commencing salary of these graduates amounts to RMB 1,550.7, those below RMB 1000 account for 40.9%, those between RMB 1,001-2,000 account for 45.5%, those between RMB 2,001-3,000 account for 9.5%, and those above RMB 3000 account for 4.1%. 26

27 The data also indicate distribution conditions of graduates in the units of different nature, of which, the state-owned enterprises and schools have been the leading units in employment of graduates from institutions of higher learning, of which, 34.4% have been employed by state-owned enterprises, 22.9% by schools. State organs, private enterprises and the three capital enterprises (i.e.: those run with foreign funds only, Chinese-foreign joint ventures and cooperative enterprises) are also units with relatively greater proportion of employment of graduates. The percentage of graduates entering into urban collective enterprises and village and township enterprises is rather quite low, only accounting for 3.1% and 1.1% respectively. Analysis over the rate of employment and average monthly commencing salary of graduates with different educational background reveals that there are some strong relationships between monthly commencing salary and educational background. The rate of employment of college students for professional training or specialized subjects (3 years) was only 34.7%, therefore no room for being optimistic; while rate of employment of postgraduates was 88.6%. Besides, the average monthly commencing salary of postgraduates was RMB , far much higher than that of the regular college graduates RMB 1,501.2, and graduates from college for professional training or specialized subjects (3 years) RMB 1, Analysis over the rate of employment of graduates with different specialties also 27

28 reveals that specialties with rate of employment over 60% include philosophy, economics, law, history, engineering, agriculture and management sciences, of which, graduates of engineering sciences have the highest rate of employment, being 73.2%; whereas, graduates of disciplines of education and literature have the lowest rate of employment, being 28.2% and 48.7% respectively. From the sample point of view, in terms of commencing salary, there is no obvious difference between male and female graduates, as their average monthly commencing salary were RMB 1,546.9 and RMB 1,545.2 respectively. Nevertheless, the rate of employment of male graduates was higher than that of the female graduates, which were 65.9% and 56.1% respectively. 5.2 The Types of Graduates Favored by the Current Labor Market Based on analysis of factors affecting the success or failure of job-search as well as the high or low commencing salary of graduates, we have drawn the following conclusion as to what types of graduates are more competitive in the current labor market in China: The higher the educational level, the bigger probability of success in job-search, and the higher the commencing salary. Graduates from high-quality institutions of higher learning will have obvious 28

29 advantageous in the labor market whether in terms of job-search or income, that is to say, the current labor market in China favors graduates from key institutions of higher learning. This not only indicates the role-play by the brand of the school, but also indirectly supports the statement that high-quality teaching causes high-quality human capital. English proficiency is important for graduates to find a job. It conducive to find a job with much higher salary, that is, the currently labor market needs graduates with better command of the English language. The employing work units tend to recruit cadres of students. Besides, cadres of students have also advantages in their commencing salary. In contrast, student ranking in class performance does not have much obvious impact to job search and the commencing salary. This may indicates that the labor market pays more attention to the various qualities and skills of the graduates, cultivated and built up through school social activities, rather than simply stresses on the singular school performance of the graduates. That the job suited to graduate s specialty does not have obvious impact on the commencing salary; nevertheless, acquirement of other certificates of competency can play a role in commencing salary promotion. This may indicates that the employing work units do not require their employed graduates to suit exactly to their special training, as they are more concerned about the real abilities of the graduates built up through other channels of learning during their schooling period. 29

30 Gender does play a role in job search. Relatively speaking, the employing work units are more inclined to recruit male graduates. However, no obvious difference has shown in their commencing salaries because of gender difference. That is to say, the employing work units do not adopt different remuneration treatment policy to the new recruits because of the gender difference. 5.3 Suggestions to Higher Education and the Labor Market As to the problem whether difficulties of employment for graduates are caused due to expanded recruitment for higher education over the recent years, different studies have drawn also different conclusions. Some studies indicate that the extensive expanded recruitment have greatly increased supply of current graduates from institutions of higher learning; on the other hand, demand to labor forces with higher educational background by the labor market in China can t catch up with the steps of the expanded recruitment, therefore, expanded recruitment has resulted in and aggravated the problem of difficulties of employment for graduates. However, some studies point out that the current ratio of laborers with higher education in the entire labor market in China is still in urgent need to increase. It is other factors, such as, global economic recession as well as failure of mechanism of the labor market in China etc., that constitute the main reason for the current difficulties of employment for graduates from institutions of higher learning. 30

31 The effective demand of the labor market has been the most important factor determining employment conditions of the graduates with higher education, just as the scale, structure and quality of the higher education itself, as well as policies for employment and relevant supporting systems are also important factors determining the employment conditions of graduates with higher education. (1) Institutions of higher learning should have more active response to the labor market. To deal with the severe challenges of the labor market, institutions of higher learning in China should have more active response to labor market conditions. This response should come not only from the curriculum system of higher education, but also the professional service system of higher institutions, as well as the conceptual changes to employment by teachers and students themselves. This demands that, in the process of reform and development, higher education units should not only consider their own special regularities, but also the demand to higher education from the society, especially the labor market. That is to say, along with the continuous changes of demand to higher education by the labor market, the higher education unit itself should also make comprehensive and active response. Only as such, can we promote the genuine harmonious development between higher education and the labor market. (2) Stress on diversity of features of institutions of higher learning, enhance their 31

32 quality and balance the relationship between general education and professional technical education. From the long-term point of view, whether or not higher education units are excellent should subject to public judgment, but from the short-term point of view, they should subject to labor market inspection. However, all demands, whether from the society or the labor market, have their distinct features of diversification. To enhance adaptability of the higher education units, the society and the labor market, there higher education units should fully strengthen diversity of their respective features for school operation, improve quality of school operation on the basis of diversified features of school operation, balance the relationship between general education and professional technical education, and cultivate higher level graduates adapting to the social development. (3) Strengthen institutions of higher learning and enterprise contact and cooperation. Yue and Ding studied the elasticity of employment for higher education graduates by sectors in China. 10 The finding showed the elasticity were quite different by sectors, such as the state organs, political and party organizations and social groups etc. is between 1-3; whereas the elasticity of employment by sectors including real estate, finance and insurance, traffic, transport, warehousing as well as posts and telecommunications etc. is between Hence, to enhance the extent of adaptation between institutions of higher 10 Yue Changjun and : The Employment of Higher Educated labor: an Economic Analysis <Higher Education Research> Oct

33 learning and enterprise labor market and fully tap enterprise employment potentials will be an important measure to alleviate the difficulties of employment for the graduating population from institutions of higher learning. To enhance the extent of adaptation between the institutions of higher learning and the enterprise labor market, it is necessary to vigorously strengthen institutions of higher learning and enterprise contact and cooperation and to bridge the gap between graduates from institutions of higher leaning and enterprise demands. (4) Improve employment information system establishment. A perfect employment information system is an important measure to reduce unemployment. With an improved employment information system, the employment conditions of population of graduates with higher education will be improved considerably. (5) Provide Comprehensive Employment Guidance. While setting up a prefect employment information system, these institutions of higher learning should also provide timely and comprehensive employment instructions and guidance to these school students. Institutions of higher learning should provide full and in-depth professional planning services through establishment of professional employment service departments, so as to help these students to determine, plan and realize their career objectives; at the same time, institutions of higher learning may also 33