Extended essay

Chinese students going abroad:

A study in overseas-study service agencies in Beijing and Guangdong

Student ID: 1295234

Word count: 6852

AcknowledgementsI want to thank Dr. Kamilya Suleymenova for her supervision and encouragement.

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Abstract

This essay provides an overview of the rapid expansion of Chinese citizens studying abroad,

resulting from changes in government policies, the middle class wealth and the educational

situation. It also analyses the development of the derivative market for overseas-study service

agencies, and their roles in improving social efficiency and accumulating human capital. In

the case studies, we find that agencies in Beijing have more industrial opportunities and those

in Guangdong face higher demand for overseas-study services, while both provinces have

positive expectations for the overseas-study service industry.

Keywords: International education, overseas-study services, agencies, Beijing, Guangdong

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Contents

Acknowledgements....................................................................................................................1

Abstract......................................................................................................................................2

Introduction................................................................................................................................3

Chapter 1: Facts of Chinese students going abroad...................................................................4

1.1: Number and trend............................................................................................................4

1.2: Popular destination countries..........................................................................................9

1.3: Main channels................................................................................................................11

Chapter 2: Overseas-study service agencies............................................................................13

2.1: Answering a demand.....................................................................................................13

2.2: The development history...............................................................................................14

2.3: The social roles..............................................................................................................15

2.4: The dark side.................................................................................................................16

Chapter 3: Beijing VS Guangdong..........................................................................................17

3.1: The local economic growth...........................................................................................18

3.2: Local education situation...............................................................................................18

3.2.1: Demand and supply of local education...................................................................19

3.2.2: Local education funds and student structures.........................................................23

3.3: Social environments of international education............................................................26

3.3.1: The industrial association in Beijing......................................................................26

3.3.2: The old story and new regulations in Guangdong..................................................28

Conclusion................................................................................................................................31

References................................................................................................................................32

Appendix..................................................................................................................................37

1. Map of China.................................................................................................................37

3. GDP in Beijing and Guangdong...................................................................................38

4. Population in Beijing and Guangdong..........................................................................39

5. National College Entrance Examination.......................................................................42

6. Local supply and demand for higher education in Beijing and Guangdong.................42

7. Local education funds of Beijing and Guangdong........................................................43

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Introduction

In recent years, China has become the country with the largest amount of students studying

abroad, and this expansion has provided opportunities for overseas-study service agencies.

This nascent industry has grown quickly over the past three decades, but limited information

is available in surveys and literature. However, investigating in the overseas-study service

market is helpful, not only theoretically by applying institutional economic theory and

evaluating further studies on human capital, but also practically by providing suggestions for

Chinese students and authorities, and highlighting implications for Western educators and

governments. In this essay, we provide an overview of overseas-study among Chinese

students and explore the roles of agencies. We also compare two provinces and discuss where

these agencies are going.

Firstly, we demonstrate the relevant facts and figures of overseas-study, which provides the

general background. We also look at the most popular destination countries and their

admittance policies, which greatly influence where Chinese students go abroad. Then we

identify the main channels to start overseas study, indicating the position of agencies.

In chapter 2, we analyse how agencies are answering the demand, then summarise the

development pathway and characteristics of this derivative service market. This part shows us

the nature of overseas-study service agencies and the social position they occupy.

Chapter 3 compares the overseas-study service market in Beijing and Guangdong under

different economic and educational backgrounds. We then discover the only industrial

association for agencies located in Beijing, and report on the old story of going abroad from

Guangdong and analyses the new regulations implemented from 2014 onwards for the

agencies.

Finally, we summarise the key results and generate suggestions for further study.

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Chapter 1: Facts of Chinese students going abroad

1.1: Number and trend

The history of Chinese citizens studying abroad can be traced back to the Qin dynasty, when

the Qin government arranged for the first group of children to travel to America in 1872. In

the following century, 140,000 students followed their steps. However, the total of students

studying abroad has soared to 162,070,000 during the past three decades, with the range of

hosts spreading to more than one hundred countries and areas (China Education Online,

2013).

According to the Open Doors Report (Institute of International Education, 2013), Chinese

students comprise the largest international student group in America since 2009, constituting

18.5% of the total amount of foreign students. This figure climbed to 25.4% in 2011-12,

followed by the second largest group from India (13.1%). Meanwhile, other main English-

speaking countries have also experienced a dramatic increase in the proportion of Chinese

students, such as Britain with 18.1% (Higher Education Statistic Agency, 2013), Austria with

23.7% (Australian Government, 2013) and Canada with 30% (Canadian Bureau for

International Education, 2013) in 2012.

Figures 1 and 2 portray the changes in this expansion: the annual number of Chinese students

abroad is broadly stable between 2002 and 2006; then a rapid growth at an annual rate of

27.5% took place between 2008 and 2009. In the past two years, the total amount continues

to increase, but at a lower rate. Today, the annual amount reaches 400,000, but the growth

rate is currently less than 20%.

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

number of students going abroad (in ten thousand)

Figure 1- Annual number of students going abroad (10000 persons)1

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

percentage change of student number

Figure 2- Annual change level of the number of students going abroad (%)2

There are several contributing elements to this expansion:1 See: Appendix 2. Data of Chinese people studying abroad2 See: Appendix 2. Data of Chinese people studying abroad

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1) The increase in the openness of China and the wealth of the middle class

When the Chinese government first introduced the Reform and Opening Revolution in 1978,

the chief reformer Deng Xiaoping stated his encouragement to enlarge the number of Chinese

students abroad, supported both by government funds and their own finances (China Scholar

Abroad, 2004). The following policy also reconfirmed the government’s position in

improving students’ social mobility.

As defined by income, education and occupational status (Lanteigne, 2011), China’s middle

class consists of more than 300 million people. Based on the new rich phenomenon in Asia

since the 1990s, Stephanie and Zheng (2008, p.71-82) found evidence that China’s middle

class are “richer than before” in terms of personal property, access to world media and

advanced communication systems, tourist visas for overseas travel, Chinese cultural and

creative industries and the luxury “branded” market, as well as private schooling for

privileged single children. The improvements in the wealth of the middle class not only

ensure basic living standards, but also allow them to afford expensive overseas education.

2) The transformation of higher education

Resulting from the evolution of tertiary education in the 1990s, the largest group of Chinese

students abroad are enrolled in postgraduate study. The total numbers of higher educational

institutions in 1985 and 2011 were approximately 1000 and 2409 respectively, which lead to

a large increase (3.7 times greater) in the number of graduates, from 1998 to 2005 (Li et al.,

2011). Meanwhile, the promotion of elite universities and the consolidation of others

guaranteed that the Chinese students’ abilities would meet the entry requirements of foreign

schools. Besides, as the Chinese education system became better known by other countries,

students at different levels could find suitable courses in foreign schools (Commonwealth of

Australia, 2009). Thus we can see that the improvement in the quantity and quality of tertiary

educational institutions correlates with the increasing enrolments of Chinese students in

foreign schools.

3) The excess demand for higher education domestically

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The input of students in the education industry is regarded as the “demand for places” by

potential students (Radner and Miller, 1970). In 2008, 10.5 million senior secondary schools

graduates in China sat the National College Entrance Examination (NCEE) with only 5.99

million places available in domestic higher educational institutions (China Education Online,

2013). This significant imbalance from home has a corresponding relationship with the

growth rate of students going abroad, which reached a peak of 25% during 2008 and 2010.

Despite the inadequate domestic educational resources, there remains a strong incentive for

the Chinese government to increase the quantity of well-educated workers: skilled human

resources come as a key to economic growth. In an extended version of the Solow growth

model, by Mankiw, Romer and Weil (1992), human capital is captured as a production factor:

Y=A K α H β L1−α−β

Where Y is the total output, K and H represent physical and human capital respectively, L is

the labour force and A is the “knowledge” or “effectiveness” of labour. This model illustrates

that both the level and growth of output are positively related to the investment rate in

physical and human capital. This neoclassical approach has also been examined by Marcelo

Soto (2002). Therefore, as a developing country seeking growth, the political demand for

education is clear: since the state-run education facilities still cannot catch up with the soaring

demand for education, encouraging overseas study is beneficial in accumulating human

capital (L). In addition, more individuals with international education lead to more foreign

investment in China (Keane, 2003), which implies more physical capital (K) and advanced

technology (A).

An earlier study by Härnqvist (1978) summarises the factors influencing individual demand

for education:

a) Psychological/Individual factors

b) Structural/Institutional factors

c) Social/Families factors

d) Economics/Financial Factors

The first term comprises interests, aspirations, goals and occupational motivation. Traditional

Chinese philosophies, such as Confucian values, emphasised the importance of education and

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propagated it (Yao, 2000, p.163, 280-286) and many Chinese citizens consider gaining

education a significant way of fulfilling the value of people.

The second term is specific to the nationwide educational environment, including the range of

options and the vocational alternatives. During the Cultural Revolution (Unger, 1980), well-

educated people were suppressed and the academic atmosphere was seriously damaged,

leading to education becoming unavailable. Since the 1990s, the revolution in tertiary

education has promoted the system and people were encouraged to study.

The third term refers to the “social origins” of the children, such as the profession of both

parents. It is generally believed that family background impacts on children’s educational

choice and subsequent career choice (Peraita and Sanchez, 1998). In particular, Tsang (2013)

also proposes an interesting view: middle-class parents in China want to send their children to

better schools because of their instinct to secure their social status.

The fourth term includes the labour market situation and the financial benefits. The

unemployment rate increased from 1.8% in 1985 to 4.1% in 2012 (National Bureau of

Statistics of China, 2013), which shows that the labour market requires workers with higher

qualifications and levels of employability. Meanwhile, the average salary in the financial

industry is almost four times than that in the primary industry (National Bureau of Statistics

of China, 2013) and this imbalance in salary encourages people to gain educational

qualification for certain jobs with higher incomes.

In addition, Di Pietro and Page (2008) summarise several additional incentives:

a) To gain cultural experience

b) To improve foreign language skills

c) To study in higher quality academic environment

d) To have improvement of career prospects

e) To have good understanding of host country

Although their research was based on European students, we assume that these reasons also

hold among Chinese students. However, for Chinese students without government funding,

they would have to pay the high school fees by themselves and expect more substantial return

from schooling, such as higher wages after overseas study.

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1.2: Popular destination countries

Figure 3 shows that more than 75% of Chinese students overseas go to English-speaking

countries: America, Britain, Australia and Canada. This is because, in China, English is

taught from primary education, and students are required to have the basic skills to apply it

after compulsory education (Ministry of Education, 2011). Besides, western countries have

also increased the quantity of places for overseas students as a means to promote economic

revenues and intercultural understanding (Andrade, 2006).

U.S.A, 30%

the UK, 21%Australia, 13%

Canada, 10%

Hong Kong, 7%

Japan, 5%

France, 4%

Germany, 2%Netherlands, 2%

Singapore, 2%Korea, 1% Others, 3%

Figure 3- Destination countries of self-funded students, 2012-2013 (China Education Online, 2013)

The accessibility of overseas universities is an important motivation for Chinese students

choosing to study abroad (Davey, 2005). We will next analyse the admittance policies of

popular destination countries.

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As the most popular destination country, the United States Immigration (2013) announced

new admittance policies indicating its intention to attract more overseas students, by

simplifying the procedure. This would encourage more Chinese students travel to America.

The UK government (2012) announced new policies for Tier 4 student visas. International

students, thus, no longer enjoy the work visa after graduation and the entry requirements in

terms of language and deposits are higher. This would reduce the number of applications

from China to UK educational institutions.

The Australian government announced its plan to simplify the assessment level and reduce

the deposit requirement, which will be helpful for overseas student visas. Besides, for

students who finish the NCEE in China, it is possible to be directly enrolled at undergraduate

level in some Australian universities3. This would increase the amount of Chinese students in

Australia.

The Canadian government (2013) suddenly announced that eight occupations are no longer

included in the Canadian Experience class, which will have a large impact on approximately

80% of Chinese students since they cannot fully immigrate after completing their education.

Since many international students were attracted by the previous immigration act, educational

institutions in Canada thus may expect to receive fewer applications from China under the

new admittance policy.

The English-speaking countries will still be the most popular destination countries. But as

there are more opportunities for Chinese people to learn other languages, and as more

institutions in other countries provide courses to help overseas students adapt to local life and

study, there will be a redistribution of the prevalent destinations to study abroad.

3 Previously, those students need to take up Foundation course before enrol in undergraduate level.

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1.3: Main channels

Compared to the situation 30 years ago, when the majority of Chinese students studying

abroad were sent and financially supported by the government, now over 93% of Chinese

students abroad are self-funded (Shirong, 2011).

With regard to access channels to study abroad4, five main ways have been identified:

1) Organised by the government

Students can directly submit applications to the Ministry of Education of the People’s

Republic of China (MOE) for scholarships and living subsidies. The majority of those who

study abroad at the government’s expense are postgraduates, doctors and employees within

public sector institutions; the remainder include exchange students who do not need to pay

the fees for overseas universities. According to the China Scholarship Council (2013), the

size of this group is less than 20,000 people and the plan for 2014 is 21,350 in total. The main

subjects studied by these students are related to Energy, Resources, Environment and

Agriculture and they are required to return to China after their overseas study.

2) Arranged by corporations

Nowadays, many companies realise the importance for their employees to have an

international perspective under the ever-spreading process of globalisation. Corporations

provide opportunities for their workers to take MBA or other administrative courses overseas,

in order to be more competent and efficient at work. However, these cases are uncommon

due to the high fees required, and this alternative is still underdeveloped in China.

3) DIY

Given the free flow of information, students with sufficient qualifications can apply to

overseas universities on their own, by directly submitting an application to the overseas

educational institutions. One can choose from almost any level of education, as long as they

meet the entry requirements of their desired schools. In 2012, 35% of students intending to

4 Including the channel for mainland students to study in Taiwan, Hong Kong and Macao

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study abroad decided to apply by themselves, and this percentage increased to 40% in 2013

(China Education Online, 2013).

4) Apply via overseas study services agencies

Agencies provide consulting services and help with applications to foreign schools, serving

more than half of the total amount of overseas Chinese students. Although there are other

alternatives for people to start overseas study, the appearance of the agencies in this market

provides more convenience and opportunities for them. In this essay, we mainly focus upon

this channel, in particular the situation it faces.

5) Sino-foreign cooperative education

Based on the different main bodies of teaching, this alternative can be divided into two parts:

one is cooperative programs with overseas universities; the other is Chinese-foreign

cooperatively-run institutions. The courses range from undergraduate level and above. The

approval, assessment and management of Chinese-foreign cooperation are governed by the

Department of International Cooperation and Exchanges of MOE.

Reported by MOE (2013), there are 40 Chinese-foreign cooperative education institutions

and 673 cooperation programs with overseas universities. It is interesting to note that

Heilongjiang Province, which has the largest involvement with cooperation programs (168),

does not have any Chinese-foreign cooperatively-run schools, which means that these

programs are 100% provided by state universities. This indicates that domestic universities

have an overwhelming part to play.

In Beijing, there are 3 institutions providing 35 programs, while in Guangdong, there are 3

institutions but only 10 programs.

6) Immigration

Children can receive education from their adapted countries by immigrating. The impacts of

this channel are large in Guangdong, since this province has the largest group of Chinese

people moving abroad (Guangdong Government, 2011). However, students within this

classification are still the minority when compared with the previous alternatives.

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Chapter 2: Overseas-study service agencies

Chapter 1 illustrated the demand of overseas study in China, driving the relevant service

industry to develop. Chapter 2 analyses the overseas-study services, which are known

helping domestic students to apply for overseas schools as well as helping overseas students

receive education in China. We focus mainly on domestic students going abroad, since it

forms the main target market of overseas study service providers in China.

2.1: Answering a demand

In the opening stages of this industry, the target market of agencies was those who were

seeking for Master programmes overseas. However, these institutions are now also targeting

younger students who intend to apply for undergraduate courses, and also help with

applications to places in high schools and even middle schools or primary schools. In the past

six years, approximately 10% of students in high schools decide not to take the NCEE and

study abroad at younger age (Haili, 2013).

In addition to providing relevant information and helping their customers apply for schools,

overseas education services also assist with the application for the visas. Some agencies also

provide language courses, for instance Shinyway Education (2014), which is one of the most

famous overseas- study service agencies. In fact, some famous privately owned English

language educational institutions, such as New Original (2014), also provide services related

to overseas university applications. By providing courses for language tests like the IELTS5

and TOFEL6, these language institutions generate a considerable number of customers who

intend to study abroad, and thus have the potential to compete with the existing agencies.

2.2: The development history

This new service industry did not exist in 1978. But by 2008, it was already quite large, since

more people could afford to study abroad with their own finances and the demand for

agencies grew.

5 International English Language Testing System6 The Test of English as a Foreign Language

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1) Introduction

At the beginning of the Reform and Opening (1978), the government made decisions to

enlarge the amount of domestic students going abroad. However, the demand for agencies

was low, given the underdeveloped economic environment, inactive educational situation and

insufficient information about overseas study services.

2) Chaotic development

The government in the 1980s started to encourage self-funded people to study abroad and the

number of agencies increased as a result. But there were not enough regulations in the

overseas-study service industry and the legal position of these agencies was ambiguous.

3) Government supervision and self-regulation

In 1993, the government set a goal to support studying abroad and to encourage returning

while allowing more freedom. During the 1990s, the first regulations were set and the

Department of international cooperation and exchanges under MOE (2014) was established

for overseas study.

4) Competition and trademarks

As more service providers entered the market, there is an expansion in the quantity of the

supply side. However, the quality was worrying. To cope with this situation, MOE (2012)

announced information about registered agencies via its official network, which have licenses

running overseas study services. Until 15th October 2013, there were overall 452 registered

agencies, compared with 419 in 2012. However, there were other institutions, such as

unregistered agencies and language schools, providing similar services.

As the competition became fierce, MOE also announced relevant information on its website

and held exhibitions to help consumers choose legal agencies. In addition, it set up an official

contract form and encouraged the overseas-study agencies to use this. However, there are

only 22 agencies using this contract form, which is a small proportion of 4.9%7 of this

market. The out-of-list supply side and the various contract forms make it difficult for the

government to supervise the overseas-study service industry. 7 22 agencies using the official contract form/452 registered agencies = 4.87%

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In the John and Kwoka studies (2004), they find that both the number and size of institutions

grew as a result of demand shift. Like American institutions in their article, the educational

industry in China confronted a dramatic growth in the demand side, both for domestic

education and overseas study. In responding to this, the amount of international study service

institutions soared and the scale also grew exponentially.

2.3: The social roles

The overseas-study service agencies exist because of consumers’ demand. These institutions

make the overseas education market more efficient and productive, and they can be beneficial

to the society as a whole in the following ways.

1) Improving social efficiency

The complexity and soundness of institutional structures allow the specification and

enforcement of property rights, and thus results in productivity gains from modern

technology (North 1989). Because of the relevant experiences, the agencies have cooperative

relations with foreign educational institutions, thus they reduce the transaction costs and

make the application progress more quickly and effectively.

Additionally, since agencies are “learning by doing” (Arrow, 1962), they have more relevant

information than the individual applicants do about the education systems of different

countries and their visa policies. In this way they improve the social efficiency by making

information less “costly”.

2) Helping accumulate human capital

Benhabib and Spiegel (1994) find evidence that, based on the endogenous growth models, the

level of human capital is a determinant of domestic innovation and the absorption capacity of

foreign technologies. Since the domestic education facilities could not catch up with the

demand, agencies help more students to receive overseas education, and thus help the

economy accumulate more skilled workers, who are able to absorb new technology and

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introduce more efficient management to society. In addition, as greater number of Chinese

citizens gain western experiences, more foreign investment will be brought into China as a

corollary (Song, Chu and Chao, 2001).

2.4: The dark side

Although the overseas study service agencies are developing quickly and positively overall,

we should record some problems related to this industry.

1) High price of registered agencies

Pricing is one of the most complex and important decisions confronting any profit-seeking

organization (Indounas and Avlonitis, 2011). Overseas-study agencies charge for their

services (Mei, 2012); applications for American schools are the most expensive, ranging from

20,000 RMB to 60,000 RMB, while applications for other countries are 10,000 RMB to

20,000 RMB. By comparison, the same services in India cost less than 1,000 RMB (Nanfang

Daily, 2011).

2) Low quality of unregistered agencies

In the recent years, complaints about the substandard services of agencies have increased

(Topsage, 2010). Since the huge profits in this market stimulate more agencies to participate,

most are unregistered, and the quality problem has grown more serious.

To solve these problems, the government should promote the soundness of regulations in the

overseas-study service market, to stop unreasonable high prices and illegal agencies. Setting

up an industrial association is also beneficial in maintaining the order and improving the

efficiency of the overseas-study service market. The development of this industry will bring

more job opportunities and help China accumulate more skilled human resources in the era of

globalisation.

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Chapter 3: Beijing VS Guangdong

Before exploring the details of the overseas study service market in Beijing and Guangdong,

it is worth noticing that the latter is geographically 10.96 times larger than the former.

According to the data from National Bureau of Statistics (2012), the population density is

1464 /km2 in Beijing, and 2927 /km2 in Guangdong. Although Guangdong is larger

geographically and demographically, the number of registered agencies in Beijing (78) is

almost triple that in Guangdong (27). In this chapter, we firstly analyse the economic

backgrounds of Beijing and Guangdong, then continue to the education systems and social

environments for the overseas-study service industry.

3.1: The local economic growth

Figure 4 shows the trend of economic growth: the GDP per capita of Beijing and Guangdong

have both increased in the past decade, by 2.65 times in Beijing and 3.32 times in Guangdong

respectively. Since the greater human and social capital is accompanied by the more

attractive institutional opportunities (Glaeser et al, 2004), the economic prospective for

agencies in Beijing and Guangdong is positive. More specific, the supply side of overseas

service industry in Beijing is larger, and tends to have larger institutional and productive

capacities. Besides, higher GDP per capital also implies that overseas study is relatively more

affordable for Beijing citizens.

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0000

10000.000020000.000030000.000040000.000050000.000060000.000070000.000080000.000090000.0000

Beijing Guangdong

Figure 4- GDP per capita in Beijing and Guangdong (RMB)8

8 See: Appendix 3. GDP in Beijing and Guangdong

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3.2: Local education situation

In China, the overall number of students attending NCEE reached a peak of 10,500,000 in

2008, followed by a rapid decrease in the following years. However, this trend has been

slowed down to 9,150,000 with a promotion rate of 75% (China Education Online, 2013).

3.2.1: Demand and supply of local education

Figure 5 indicates that Beijing experiences a continuing decline in the number of students

attending NCEE in the past few years, while Guangdong shows an upward tendency. Until

2014, the number of students attending NCEE in Guangdong (727,000) is almost ten times

that in Beijing (72,736). While according to National Bureau of Statistics (2013), the

available places offered by official higher education institutions in Guangdong (501,900)

were only triple that of Beijing (158,600).

2008 2009 2010 2011 2012 2013 20140

10

20

30

40

50

60

70

80

Beijing Guangdong

Figure 5- The annual number of students attending NCEE (10000 persons) 9

Since students set for NCEE have different exam papers in Beijing and Guangdong (Gareth,

Chuan and Louise, 2007), it results in a certain degree of immobility for students from

different provinces. Therefore, there could be an excess of supply for higher education in

Beijing and an excess of demand in Guangdong: universities and colleges in Beijing do not

have enough local students to fill the spaces, while the competition among students in

Guangdong is becoming increasingly fierce.

9 See Appendix 5. National College Entrance Examination

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1) The excess supply in Beijing

Figure 6 indicates that the places available in universities and colleges are more than the total

amount of graduates from high schools and secondary vocational schools in Beijing, which

implies the excess supply for higher education.

2005 2006 2007 2008 2009 2010 2011 201202468

1012141618

Graduates from high schools and secondary vocational schoolsUniversitiy and college enrollment

Figure 6- The excess supply of higher education in Beijing (10000 persons)10

There are two main reasons:

a) The decreasing birth rate since the 1960s

Figure 7 indicates the decreasing birth rate. Notice that the birth rate in Beijing has always

been lower than the national level. After reaching a peak of 43.4% in 1963, the annual birth

rate in Beijing started to decline over the years. During the 1990s, it steadily decreased by

5%-10%. This contributed to the decreasing number of students attending NCEE in the

2000s, in Beijing and in China as a whole.

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

0

10

20

30

40

50

Beijing Guangdong National

Figure 7- Birth rate (%)11

10 See Appendix 6. The secondary and higher education in Beijing and Guangdong11 See Appendix 4. Population of Beijing and Guangdong

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b) The stable resources in higher education institutions

In Beijing, while the amount of graduates from high schools and secondary vocational

schools was decreasing between 2005 and 2012, the higher education enrolment was stable

over time. This resulted in a relatively larger supply of higher education.

2) The excess demand in Guangdong

Figure 8 below shows that the places available in universities and colleges could not catch up

with the total amount of graduates from high schools and secondary vocational schools,

causing the excess demand of higher education. Notice that this imbalance becomes more

significant over years.

2005 2006 2007 2008 2009 2010 2011 20120

20

40

60

80

100

120

Graduates from high schools and secondary vocational schoolsUniversitiy and college enrollment

Figure 8- The excess demand for higher education in Guangdong (10000 persons)12

There are two main reasons:

a) The development of the Pearl River Delta13

From Figure 9 we can see how fast the population in Guangdong grew compared with

Beijing, which offset the impact of the decreasing birth rate. After 1978, the improvement in

coastal cities provided many work opportunities, resulting in a large labour force near

Guangdong, with children who were at school age. Besides, this development also called for

more skilled workers, therefore stimulated the demand for education. MOE (2012) reported

12 See Appendix 6. Local supply and demand for higher education in Beijing and Guangdong13 Pearl River Delta refers to the mid-southern part of Guangdong, including nine cities.

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that there are more than 1,600,000 workers from other provinces receiving higher education

in Guangdong during their employment.

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

0

2000

4000

6000

8000

10000

12000

Beijing Guangdong

Figure 9- Total number of permanent population (10000 persons)14

b) The settlement policies

The Hukou policies made it easier for immigrants to settle in Guangdong, and also for non-

local children to receive mandatory education (Guangdong Government, 2013). The inflow

of immigrants has offsetting and stronger influences than the decreasing birth rate, thus

resulting in an increasing number of students attending NCEE.

3.2.2: Local education funds and student structures

As shown by Figure 10, the level of education funding in Guangdong has increased over

time, which indicates that the education situation still has strong potential for development;

while in Beijing the education industry is relatively mature and stable. Notice that 77.05% of

higher educational institutions in Beijing are universities, while in Guangdong the proportion

is merely 44.62%15. We can therefore expect to see the Guangdong government invest more

in education.

14 See Appendix 4. Population 15 In China, official higher educational institutions include universities (4-year) and associate college (3-year). Generally speaking, universities have higher entry requirement and enjoy better reputation.

Page | 22

2002 2003 2004 2005 2006 2007 2008 2009 20100

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

Beijing Guangdong

Figure 10- Total public education funds (10000 RMB) 16

Figure 11 reveals a surprising fact about educational expenditure per students that in Beijing

students it is 3.85 times than in Guangdong in 2010, and 6.72 times in 2004! The less

educational resources that students can access domestically, the stronger the incentive to

study abroad. Therefore agencies in Guangdong have more potential customers than Beijing.

2002 2003 2004 2005 2006 2007 2008 2009 20100.0000

5000.0000

10000.0000

15000.0000

20000.0000

25000.0000

30000.0000

35000.0000

Beijing Guangdong

Figure 11- Educational expense per student (RMB)17

Figures 12 and 13 indicate the student structure in Beijing and Guangdong. Given that

Beijing has more resources in higher education, and Guangdong has more in basic education, 16 See Appendix 7. Local education funds of Beijing and Guangdong17 See Appendix 7. Local education funs of Beijing and Guangdong

Page | 23

the largest student group in Beijing comes from universities and colleges while that in

Guangdong is from primary schools.

11%

24%

11%15%

39%KindergratenPrimary SchoolMiddle Scool High SchoolUniversity and College

Figure 12- Student structure in Beijing in 2010 (National Bureau of Statistic of China, 2013)

14%

36%

21%

20%

9%

KindergratenPrimary SchoolMiddle Scool High SchoolUniversity and College

Figure 13- Student structure in Guangdong in 2010 (National Bureau of Statistic of China, 2013)

For undergraduates and postgraduates (who are the two largest groups of overseas study),

39% of students come from universities and colleges in Beijing, compared with 9% in

Guangdong; and 20% of students in Guangdong come from high schools, compared with

15% in Beijing. Therefore, we suggests that agencies in Beijing are more likely to have

students seeking for postgraduate study, who have enjoyed undergraduate education in local

higher educational institutions; and agencies in Guangdong tend to have more students

Page | 24

looking for overseas education at undergraduate level, given the fiercer competitions for

places in local universities.

Compared to their peers in other provinces, children in Beijing and Guangdong study foreign

languages earlier and have more extracurricular activities. For instance, the Beijing

government invests five hundred million RMB to improve students’ after-school activities

(Beijing Government, 2014). Another example is that the standard of English listening-

speaking test in Guangdong stands out among other provinces (Zhong, 2013). As a result,

students’ ability and intent to pursue international education is relatively stronger. However,

when we specifically compare these two provinces, it indicates that students in Guangdong

have stronger incentive to study overseas and thus the demand for agencies is larger.

3.3: Social environments of international education

The main characteristics of overseas study in these two provinces are fairly different: there is

an overseas-study service industrial association in Beijing, while Guangdong is known for

having the earliest Chinese students abroad and the largest group of overseas Chinese.

3.3.1: The industrial association in Beijing

Following the natural development of the market economy, the Beijing Overseas-Study

Service Association (BOSSA) was established in 2004. As the only industrial association in

overseas-study service market, BOSSA features:

1) Non-governmental and autonomic organisation

Run by civilian sectors, and guided by MOE as well as the Beijing Municipal Commission of

Education, BOSSA is an independent and non-political industrial association. At present, it

represents 72 organisations within the local member network including seventy agencies, one

bank and one insurance company (BOSSA, 2013).

BOSSA is given self-management in terms of organisational staffing and expenditure

planning. Its central authority system includes a board of directors and an executive council;

Page | 25

its administrative departments include the secretariat, training department, legal affairs

department and member service department (BOSSA, 2012).

Hayek (1973) has described rules of two kinds, including internal and external rules. The

former includes custom and group rules and is the foundation of the latter which includes

laws and legal terms. The regulations set by BOSSA are typically “internal rules” resulting

from the commitment of its members, aiming at the promotion of institutions and the balance

of the industry as a whole. Nevertheless, being a non-government institution without

obligatory arbitration, the governmental supervision is still of great significance to bring

these commitments and standards into play.

2) Mediator

Binding rules without social acceptability and conscious abidance cannot be binding for long.

As a mediator, BOSSA provides a platform for its members to communicate with each other

and approach internal consensus: it integrates institutions’ collective viewpoints and reflects

them to the government sectors, while helping to implement the relevant policies. Thus most

regulations come from rational negotiations and compromise. And once they are formed, they

can be tolerated by all agents without too much enforcement. In other words, when the

government supervises this market, the relevant laws are in fact not externally determined but

internally determined via multiple checks and balances. Therefore these spontaneous

regulations can be beneficial and long-lasting.

Meanwhile, BOSSA delivers the message to agencies that only by implementing the

industrial regulations can they achieve higher profits, Therefore its members are not only

“purpose-seeking” but also “rule-following”(Hayek, 1979), the constraining rules that

maximise the wealth or utility of principal (North, 1981, pp. 201-202). In the absence of a

perfect legal system, BOSSA plays a significant supplementary role, and helps maintain the

order in this market via self-regulation among the agencies.

3) Commonweal and non-profit purpose

A community of interest includes all agents in the society and those of a particular group of

people. Hegel (1991) recalled that manufacturing unions have special interest elements.

Page | 26

BOSSA as an industrial association, likewise, aims to preserve the legitimate rights of its

members and help improve their values.

Unlike traditional education supported by the government, which is supposed to maximise

the overall social welfare (Marginson, 2011), overseas-study services are mainly provided by

profit-targeting agencies. To help promote its members’ business, BOSSA acts as a

communicator with foreign schools: it obtains valuable information from abroad and

introduces qualified agencies to the overseas market.

For BOSSA itself, the non-profit purpose distinguishes it from other for-profit institutions.

By collecting membership fees to support daily operations, BOSSA engages in non-profit

activities such as holding exhibitions of overseas study, providing information about agencies

and dealing with complaints from consumers. Moreover, although the member make-up of

BOSSA indicates its main force in the local market, some of these agencies have branches in

other provinces, thus the benefit does not remain to Beijing.

The contribution it has made to the overseas-study service industry is significant. In 2011, it

collectively helped 115,000 Chinese students go abroad, which comprised 33.8% of the total

amount nation-wide (BOSSA, 2013). In the future, we expect to see BOSSA continue

implementing its role in the Beijing overseas-study service market, and enlarge its scope

towards other provinces as well as cooperating with other industries.

3.3.2: The old story and new regulations in Guangdong

Guangdong is known as ‘the hometown of the overseas Chinese’. The earlier overseas trade

and immigrants began in the late Tang dynasty and early Son dynasty (BC 907-BC 960)

(Guangdong Government, 2011).

Since the First Opium War (Britain’s invasion of China, 1840-1842), there have been two

main ways for Chinese people to travel abroad: one is free immigration owing to self-

willingness, and the other is contract immigration due to development of colonies of western

countries. The latter accounted for 3 million and 70% of them were locals of Guangdong.

Page | 27

After the adjustments to the Chinese immigration policy in the 1970s, there was another huge

increase in the number of immigrants living, working and studying abroad, mostly to

America, Canada and Australia. According to the data of the Guangdong Government (2011),

the amount of Guangdong citizens resident abroad now numbers 30 million, still ranked

among the Chinese provinces. With respect to students, we can know from history that the

first group of Chinese children studying abroad was appointed by the Qin government: 70%

of them (83/120) came from Guangdong. Moreover, the first individual student abroad

Ronhong was also from here 160 years ago (Hanchai, 2008).

These facts and figures reveal that the locals of Guangdong, especially those speak

Cantonese, Teochew and Hokkien, have a long history of going abroad, both for working and

studying18. As reconfirmed by any studies (Cheng and Ngok, 2013, p.115; Ken and Weihua,

2009; Liu, 1998), Guangdong is therefore the largest “hometown” province for Chinese

immigrants and overseas Chinese students.

Despite the long history of living and studying abroad, there are merely 27 official agencies

in this province (1/3 of the amount in Beijing). One explanation lies in the “out-of-list”

institutions. According to the relevant regulations by MOE (1999), the overseas-study

services from the branches of famous agencies, which mostly have parent companies in other

provinces, are not included in the official list if they do not have the licence to run their

business in Guangdong.

To cope with the speedy increase in demand and the expansion in the supply side, the

Department of Education of Guangdong Province (2013) announced a set of new regulations

to help manage the local overseas study service industry. Here we analyse some of the key

clauses:

1) Right of approval is delegated

In the past, only MOE possessed the authority to approve overseas-study service agencies.

Now, it delegates the authority for examination and approval to the Guangdong government.

As suggested by Glaeser et al (2004), democratisation and constraints do not necessarily

18 This remains me of an interesting experience of walking in the Chinatowns of western cities such as London and Paris: I found that most Chinese people there are using local languages of Guangdong, and the number of Cantonese style restaurants ranks the first among other Chinese eating places in foreign countries.

Page | 28

come first, in terms of security of property and economic development. We expect that this

good-for growth clause will allow more local agencies to obtain the official licences,

accumulate capital and develop more quickly.

2) The deposit requirement is higher

In terms of reserve funds, the office space and the number of staff, the requirements are

higher than previous regulations set out under MOE. Based on Lipset’s (1981) viewpoint of

an underdeveloped market, it is beneficial to accumulate capital via dictatorships and

increasingly improve its institutions as it becomes richer. This sets challenges for small and

new competitor agencies, but protects the rights of consumers and improves the quality of the

local market.

3) The management of the behaviour of the agencies

The agencies are not allowed to organise language training foundation courses (unless they

apply for another license in teaching), nor to hold recruitment fairs or other activities in

schools. Since some relatively mature agencies extended their range of services to training

and invited representatives from foreign schools to give speeches, this term rules out such

possibilities. In some sense, by restricting the scope of the business, the new regulations set

up many barriers for the development the local overseas-study service market.

Since the new regulation was brought in and implemented on 15th January 2014, the specific

impacts it has are still unclear by now. On the one hand, it facilities quicker procedures for

unregistered agencies to become formal while raising the entry requirements for this market;

on the other hand, it also set more detailed rules for registered agencies in their business

activities, which help maintain the order in the overseas-study market and encourage agencies

to improve their essential roles. Nevertheless, we expect to see an increase in the quantity of

agencies in Guangdong, with higher quality and expect to see a more efficient and

competitive market.

Page | 29

Conclusion

This essay originated from the increasing number of Chinese students going abroad, and

analysed the why, how and where of this expansion. We see this trend as a result of changes

to policies of openness, the wealth of the middle class, the transformation of education

systems and the demand for education. We also find that the destinations of the majority of

Chinese students are English-speaking countries, and summarised the main channels used to

start their overseas study.

Then we looked at the overseas-study service agencies, which have an important role to play

in helping students fulfil their applications. The encouraging policies raised the demand for

overseas education and boosted the development of these agencies. In return, agencies have

made contributions to improving social efficiency and accumulating human capital. However,

there problems still remain such as unreasonable prices and insufficient quality, requiring the

inclusion of more detailed regulations.

When looking specifically at two regions, Beijing and Guangdong, we noticed that while the

higher level of capital provided more opportunities for agencies in Beijing, those in

Guangdong face a higher demand for overseas education. Besides, in terms of the target

market, Beijing agencies are suggested to put more marketing weight on post-graduate

applications or above, while Guangdong agencies receive relatively more undergraduate

applications. With regard to the social environment, the local market in Beijing is more

mature and has developed an industrial association; while Guangdong agencies are facing

new regulations and expect to see an increase in the quantity and quality of these institutions.

The overseas-study service industry is new in China, and the actual situation of supply and

demand and the interaction between government and agencies make this market fairly

dynamic. Further studies could focus on the Industrial Organsation Theory in greater depth.

Page | 30

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Appendix1. Map of China

Figure 14- Map of China

2. Data of Chinese people studying abroad

Year Annual number Annual Growth rate

2002 12.51 -0.066496164

2003 11.73 -0.022667829

2004 11.47 0.000189526

2005 11.85 0.115671642

2006 13.4 0.078358209

2007 14.45 0.244290657

2008 17.98 0.275305895

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2009 22.93 0.241604884

2010 28.47 0.19318581

2011 33.97 0.176332058

2012 39.96

Figure 15- Annual number and annual growth rate of Chinese students going abroad (10000 persons)

Resource: National Bureau of Statistics of China, 2013

Solution: Annual change level of the number of students going abroad= (The number of students going abroad

this year – The number of students going abroad last year)/The number of students going abroad last year

3. GDP in Beijing and Guangdong

BeijingGDP (billion RMB) 4315 5007.21 6033.21 6969.52 8117.78 9846.81 11115 12153.03 14113.58 16251.93Population (billion persons) 0.1423 0.1456 0.1493 0.1538 0.1601 0.1676 0.1771 0.186 0.1962 0.2019GDP per capita 30323.26 34390.18 40409.98 45315.47 50704.43 58751.85 62761.15 65338.87 71934.66 80494.95

GuangdongGDP (billion RMB) 13502.42 15844.64 18864.62 22557.37 26587.76 31777.01 36796.71 39482.56 46013.06 53210.28Population (billion persons) 0.8842 0.8963 0.9111 0.9194 0.9442 0.966 0.9893 1.013 1.0441 1.0505GDP per capital 15270.78 17677.83 20705.32 24534.88 28159.03 32895.46 37194.69 38975.87 44069.59 50652.34

Figure 16: Data of GDP per capita (in RMB)

Resource: National Bureau of Statistics, 2013

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.000

10000.000

20000.000

30000.000

40000.000

50000.000

60000.000

Beijing Guangdong

Figure 17- GDP in Beijing and Guangdong (Billion RMB)

Page | 37

4. Population in Beijing and Guangdong

Year Beijing Guangdong

1960 732 3,995.10

1961 721 4,035.70

1962 723.6 4,134.90

1963 747.4 4,247.30

1964 765.4 4,347.50

1965 776.3 4,231.30

1966 771 4,347.00

1967 782 4,456.00

1968 782 4,586.00

1969 767 4,702.00

1970 771 4,811.00

1971 782.8 4,947.60

1972 793 5,057.10

1973 806.2 5,175.20

1974 814.7 5,268.40

1975 822.6 5,355.30

1976 828.8 5,427.10

1977 838.4 5,501.90

1978 849.9 5,592.60

1979 870.8 5,680.80

1980 886 5,780.20

1981 901.9 5,884.10

1982 919 5,986.70

1983 933.5 6,074.80

1984 947.1 6,165.90

1985 960.3 6,253.10

1986 975.1 6,346.30

1987 1,067.00 6,447.00

1988 1,081.00 5,928.00

1989 1,037.00 6,025.00

1990 1,086.00 6,346.00

1991 1,094.00 6,439.00

1992 1,102.00 6,525.00

1993 1,112.00 6,607.00

1994 1,125.00 6,689.00

1995 1,251.00 6,868.00

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1996 1,259.00 6,961.00

1997 1,240.00 7,051.00

1998 1,246.00 7,143.00

1999 1,257.00 7,270.00

2000 1,364.00 8,650.00

2001 1,385.00 8,733.18

2002 1,423.00 8,842.08

2003 1,456.00 8,962.69

2004 1,493.00 9,110.66

2005 1,538.00 9,194.00

2006 1,601.00 9,442.00

2007 1,676.00 9,660.00

2008 1,771.00 9,893.00

2009 1,860.00 10,130.00

2010 1,961.90 10,440.96

2011 2,018.60 10,504.85

2012 2,069.30 10,594.00

2013 2,114.80 10,644.00

Figure 18: Data of total permanent popluation (10000 persons)

Resource: China Data Online, 2014

Year Beijing Guangdong National

1960 33.32 18.72 20.86

1961 25.73 21.27 18.13

1962 35.7 43.31 37.22

1963 43.4 39.17 43.6

1964 30.51 36.74 39.34

1965 23.1 36.28 38

1966 19.51 33.5 35.21

1967 18.15 31.97 34.12

1968 23.79 33.76 35.75

1969 22.32 33.74 34.25

1970 20.68 32.57 33.59

1971 18.85 31.41 30.74

1972 17.91 29.8 29.92

1973 15.8 28.66 28.07

1974 12.05 26.16 24.95

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1975 9.94 23.1 23.13

1976 9.08 21.37 20.01

1977 10.25 20.98 19.03

1978 12.94 22.56 18.25

1979 13.72 23.81 17.82

1980 15.58 23.34 18.21

1981 17.65 24.99 20.91

1982 20.82 23.24 22.28

1983 15.62 21.15 20.19

1984 15.44 20.9 19.9

1985 14.43 15.68 21.04

1986 13.41 22.15 22.43

1987 17.83 22.18 23.33

1988 14.4 20.9 22.37

1989 12.84 20.27 21.58

1990 13.01 22.26 21.06

1991 8.03 20.54 19.68

1992 9.22 19.31 18.24

1993 9.35 18.34 18.09

1994 8.96 18.2 17.7

1995 7.92 18.1 17.12

1996 8.02 18.05 16.98

1997 7.91 16.9 16.57

1998 6 16.51 15.64

1999 6.5 15.32 14.64

2000 6.2 15.32 14.03

2001 6.1 13.95 13.38

2002 6.6 13.29 12.86

2003 5.1 13.66 12.41

2004 6.1 13.13 12.29

2005 6.29 11.7 12.4

2006 6.26 11.78 12.09

2007 8.32 11.96 12.1

2008 8.17 11.8 12.14

2009 8.06 11.78 11.95

2010 7.48 11.18 11.9

2011 8.29 10.45 11.93

2012 9.05 11.6 12.1

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2013 8.93 10.71 12.08

Figure 19: Birth rate (%)

Resource: China Data Online, 2014

5. National College Entrance Examination

The National College Entrance Examination ( NCEE), commonly known as Gaokao (高考), is a prerequisite for

entrance into almost all higher education institutions at the undergraduate level, held annually in People's

Republic of China.

Year Beijing

Guangdon

g

2014 7.05 75.6

2013 7.27 72.7

2012 7.34 69.2

2011 7.6 65.5

2010 8.1 61.5

2009 10.1 64.4

2008 11.8 61.4

Figure 20: Data of students attending NCEE in Beijing and Guangdong (10000 persons)

Resource: Gaokao Education Online, 2014

6. Local supply and demand for higher education in Beijing and GuangdongBeijingYear 2005 2006 2007 2008 2009 2010 2011 2012Graduates from high schools 7.33 7.8 7.84 7.85 7.01 6.23 5.83 5.57Graduates from secondary vocational schools 6.18 6.1 6.06 5.49 5.68 5.13 5.11 5.89Total Graduates 13.51 13.9 13.9 13.34 12.69 11.36 10.94 11.46

University and college enrollment 15.89 15.41 15.74 15.61 15.98 15.51 15.69 15.86

Excess supply 2.38 1.51 1.84 2.27 3.29 4.15 4.75 4.4

Figure 21: The number of different student groups in Beijing


Page | 41

GuangdongYear 2005 2006 2007 2008 2009 2010 2011 2012Graduates from high schools 37.44 42.99 48 53.49 56.9 56.76 63.09 68.85Graduates from secondary vocational schools 18.91 19.83 22.15 24.53 27.77 33.17 36.64 41.92Total Graduates 56.35 62.82 70.15 78.02 84.67 89.93 99.73 110.77

University and college enrollment 30.7 33.93 35.18 38.45 43.59 43.73 46.87 50.19

Excess demand 25.65 28.89 34.97 39.57 41.08 46.2 52.86 60.58

Figure 22: The number of different student groups in Guangdong


7. Local education funds of Beijing and Guangdong

BeijingYear 2002 2003 2004 2005 2006 2007 2008 2009 2010Universities and colleges 39.57 45.45 49.95 54.83 56.58 57.82 58.56 58.67 58.71High school students 20.86 20.86 20.86 20.86 19.91 18.78 17.46 16.16 16.18Middle school students 22.07 25.1 17.48 27.84 25.94 24.38 21.92 20.35 19.84Secondary vocational school students 30.23 30.23 30.23 30.23 30.23 30.23 30.23 30.23 30.23Primary school students 59.42 54.65 51.6 49.45 47.33 66.66 65.95 64.71 65.33Total number of Beijing students 172.15 176.29 170.12 183.21 179.99 197.87 194.12 190.12 190.29

GuangdongYear 2002 2003 2004 2005 2006 2007 2008 2009 2010Universities and colleges 46.78 58.78 72.69 87.47 100.86 111.97 121.64 133.41 142.66High school students 98.41 113.72 131.31 148.99 163.46 172.43 181.76 192.44 208.95Middle school students 71.02 71.02 71.02 71.02 80.84 90.76 100.08 120.46 154.78Secondary vocational school students 479.06 479.06 479.06 479.06 479.06 479.06 479.06 479.06 479.06Primary school students 979.61 1025.4 1049.6 1067 1057 1017.6 956.47 887.65 848.55Total number of Guangdong students 1674.9 1748 1803.7 1853.6 1881.2 1871.8 1839 1813 1834

Figure 23: Data of local student numbers


Public funds (RMB)Year 2002 2003 2004 2005 2006 2007 2008 2009 2010Beijing 3538686 3928774 4492628 5227188 3374329 4077284 4690166 5289432 6134448Guangdong 5203412 6222727 7087101 8066357 8654359 10734751 11661554 12843085 15327348

Figure 24: Data of public funds


Page | 42

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010Funds per student in Beijing 20555.8292 22285.85853 26408.58 28531.13 18747.31 20605.87 24161.17 27821.54 32237.36Funds per student Guangdong 3106.7372 3560.014302 3929.202 4351.795 4600.422 5734.866 6341.213 7083.808 8357.333

6.61653301 6.26004747 6.721106 6.556174 4.07513 3.593087 3.810181 3.927484 3.857375

Figure 25: Funds per Beijing student/Funds per Guangdong student

Source: National Bureau of Statistic of China, 2013

Solution: Educational expense per students=Total public education funds/ Total number of students

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Extended essay

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