December 2009
CRDHE Working Paper Vol.3

System Differentiation and Funding Shifts in Chinese Higher Education

Liu Wenjun

Center for Research and Development of Higher Education
The University of Tokyo

CRDHE Working Paper Vol.3
System Differentiation and Funding Shifts in Chinese Higher Education
Liu Wenjun
Published and Edited byCenter for Research and Development of Higher Education, The University of Tokyo
7-3-1 Hongo Bunkyo-ku,Tokyo 113-0033,Japan
TEL:+81-5841-2390
FAX:+81-5841-2316
http://www.he.u-tokyo.ac.jp/

December 20092

System Differentiation and Funding Shifts in Chinese Higher Education
Liu Wenjun＊

Contents
1. Introduction
2. Quantitative Expansion and Structural Transformation in Higher Education
3. Funding of Higher Education
4. Differentiation in the Higher Education System
5. Funding Shifts and Their Consequences
6. Policy Implications

Research Fellow, Center for Research and Development of Higher Education, The
University of Tokyo.
＊

3

System Differentiation and Funding Shifts in Chinese Higher Education
Liu Wenjun

Since the end of the 1990’s, higher education in China has seen a remarkable
expansion. Through this process, the higher education system has become moredifferentiated and hierarchical. This change was accompanied by a significant shift in
the funding mechanism in the direction of further reliance on markets. This paper
analyzes the process of system differentiation and funding shifts, and the relation
between the two, and then examines the consequences and issues connected with thesechanges.

1. Introduction
After moderate growth in the 1980s, expansion of higher education in China
accelerated in the 1990s, and with 1999 as a turning point, entered into a period of great
expansion associated with dramatic changes. Enrollments in institutes of higher
education posted double-digit increases between 1999 and 2004, and have continued to
grow thereafter. Consequently, the number of students enrolled in higher education
showed an explosive growth of over five times from 3.41 million in 1998 to 17.39
million in 2006. Thus, higher education in China has achieved a remarkable quantitative
expansion, while differentiation in the higher education system has developed rapidly,
resulting in a clearer hierarchical structure. Along with progress in the market-based
approach and system differentiation, funding and financial allocations in higher
education have also undergone a significant transformation. This paper first outlines thequantitative expansion and changes in the financial structure of higher education in
China, and then analyzes system differentiation and structural shifts in funding in higher
education, and finally considers the policy implications of these.
2. Quantitative Expansion and Structural Transformation in Higher Education
Since the 1980s, higher education in China has steadily developed and expanded
against the backdrop of the country’s economic development. During this period of overtwo decades, quantitative expansion has been accompanied by a string of trial-and-error

4experiences as well as various institutional reforms. Two guidelines announced
respectively in the 1980s and the 1990s, namely, the “Decision on the Reform of the
Educational System” (1985) and the “Outline for Educational Reform and Development
in China” (1993), were the most important policy papers setting the tone for reforms inhigher education in China. In line with the basic policies of reform enunciated by thesetwo policy papers, such as “transfer of control from the central government to local
governments,” “expansion of local autonomy” and “diversification of fundraisingroutes,” higher education in China drastically cast off the previous systemcorresponding to the planned economy and gradually transformed the system to one
adaptable to a market-oriented economy. Cited behind the explosive expansion of higher
education in the 1990s were factors such as an acceleration of demand for a higher levelof education associated with China’s economic development, macroeconomic policy
intentions to expand domestic demand amid the Asian currency crisis, and labor market
measures to prolong the period of education of young people in order to tide over theslowing demand for labor. Having said that, it was not that there was a social consensus
concerning the rapid expansion of higher education, and heated arguments for andagainst ensued among researchers. The Chinese government did not necessarily have awell thought-out higher education expansion program, and the fact that the actual speedof the expansion was much faster than the government had expected is reflected invarious policy papers. In reality, the new higher education system had been formed
through various reforms undertaken since the 1980s and contained within itself theconditions for a great expansion or had reached the stage where it had no choice but toexpand greatly. These aspects should not be neglected as factors behind the great
expansion of higher education in China.
Institutes of higher education in China can be broadly classified into “regularcourses,” the equivalent of four-year universities in Japan, and “special courses,” which
are similar to junior colleges and vocational colleges in Japan, ordinarily having a
two-year duration of schooling. In China, in addition to the universities directly
controlled by the Ministry of Education, there also are universities established by othercentral government ministries such as the Ministry of Public Health and the Ministry ofAgriculture (the equivalents of ministries and agencies in Japan) and universities
administered by local governments. Most of the universities under the administration ofcentral government agencies are categorized as “National Key Universities,” while
universities controlled mainly by local governments are regarded as “general
universities” However, the National Key Universities in Chinese higher education havebeen so termed principally because they are closely related to nation-building, such as

5

infrastructure construction, national defense, and agriculture, and as such do notnecessarily represent higher levels of academic research or difficulty of entrance.
Comparing the number of schools by classification, out of a total number of 1,075
universities in 1989, the number of universities administered by central government
agencies stood at 353, accounting for a little over one-third of the total. In the wake ofthe reform of higher education, universities under the control of the central government
were gradually transferred into the hands of local governments. In particular, thesweeping restructure of China’s central administrative organizations reduced thenumber of central government ministries and agencies from 40 to 29. Universities
previously administered by the consolidated central government agencies weretransferred to local governments along with the reorganization of universities under thecontrol of the Ministry of Education. As a result, between 1998 and 2000, the number offour-year universities and vocational colleges administered by central government
agencies declined sharply from 220 to 105 and from 48 to 11, respectively. All thesedevelopments resulted in the formation of a changed proportion of universities
administered by the central and local governments. As of 2005, there were 104
four-year regular course universities and seven special course vocational colleges under
the administration of central government agencies, while there were 597 regular course
universities and 1,084 vocational colleges controlled by local governments, rendering
the comparison of schools simply according to administration by the central or local
governments no longer meaningful. The “Higher Education Law of the People’s
Republic of China” and the “Action Plan for Invigorating Education Towards the 21stCentury,” both adopted in 1998, and the “Decision on Deepening Educational Reformand Pushing Ahead with Education for All-around development ” of 1999 emphasized
the role of provincial governments in the establishment and management of institutes ofhigher education. Regarding the authorized numbers of students to be recruited forhigher education, previously under the rigid control of the central government, theauthority to make decisions concerning student enrollment numbers in special courses
was ceded to local governments. These changes also proved to be important factors
encouraging the great expansion of higher education that took place from 1999
onwards.

6

Figure 1: Changes in Shares of Institutes of Higher Education by Classification(1998-2006)
Four-year universities administered by the central government (National Key Universities)
Regular course universities administered by local governments (general universities)
Special course schools administered by the central governmen
Special course schools administered by local governments

100%
105
90%

220

100

103

104

104

104

526

540

580

597

7

7

7

80%
497

70%
60%
50%

371

390

494
8

11
48

106

207

41

604

5

11

40%
759

901

1040

1084

617

2001

2002

2003

2004

2005

30%
20%

383

433

431

1998

1999

2000

898

10%
0%
2006

Source: Development and Planning Department, Ministry of Education, China
Educational Statistical Yearbook, 1999-2007
Note: Figures in the graphs indicate the number of schools.
Under these circumstances, as shown in Figure 1, the number of special course
schools under the administration of local governments increased by approximately 700
from 383 to 1,084 during the seven years from 1998 to 2005, a prodigious pace of an
average 100 schools per year. The number of regular course universities also increased
by 226 during the same period. In terms of the capacity to accept students (Figure 2), in
1986, the student enrollment was larger at four-year regular course universities than at
special course schools, and more students enrolled in four-year universities
administered by the central government than in four-year universities administered by
local governments. To summarize, until the 1990s, increases in enrollment were larger
at universities administered by local governments when comparing institutes

7

administered by the central or local governments, and larger at regular course
universities when comparing regular and special courses. However, the great expansion
in higher education from 1999 brought about a significant alteration in this composition.
For example, between 1998 and 2005, the student enrollment at special course schools
administered by local governments increased some six-fold from 370,000 to 2.2 million,
grew by some fourfold from 380,000 to 1.56 million at regular course universities
administered by local governments, but rose by only 120,000 from 270,000 to 390,000
at regular course universities administered by the central government. Further, in 2005
the enrollment at special course schools administered by the central government
actually declined to a mere 30,000. Thus, the great expansion in higher education was
clearly propelled by regular and special course universities administered by local
governments.
Figure 2: Changes in Enrollment at Institutes of Higher Education by Classification(1986-2006, 10,000 persons)
500
450

Regular course universities administered by the central government(National Key Universities)

400

Regular course universities administered by local governments(general universities)

350

Special course schools administered by the central government

41
39
38
36

300

Special course schools administered by local governments

156

35

146

33

250

132

105
150

34

100
50
0

20

22

23

39

31

28

27

86

59

17
38
18 19
23 27
19
18
16
15
8 99
14
17
14
13 14
13 12
9 37 6 53
10
35 35
34 33
22 6 23 6 23 6 30 37

3

123

30

200

182

2

4
5

6

5

6
124 142171

197

220 225

1986 1989 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: Development and Planning Department, Ministry of Education, China
Educational Statistical Yearbook, 1987-2007

8

3. Funding of Higher Education
Progress in the massification of higher education in tandem with the tide ofglobal marketization is one of the important characteristics of China. Here, we first takea look at the structural shifts in the funding of Chinese higher education during theperiod of great expansion.
Figure 3: Ratio of Government Expenditures on Higher Education to GDP (%)
1.7
CanadaFranceGermany
USA
Australia
UK
China
Japan
South Korea

1.5
1.3
1.1
0.9
0.7
0.5
0.3
1997

1998

1999

2000

2001

2002

Sources: Fumihiro Maruyama, “Funding of Higher Education and University Tuition Fees,”
University Finance and Management Research, No. 2, 2005, p. 31; Min Weifang and Wang Rongeds., Chinese Education and Human Resources Development Report, 2005-2006, 2006, p.72

As shown in Figure 3, the ratio of government expenditures on higher
education to GDP in China, which was less than 0.5% in 1998, exceeded 0.6% in 2001,
but still lagged far behind the industrial countries of Europe and North America. The
Chinese ratio was higher than those of Japan and South Korea, but in these twocountries, enrollments in private institutes of higher educational account for 80% of thetotal enrollment, with private-sector funds playing a significant role despite the lower
ratio of government expenditures to GDP. In the case of China, however, national andother public universities account for the dominant proportion, resulting in a muchstronger demand for public expenditures. This also means that there are significant
constraints on government expenditures on higher education.
The rapid growth of higher education in China can also be described as having
been facilitated by the forces of marketization. Kaneko (2004, p. 6) suggested that the9marketization trends of higher education in various countries involve three aspects:
beneficiary liability; introduction of competition and evaluation; and diversification offunding sources and fund supply routes. Similar developments were also seen in China.
The system of levying tuition fees for higher education, introduced in 1989, was fully
enforced in 1997. Competition for research achievements was also institutionalized, andeconomic incentives were provided for individuals. Under these systems, subsidies forcompetitive research projects expanded markedly from the late-1990s. At the same time,
funding sources and fund supply routes were diversified in order to draw on funds otherthan governmental funds. Not a few of the venture businesses established byuniversities in the late-1980s and early-1990s developed into large enterprises in thelate-1990s, and profits earned by these venture businesses have become sources ofrevenue for universities. In addition, an attempt was also made to proactively obtain
donations from the private sector. The enactment in 1999 of the Law of the People’s
Republic of China on Donations for Public Welfare Undertakings raised expectations
concerning the promotion of donations to higher education. Thus, market principles
were introduced into Chinese higher education in various ways during the period ofgreat expansion.
Revenue structure changes in national and other public institutes of higher
education (Figure 4) indicate that while government subsidies steadily increased, as
total revenues expanded simultaneously, the ratio of subsidies to total revenue declined
substantially from around 80% in 1997 to less than 50% in 2005. In contrast, revenues
from tuition fees as well as miscellaneous revenues and donations have increased
significantly. However, high tuition fees have reached maximum levels affordable byhouseholds after spiraling rises in recent years, leaving little room for further increases.
Thus, on the one hand, the government sector’s fiscal capacity has failed tokeep up with the rapid pace of expansion in higher education, making it necessary toraise funds for higher education through diversified means. On the other, the situation
has raised the important policy issue of how the relatively shrinking fiscal expenditures
are to be efficiently and rationally allocated to fund the bloated higher education system.

10

Figure 4: Shares of Revenues at National/Public Institutes of Higher Education by
Source (1997-2006)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Donations and Fund-Running Schools
Funds of Social Organizations and Citizens for Running Schools
Others Educational Funds
Tuition and Miscellanecous Fee
Government Appropriation for Education

Source: Development and Planning Department, Ministry of Education, China
Educational Statistical Yearbook, 1998-2007
4. Differentiation in the Higher Education System
As described above, there was not necessarily a consistent policy concerning the
expansion of the scale of higher education in China. Yet, it is also true that there was acertain policy direction concerning the structure of higher education. The period
following the late-1990s was a period of great expansion in higher education as well asa period of differentiation in the higher education system.
4.1 Specialization in Special Course Vocational Education: The Distinction between
Special Courses and Regular Courses
Special course education, developed since the 1950s, represented one type of11

specialized higher schools. While the status of these schools as short-term institutes ofhigher education is low relative to four-year regular course universities, the educational
content was in many cases simply a shortened and popular version of what was taught
in regular course education. In the early 1980s, short-term vocational colleges were
newly established in the wake of the reform of the education system, with a tendency tolink special course education to the fostering of specialist technical human resources for
actual production and business operations becoming increasingly noticeable.
Furthermore, following the legal and institutional improvements in higher educationfrom 1992, the vocational education nature of special course education came to beemphasized. The Vocational Education Law of the People’s Republic of China, adopted
in 1996, transferred vocational education, previously conducted at the stage of
secondary education, to the stage of higher education, and legally provided for the
mission of higher vocational education. In particular, the Chinese government
announced in 1999 a policy to reorganize various existing short-term institutes of higher
education and some of the secondary specialized schools into “vocational and technicalcolleges” In 1998, of the total of 431 special course institutes of higher education, there
were 101 “short-term vocational colleges” In 2005, of the 1,091 special course institutesof higher education, there were 921 vocational and technical colleges.
In the period of the great expansion in higher education, the process of the
expansion of special courses was a process of their becoming specialized institutes ofvocational education and casting aside institutional similarities with universities tobecome clearly distinct from regular course education.
4.2 Strengthening of the National Key Universities Policy: Differentiation among
Regular Course Universities
Along with the specialization in vocational education of special courses, thedifferentiation of functions gradually progressed among regular course universities. As
shown in Figure 1, while special course education and regular courses administered by
local governments significantly contributed to the great expansion in higher education,
universities administered by the central government posted only a modest growth. Amid
the expansion in higher education as a whole, parallel efforts were underway tostrengthen the National Key Universities. The National Key Universities policy was
implemented in the early 1950s, immediately after the establishment of the People’s
Republic of China. Important requirements for recognition as a National Key University,
aside from regional distribution, included relevance to nation-building, such as
infrastructure construction, national defense and agriculture. National Key Universities

12

are administered mainly by the Ministry of Education, but also by other central
government ministries and agencies, and their enrollments are allocated to provinces
and cities under the direct control of the central government, with their graduates also to
be allocated to various regions of the country. With the reopening of universities in theearly 1980s, the status of National Key Universities was also restored. However, theNational Key Universities did not necessarily represent high levels of education andresearch and difficulty of entrance relative to the general universities. Since graduatesfrom National Key Universities are allocated to jobs across the country, they wereshunned by young people from urban areas, making National Key Universities the
choice of young people from rural areas. Efforts to strengthen National Key Universities
from the mid-1980s helped gradually raise the levels of education and competition for
entrance to these universities. However, the greatest impact of the National Key
Universities policy was felt with Project 211 implemented in 1993 and Project 985
launched in 1998.
The objective of Project 211 was for the government, during the NinthFive-Year-Plan period, to intensively reinforce a number of universities and key
disciplinary areas in anticipation of the beginning of the 21st century. On thisfoundation, and after several years’ efforts, some l00 institutes of higher education and agroup of key disciplinary areas would have greatly improved in terms of the quality of
their education, scientific research, and university management and operations.
Consequently, these institutes became the bases for developing diverse human resources
and research into major problems in China’s economic construction and social
development. As of 2005, a total of 107 universities were recognized under the project.
Project 985, meanwhile, stemmed from the proposal of then President Jiang Zeminmade at a meeting to commemorate the 100th anniversary of Peking University on May,
1998, that “China must have a number of top-class universities at the international levelin order to accelerate modernization.” Following the proposal, the Ministry of
Education, in the course of the implementation of the Action Scheme for Invigorating
Education Towards the 21st Century, was instructed to provide prioritized support touniversities endeavoring to become world-class and high-level universities. Currently, a
total of 38 universities are recognized as such universities under Project 985.
Through the strengthening of the National Key Universities policy as describedabove, differentiation between National Key Universities administered mainly by thecentral government and general universities administered mainly by local governments
advanced rapidly. Needless to say, the dramatic expansion in higher education and this
rapid systemic differentiation brought about a major shift in the funding of higher

13education.
5. Funding Shifts and Their Consequences
One of the reasons Projects 211 and 985 generated such a tremendous impact aspart of the National Key Universities policy is that the implementation of the two
projects brought about a major structural shift in fund allocations in the area of higher
education.
5.1 Concentration of fund allocations
Project 211 was one of China’s priority projects during the NinthFive-Year-Plan period (1966-2000) and boasted the largest amount of investment for auniversity education project since the founding of the People’s Republic of China. The
combined amounts invested in the 96 then-recognized universities and two public
service systems came to 11,037 billion yuan. With a further 7.332 billion yuan invested
in the development of education-related infrastructure, the gross investment reached18.369 billion yuan. Of the total amount, 2.755 billion yuan came from the Ministry of
Education (central government specified funds) and 3.952 billion yuan from local
governments. The ambitious investments significantly transformed the universities
recognized under Project 211. Between 1996 and 2000, the combined value ofmachinery and equipment at these universities almost doubled from 10.4 billion yuan to
20.6 billion yuan. While these universities accounted for some 10% of the total numberof institutes of higher education, the gross of value of machinery and equipment
installed, books in their possession and scientific research funding obtained represented
54%, 31% and 72%, respectively, of the total.
Under Project 985, intensive investments were made in a further
narrowed-down number of universities. For the first phase of the project, 34 universities
were selected, these 34 universities being further classified into three classes. These
three classes of universities were encouraged to achieve the respective goals of
becoming “world-class universities,” “distinguished high-level universities well-known
both domestically and internationally,” and “domestically and internationally famous
high-level universities.” As shown in Table 1, investment amounts differ according to
the class of the university. For Peking University and Tsinghua University, in the firstclass, the central government disbursed the total investment amounts from its coffers.
Universities in the second and third classes first conclude “joint construction contracts”
with central government ministries and agencies or local governments, under which

14they disburse about half of the investment amounts and then sign project contracts with
the Ministry of Education. The duration of the first phase was to be 1999-2003 for the
first and second classes and 2001-2003 for the third class. The second phase is alreadyunder way, with the addition of four universities.
The major difference between these two projects and the previous National
Key Universities policy lies in that, aside from the massive amounts of investment
mentioned earlier, the two projects draw heavily on local government funds as a form of“joint construction.” The breakdown of Project 985 investment funds between thecentral and local governments is given in Table 1. Projects 211 and 985 are bothpremised on fund contributions from local governments, and thus they have beenlabeled a “fishing process” designed to pull in funds from local governments using
central government funding as bait (Chen, 2005, p. 12). Local governments consider thedesignation of universities in their regions as favorable for regional development andcommonly eke out investment funds. However, this mechanism is deemed to have four
problems.
First, local government finances, already under pressure from the rapid
expansion of universities under their administration have had to struggle with further
burdens. At the time of concluding contracts for the first phase of Project 985,
provincial governments that found it difficult to provide the whole sum of the funds
expected of them used land and other projects they owned to fill the gaps. Some local
governments were unable to make good on their promised funding after the conclusionof contracts. Extracting funds from local governments through the “fishing process”
may have had an adverse influence on other institutes of higher education administeredby local governments or other levels of education. It has often been pointed out that thecondition and quality of education at universities under the administration of local
governments deteriorated markedly during the great expansion period.
Second, the geographical distribution of the 38 universities designated under
Project 985 shows that while Beijing has eight, there is not one in the provinces andautonomous regions of Inner Mongolia, Jiangxi, Henan, Guangxi, Hainan, Guizhou,
Yunnan, Tibet, Qinghai and Xinjiang. These are provinces and regions where economic
development and educational levels are falling behind. Thus, the project may possibly
cause a widening of gaps in the developmental level of local higher education andexacerbate the problem of unequal higher education opportunities.
Third, since the restoration of the national unified examination system in 1978,
National Key Universities have allocated greater portions of their enrollments to theregions in which they are located. For example, Peking University and Tsinghua

15

University allocate one-tenth of the national enrollment quota to Beijing each year andthe pass mark for Beijing applicants is significantly lower than the national average. It isa known fact that even when they earn identical scores, students taking the entrance
examinations from Beijing are able to enter prestigious universities, while students fromrural areas have to settle with second-class universities. However, since local
governments made investments in universities in their regions under Projects 211 and985, they have gradually earned a greater say concerning the operation of these
universities and are now demanding greater enrollment quotas for local students. For the2005 student enrollments, for example, Fudan University, Shanghai Jiaotong University
and Tongji University, all located in Shanghai, allocated over 60%, 50% and 50%,
respectively, to students from Shanghai. In recent years, Zhejiang University has
allocated 70% of its enrollment to students from Zhejiang Province. This localization
phenomenon at National Key Universities not only results in a regional disparity ofopportunities, but also may substantially lower the levels of selection and quality ofeducation at National Key Universities, an outcome quite contrary to the original
intentions of the projects.
Fourth, there is the problem of widening economic gaps between teachers atuniversities designated under Projects 211 and 985 and those at other universities.
Under these two projects, housing for teachers has improved and a considerable portionof funds accepted were appropriated for teaching staff salaries. In the case of Peking
University, for example, funds used for these purposes accounted for almost one-third of
the funds received (1.8 billion yuan) during the first phase of Project 985, and it isconceivable that the salaries of some teachers has increased several times (Chen, 2005,
p. 16). Unless sufficient explanations are given regarding the advisability of great
portions of the massive funds disbursed under the project going to individuals, it will be
hard to avert complaints from teachers at other non-designated universities.

16

Table 1: Breakdown of Project 985 Investment Funds between Central and Local
Governments (in 100 millions of yuan)First phase
University

First class
Peking University
Tsinghua University
Second class
Nanjing University
Fudan University
Zhejiang University
Shanghai Jiaotong
University
University of Scienceand Technology of
China
Xian Jiaoton University
Harbin Institute ofTechnology
Third class
Beijing Institute ofTechnology
Beijing Normal
University
Renmin University of
China
Beihang University(formerly Beijing
University of
Aeronautics andAstronautics)
Northwestern
Polytechnical
University
Nankai University
Tianjin University
Wuhan University
Sichuan University
Jilin University
Sun Yat-sen University
Shandong University
Southeast University
Huazhong Universityof Science andTechnology
Xiamen University
Tongji University
Chongqing University
Lanzhou University

Central (Ministry of
Education)

Second phase
Central(Ministry of
Education)

Local

18
18

Location

22 Beijing
22 Beijing

6
6
7

6
6
7

8 Jiangsu
8 Shanghai
8 Zhejiang

66

8 Shanghai

34 Anhui

3

8 Shanxi
Heilongjian
5.1
g6(otherministry/agency 3)66(otherministry/agency 3)46(otherministry/agency 3)44 Beijing

66

5 Beijing

66

5 Beijing

3

4 Beijing(otherministry/agency 3)34 Shaanxi

3.5
3.5
4
4
4
3
3
3

3.5
3.5
4
3.2
3
9
5
3

3

3

3
3
3
3

3
3
2.4
1.5 + land(otherministry/agency 3)

17

4
4
5
4
4
4
3
4

Tianjin
Tianjin
Hubei
Sichuan
Jilin
Guangdong
Shandong
Jiangsu

4 Hubei
3
4
3
3

FujianShanghai
Chongqing
Gansu

Central South
University
Hunan University
Dalian University ofTechnology
Northeastern
University
University ofElectronic Science andTechnology of China
Ocean University of
China
China Agricultural
University
National University of
Defense Technology
Northwest A&F
University
Central University for
Nationalities

Hunan

2

2

3

2

2

2 Hunan2

2

3 Liaoning

22

2 Jilin2

1.6

2 Sichuan

12

1.5 Shandong
3.5 Beijing
3 Hunan
2.4 Shaanxi
1.5 Beijing

Note 1: Prepared by the author by referring to “A List of State Approved and Specified Key
National Universities since Liberation,” Liu Niancai, Differentiation and Classification of
Institutes of Higher Education in China, and Hiroshima University, “A New Era for Higher
Education in Japan and China”
Note 2: While the author has yet to obtain materials on second phase funds invested inuniversities by other ministries and agencies of the central government and local governments,
they are said to be at the same one-for-one ratio with investments by the central government(Ministry of Education) as in the first phase.

5.2 Structural Changes in the Distribution of Scientific and Technological Research
Expenditures
The concentration of fund allocations described above is reflected also in the
structure of the distribution of scientific and technological research expenditures. As
shown in Figure 5, an initial look at the changes in scientific and technological researchexpenditures by type of institute appears to indicate increases for both National Key
Universities and general universities. But a closer examination reveals two points. First,
a small number of National Key Universities receives far larger amounts than general
universities. Further, as pointed out earlier, the pace of increase in research expendituresat general universities is slower than that at National Key Universities despite the rapid
increase in the number of general universities during the great expansion period.

18

Figure 5: Scientific and Technological Research Expenditures at Institutes of Higher
Education by Classification (1997-2006)
1,000 yuan
35,000,000
30,000,000

National Key Universities
General universities
Specialized schools

25,000,000
20,000,000
15,000,000
10,000,000
5,000,00001997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Source: Development and Planning Department, Ministry of Education, China
Educational Statistical Yearbook, 1998-2007
Furthermore, regarding the sources of scientific and technological researchexpenditures (Figure 6), the ratio of government funds exceeded 50% for the general
universities by 2002, but subsequently declined, with growth occurring in the ratio offunds for research commissioned by companies and other businesses and funds fromother sources. On the other hand, looking at the sources of scientific and technologicalresearch expenditures of National Key Universities , the ratio of funds by companies
and other businesses, etc. has decreased since 1999. It is evident that both National Key
Universities and general universities obtain about 50% of their scientific andtechnological research expenditures from sources other than the governments.

19

Figure 6: Sources of Funding for Scientific and Technological Research Expenditures at
National Key Universities and General Universities (1997-2007)
National Key Universities
Government funds
Revenue from research commissioned by companies and other businesses

60

Other sources

%

50
40
30
20
10
0
1997

1998

1999

2000

2001

2002 2003

2004

2005

2006

2007

2000

2001

2002

2004

2005

2006

2007

General Universities
60

%

50
40
30
20
10
0
1997

1998

1999

2003

Source: Development and Planning Department, Ministry of Education, China
Educational Statistical Yearbook, 1997-2007

20

As noted above, the gap in the distribution of scientific and technologicalresearch expenditures between National Key Universities and general universities
widened further during the great expansion period. In addition, as China has been
expanding the allocation of competitive funding in a bid to enhance the researchfunctions of universities, and part of these research funds are directly linked to therevenues of individual teaching staff at universities, the economic disparity between
teachers at National Key Universities and general universities could widen further.
These two points may help further strengthen research functions at National Key
Universities while accelerating the erosion of the foundations for research at general
universities.
5.3 Widening Gaps in Higher Education among Institutes and Regions
In order to examine the gaps between institutes of higher education brought
about by the changes in the financial structures described in the preceding section, welook at educational expenses per student of universities administered by the central
government and local governments by region in 2004 (Table 2).
Educational expenses per student in Beijing, which has the highest figure foruniversities administered by local governments, are over three times those in Guizhou,
with a standard deviation reaching as high as 4,565. On the other hand, at universities
administered by the central government, the highest figure is eight times as large as thelowest figure, with a standard deviation of 9,975.7. In other words, this confirms that
there are large gaps both between universities in provinces administered by local
governments and between universities located in provinces but administered by thecentral government. Furthermore, it is apparent that the gap in the latter case isconsiderably larger. The average of educational expenditures came to 12,652.4 yuan for
universities administered by local governments and to 22,921.9 yuan for universities
administered by the central government, an obviously huge disparity between the two.
Next, we look at the correlation between educational expenses per student andper-capita GDP of regions where the universities are located, for both universities
administered by local governments and universities controlled by the central
government.
As seen in Figure 7, both scatter plots indicate a positive correlation between
educational expenses per student (vertical axis) and per-capita GDP of university
locations (horizontal axis). In other words, while universities administered by local
governments are significantly affected by the levels of economic development in theirlocations, universities controlled by the central government are also influenced by the21

levels of economic development in the regions in which they are located. Thesesituations not only reflect the scale of fund contributions from local governments but
also are linked to divergent sources of non-government funds in such areas asindustry-university cooperation.
Table 2: Educational Expenses per Student at Universities Administered by the Central
Government and Local Governments in 2004 (in yuan)
Universities administered by Universities administeredlocal governments
by the central governments
Beijing
27399.4
31857.8
Tianjin
15961.623178.0
Hebei
10499.012822.3
Shanxi
11130.8
6183.3
Inner Mongo
8927.1
Lioaning
12668.7
17780.3
Jilin
10642.9
19148.8
Heilongjiang
11792.732808.5
Shanghai
21498.633056.1
Jiangsu
12133.3
28049.9
Zhejiang
19663.3
30792.1
Anhui
8727.054069.8
Fujian15228.820396.5
Jiangxi
10485.3
Shandong
9424.420285.6
Henan10758.3
Hubei
10695.4
17956.5
Hunan
10037.1
14340.3
Guangdong
20690.5
31007.1
Guangxi
9615.6
Hainan9732.6
Chongqing
12472.8
18402.2
Sichuan
8295.616267.9
Guizhou
8103.2
Yunnan12870.3
Tibet20588.9
Shaanxi
10775.4
18781.4
Gansu
10515.0
17871.2
Qinghai
10464.9
Ningxia
11439.2
16304.7
Xinjiang
8986.7
Average
12652.4
22921.9
Standard deviation
4565.09975.7
Source: Finance Department, Ministry of Education, China Educational Finance
Statistical Yearbook, 2005

22

Figure 7: Correlation between Educational Expenses and Per-Capita GDP in University
Locations by Administration (in yuan)
Universities administered by local governments
30000
y = 0.3168x + 8192.1
25000

Ｒ2＝0.58

20000
15000
10000
5000
0
0

10000

20000

30000

40000

50000

60000

Universities administered by the central government
60000
y = 0.3095x + 17729

50000

Ｒ2=0.36
40000
30000
20000
10000
0
0

10000

20000

30000

40000

50000

60000

Sources: Finance Department, Ministry of Education, China Educational Finance
Statistical Yearbook, 2005; State Statistical Bureau, China Statistical Yearbook, 2004
6. Policy Implications
Higher education in China achieved a dramatic expansion from the late 1990s,
and the significant players in that expansion of educational opportunities were special
23

course and regular course institutes of education under the administration of local
governments. Subsequently, special course institutes became specialized in vocational
education, becoming further distinct from regular course institutes. On the other hand,
China invested heavily in a selected few National Key Universities in a bid to enable aswift rise in the level of research at these universities. This shows a differentiation in thefunction of regular course universities, with National Key Universities, mainly
universities administered by the central government, becoming research-oriented
institutes, and general universities, mainly consisting of universities administered by
local governments, turning into education-oriented institutes. As a result of this process,China’s system of higher education has come to exhibit a clearly hierarchical structure.
This transformation process was also linked to structural shifts in fundallocations. While the massification and marketization of higher education in China
progressed simultaneously, institutes of higher education found themselves incircumstances where they had to reduce their dependence on government funds anddiversify fund-raising channels. However, the National Key Universities policy that
intensively directed limited amounts of funding for higher education toward National
Key Universities not only brought about large gaps between National Key Universities
and general universities, but also created gaps even among National Key Universities.
Furthermore, the fishing process, intended to pull in funds from local governments toboost universities located in their regions through the use of central government projects,
squeezed funds out of local governments, threatening educational funding foruniversities administered by local governments, which had contributed to thequantitative expansion of higher education, as well as for other levels of education. This
helped further widen the gaps between universities administered by local governments,
and also apparently made National Key Universities more vulnerable to the levels of
economic development in the regions where they are located. It is true that the intensive
investments made in National Key Universities since the 1990s significantly
transformed the campuses, facilities and equipment at a small number of selected
universities, and helped raise the levels of research and international recognition ofthese institutes in a relatively short span of time. However, there does remain room for
doubt regarding the degree of achievement of policy objectives by these massive
investments in terms of enhancing the levels of education and research. Even when theattainment of policy objectives can be reasonably expected, if the initiatives led to theundermining of the balanced development of higher education between universities andbetween regions, these should be examined and assessed in terms of both what has been
gained and what has been lost.

24

Up to now, public concern has focused on the quantitative expansion of
education in China, and has not necessarily paid due consideration to aspects of equal
opportunity and fairness in education. Educational policies have also tended to give
greater weight to efficiency. By international standards, the massification of higher
education did expand opportunities for higher education, but at the same time brought
about various social problems which have the potential to develop into a social crisis.
Drawing on the experiences of Japan, higher education expanded rapidly in the 1960s
against the backdrop of high economic growth, but a string of problems subsequently
emerged, including the deterioration of the quality of education, the widening gap inopportunities for higher education, and the deteriorating job market for university
graduates. These problems in part triggered a wave of university disturbances in the
1970s. Needless to say, the great expansion of higher education in China has produced amassive number of university graduates, and an oversupply of university graduates in
the labor market has already surfaced as an issue. In addition, inequities in higher
education opportunities are generated by greater gaps in economic development
between regions and between cities and rural areas, disparities in incomes between
high-income and low-income urban residents, and sharp rises in university tuition fees.
At the same time, with economic development and diversification of information
sharpening the sense of equal opportunity in society, the long-running practices ofpreferential enrollment allocations are spawning growing complaints about systemic
inequalities. Furthermore, strong pressures for direct economic incentives and keener
competition within universities have given rise to organizational and individual moral
problems at universities. However, the more important problem is the deterioration of
educational conditions and the quality of education at a large number of universities.
Under these circumstances, the measures for excessive selection and concentration offund allocations for universities are further intensifying the problems cited above.
However, influential scholars who should be responsible for calling attention to suchproblems are not always forthcoming in bringing about rapid social recognition of theseissues, partly due to the fact that they themselves are beneficiaries of the vested interests
created by the measures.
In order to overcome the distortions brought about by the rapid growth ofhigher education, Japan in the mid-1970s underwent a shift to a policy of checking
unrestrained expansion, and in an effort to narrow the gaps between institutes of higher
education and improve the quality of education, the government began to subsidize
privately-funded universities, tightened the reins over private universities and took steps
to develop short-term institutes of higher education. In recent years in China, the25government has also moved to control the speed of expansion in higher education andmaintain the quality of education through evaluation of higher education, and has also
taken certain steps regarding social fairness and equal opportunities in education.
However, these measures have as yet been insufficient to deal comprehensively with the
problems cited above. Needless to say, each country is faced with a different set ofproblems associated with the massification of higher education. However, it is important
for China to learn from the experiences of industrialized countries in order to detect andmake efforts to solve problems at an early stage.
[References](Japanese)
Chen Xuefei, 2005, “An Analysis of the Policy Process Concerning the Development ofWorld-Class Universities in China,” Working Paper, Vol. 2, July 2005, Center
for Research and Development of Higher Education, University of Tokyo.
Fumihiro Maruyama, 2005, “Funding of Higher Education and University Tuition
Fees,” University Finance and Management Research, No. 2, August 2005, pp.
29-39.
Liu Niancai, 2006, “A New Era for Higher Education in Japan and China,” October
2006, Research Institute for Higher Education, Hiroshima University, pp.
71-85.
Motohisa Kaneko, 2004, “Outlook for University Funding,” IDE Higher Education inModern Japan, No. 465, Issue 11-12, Institute for Democratic Education, pp.
5-12.
(Chinese)
Min Weifang and Wang Rong eds., 2006, Chinese Education and Human Resources
Development Report 2005-2006, Peking University Press.
Motohisa Kaneko, translated by Liu Wenjun, 2006, “Political Economy of theMassification of Higher Education – Comparison between Japan and China,”
an article presented at the convention of the Chinese Society of Educational
Economics in 2006.

26