Situated at the bottom of the echelon in the highly stratified Chinese higher education system, private higher education (PHE) faces existing challenges while being confronted with new uncertainties that threaten its survival. This article discusses the persistent quality improvement challenge and an increasingly volatile policy environment that Chinese PHE faces.

China, with the world’s largest higher education system, has the third largest private sector, enrolling over five million students at more than 700 private higher education institutions (PHEIs). With more than a 60.2 percent gross enrollment rate, Chinese higher education has turned from an elite system to a universal one within a remarkable 20-year period. During the process of system expansion, PHE was encouraged by the government to play a demand-absorbing role in providing tertiary education opportunities for students that scored the lowest in the universal college entrance examination. PHE enrolls a quarter of all postsecondary students today and is still associated with low quality, while credentials from private colleges are discriminated against on the labor market. Public policy toward PHE has become increasingly volatile, particularly regarding the separation of for-profit and nonprofit PHE registration. With the economic slowdown—especially since the COVID-19 pandemic and demographic decline—Chinese PHEIs are confronted with many uncertainties ahead.

Challenges for Quality Improvement

The efforts to improve quality for most Chinese PHEIs are perpetuated in a vicious cycle ascribable to their tuition-dependent nature, the low gaokao scores of the students, and the inability to recruit and retain high-quality faculty. PHE’s reliance on tuition, often as the only source of income, limits their program offerings to low-cost applied ones such as business, foreign languages, and information technology. Consequently, tuition fees at PHEIs are on average three times higher than at their public counterparts. Students at PHEIs pay a lot, yet their return on investment in terms of postgraduate employability is significantly lower. It is estimated that the graduate employment rate of public higher education institutions is 50 percent higher than at PHEIs. Public sector students score, on average, 51 points higher in universal examinations than PHEI students, reflecting the difference of competencies among young people at the point of entry into postsecondary education. Yet, the fact that families are willing to pay a high premium for low-quality higher education is attributed to the strong value of educational achievement, being a code of honor in Confucian heritage societies.

The challenge for PHE to recruit and retain top-notch faculty restricts the quality of program delivery and overall institutional improvement. PHEIs continue to rely on hiring retired public university faculty as senior administrators and lecturers. This practice gives PHE the benefit of experience and expertise that these people bring, yet an overreliance on retired public sector faculty also creates concerns, including a lack of creativity and inability to stay up-to-date with new curricula and pedagogy. It also creates an isomorphic effect of curriculum design in program delivery between private and public higher education institutions, which contradicts PHEIs’ efforts to be unique and niche-seeking, compared to public higher education. Young academics prefer to work in public higher education institutions even with lower pay, and those who start their academic careers at PHEIs leave for public higher education positions as soon as those become available. Working for the public sector in China is associated with better job security, a wider range of benefits, higher pension, and higher prestige. Government and industry research funding initiatives do not explicitly exclude PHE, but it is well-known that most government-funded research projects are awarded to elite public universities. PHEIs aspire to produce research, yet budget restraints mean that faculty are burdened with heavy teaching loads and left with no time for research activities.

Volatile Policy Environment

Statistics show that 30 percent of Chinese PHEIs are family-owned, and another 30 percent are private enterprise–owned (the remaining 40 percent are philanthropy-founded or owned by state enterprises or public universities). An estimated 80 percent of Chinese PHEIs are founded with the intention to generate and distribute profits despite their legal designation as nonprofits. Among the family- and private enterprise-owned, many had invested resources for over two generations in founding and developing their PHEIs. Policy ambiguity and resulting confusion around profit-making led to the government issuing its post-2010 policies, which included the order that all PHEIs had to choose, by 2021, whether to be for-profit or nonprofit. Since then, 24 institutions (or 3 percent of the total) have become legally registered as for-profit PHEIs, enrolling approximately 4 percent of PHE students. These new for-profit PHEIs either belong to an education corporation or have a state-owned enterprise involved in their structure. This slow increase in for-profit PHE is surprising as originally about a half of existing PHEIs had a clear intention to register as for-profit. Despite worries, such as the obligation to pay for a re-evaluation for the land they own, fixed capital, and taxation according to enterprise law, many PHEIs wanted to have their land ownership legally protected and to have their capital assets administered under enterprise law. According to the 2020 Chinese civil code, a for-profit legal entity had the right to distribute profit and to designate inheritance should the institution close (rights denied to nonprofits). In contrast, choosing nonprofit status would mean coming back to a form which lacked clarity or prior policy experience in communist China.

Yet, in reality, PHEIs learned that it was not only a matter of making a choice. Most of the institutions that had indicated their desire to register as for-profit had their applications denied. Complicating the situation further, it was generally the provincial government education bureaus that refused their applications, commonly demonstrating that, while the national guidelines did formally offer a for-profit option, they lacked any details on implementation, a possible signal that the national government did not truly support for-profit PHE after all.

After the upheaval caused by the government’s unclear efforts to distinguish nonprofit and for-profit institutions, uncertainty grew even further, as the PHE sector faced another major change: Hundreds of private colleges affiliated with public universities had to become freestanding, merge into public institutions, or close. Those that opted to become freestanding faced stringent rules and high costs, and were not allowed to register as for-profit, likely because of the complex public-private partnerships and resource-sharing during their founding phase. So, the Chinese government policy on PHEIs has left the majority of PHEIs still searching for ways to make and distribute profits, even while not declaring themselves for-profit. In fact, the lines between nonprofit and for-profit are further blurred, as some provinces have decided to charge nonprofit PHEIs a 25 percent enterprise tax on their tuition and residence fees.

Conclusion

Trapped in a vicious circle of challenges for quality improvement while having to navigate a volatile policy environment, PHE faces yet another threat to its survival—the demographic decline resulting from China’s one-child policy that was strictly enforced between 1979–2013. Many private primary and secondary schools in Beijing and Shanghai are closing. In 2024, for the first time, many PHEIs could not recruit enough students to fill the enrollment quota designated by the government. Combined with a slowing economy, especially since the COVID-19 pandemic, the future of Chinese PHE is uncertain.

Cassidy Gong is course instructor and research associate at the Centre for Research on International and Canadian Higher Education (CIHE) at the Ontario Institute for Studies in Education, University of Toronto, Canada. E-mail: [email protected].