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Study argues Australian universities are too reliant on Chinese students

Short on time? Here are the highlights:
    • A new research paper focuses on the high Chinese enrolments at seven leading Australian universities and explores the related business risks
    • The paper considers macroeconomic trends, including currency fluctuations, to pose the greatest threat to future Chinese enrolments

A new paper entitled The China Student Boom and the Risks It Poses to Australian Universities argues that some Australian universities are playing with fire with a growing reliance on international student enrolments for revenues, and Chinese enrolments in particular. The paper, authored by University of Sydney sociologist Salvatore Babones and published by the Centre for Independent Studies, calls the trend a “high-risk, high-reward international growth strategy” that amounts to a multi-billion-dollar gamble. If the gamble goes wrong, says Dr Babones, Australian taxpayers could be called on to help.

The paper focuses on seven Australian universities that rely especially heavily on Chinese tuition, with Chinese students accounting for more than half of all international students at each of the seven: University of Melbourne, Australian National University (ANU), University of Sydney, University of New South Wales (UNSW), University of Technology Sydney (UTS), University of Adelaide, and University of Queensland (UQ).

Dr Babones notes that,

“All seven have higher proportions of international and Chinese students than any university in the entire United States. Indeed, all seven appear to be more dependent on fee-paying Chinese students than just about any other university in the English-speaking world.”

His research reports that more than 40% of all international students in Australia are Chinese, and 10% of all students at Australian universities are Chinese. We should add, however, that international student data published by the Australian Department of Education and Training (DET) clearly indicates that just under 30% of all foreign students in Australia are from China.

That discrepancy is important but it nevertheless reinforces that Chinese students continue to account for a significant share of total foreign enrolment in Australia, as they do in most major study destinations. Given that reality, Dr Babones contends that it is global, macroeconomic factors that pose the highest threat to future Chinese enrolments: “the slowing of China’s economy, the lack of full convertibility of the Chinese yuan, and fluctuations in the value of the yuan versus the Australian dollar.” These factors could lead to “a sudden and severe fall in Chinese enrolments.”

Because the bulk of Chinese enrolments in Australia are concentrated in public institutions, Dr Babones considers these institutions’ financial dependence “a risk to Australian governments, and ultimately to taxpayers.”

Chinese enrolment growth slowing

The astronomic rise in the number of Chinese students in foreign universities over the past two decades has been slowing in recent years. In 2018, the UK and Australia saw Chinese enrolments rise by 12% and 11%, respectively, but you don’t have to look far to see how quickly this trend might change: the US and Canada saw Chinese enrolments grow by only 3.5% and 2% in 2018. In contrast, in 2016, the US had seen growth of 8% in Chinese enrolments and Canada registered a 12% jump over the previous year. Indeed, all four of these leading destinations are heavily dependent on Chinese tuition.

Illuminating the extent of the risk at play in such dependence, last year the American university with the highest proportion of Chinese students in its population – the University of Illinois at Urbana-Champaign – set a set a global precedent by taking out insurance against a future drop in Chinese enrolments.

Dr Babones’ paper notes that,

 “Now that China has progressed from being a low-income country to an upper-middle-income country, future increases in outbound student numbers are likely to be more muted. China’s number of outbound students to all countries grew by less than 0.4% in 2017, the lowest level ever recorded.”

With that as a backdrop, the paper’s overarching recommendation is that Australian universities currently drawing much of their prosperity from international students should change course. “They should act now to mitigate the risk of a sudden revenue collapse by raising admissions standards and reducing international student enrolments.”

However, the paper gives less weight to another widely observed (and adopted) strategy in international education: diversifying to new or additional markets. Indeed, the latest data again shows that Australian institutions and schools are recording strong growth from a number of important sending markets other than China, including India, Brazil, Nepal, and Colombia.

Early reaction

Speaking to ABC News this week, Dan Tehan, Australia’s Education Minister, called the universities’ financial position “strong,” and said that “The department monitors the financial performance and position of each university on an annual basis.”

Mr Tehan noted that the government has been working with universities to “strengthen English language requirements for international students by tightening regulations, improving data capture and increasing the scrutiny of visa applicants’ English language proficiency.”

Speaking on behalf of the sector, Universities Australia Chair Deborah Terry added that “regulators had assessed the vast majority of Australian universities as being in a low-risk financial position.” Furthermore, she stated:

“As not-for-profit public education institutions, our universities prudently manage taxpayer funds – and have extensive expertise in doing so. Australian universities maintain very high admissions standards and strong academic rigour – and those high academic standards safeguard quality and attract international students.”

Ms Terry noted as well that Australian universities are attuned to changes in the global flow of mobile students and that they are “nurturing diversity within and across regions, as part of their business planning.”

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