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Source: http://www.doksinet Education Finance Policy in China’s Medium and Long‐Term Guideline for Education Yuan Liansheng Abstract: The “National Guideline for Medium and Long‐Term Education Reform and Development (2010‐2020)” (hereinafter abbreviated as “the Guideline”), formulated by the CCP Central Committee and the State Council, posits the basic completion of the modernization of China’s education and other development targets by 2020. As measures to guarantee the fulfillment of education’s development targets, the Guideline proposes to increase input in education, improve education input mechanisms, strengthen management over education funds, improve the student financial assistance system and other education financial policies. This paper explains the main contents of the education finance policies in the Guidelines and the considerations when drafting these policies, forecasts the results of these policies, and puts forward suggestions for reform. I.

The Current Education Finance System and the Contents of the Guideline’s Education Finance Policies 1. The Characteristics of China’s Current Education Finance System China currently has the world’s largest education system. In 2009, there were 255,976,000 students in education institutions of all levels. Of these, 26,578,000 were in kindergartens, with the gross enrolment rate in these being 50.9 percent in three years; 100,715,000 were in primary schools, the net enrolment rate being 99.4 percent; 54,009,000 were in junior middle schools, the gross enrolment rate being 99.0 percent; 46,409,000 were in the senior middle school stage, the gross enrolment rate being 79.2 percent; and 28,265,000 were in institutions of higher learning, the gross enrolment rate being 24.2 percent [1] The Guidelines proposes that by the year 2020, China shall basically modernize its education, basically form a learning society, and enter the ranks of countries rich in human resources. [2] By that

time, Chinas education system will be even more vast and improved. Enormous amounts of education funds will be needed to support this vast education system and fulfill the targets of education Source: http://www.doksinet development for 2020, and the raising of such a huge amount of funds will require a sound and effective education finance system. China’s current education finance system is a product of the reforms of China’s political, economic, financial and education systems. The current education finance system is marked by the two outstanding characteristics described below. (1) A Multi‐Channel Fundraising System Consisting Mainly of Government Investment China’s system for raising education funds is a multi‐channel fundraising system with government investment as the main component. In 2008, the total income of educational institutions of all types was 1,450,070,000,000 yuan. Of this amount, 1,044,960,000,000 yuan, or 721 percent, consisted of public education

funds invested by the government, and 405,110,000,000 yuan, or 27.9 percent, consisted of non‐governmental education funds. Of the public education funds, 927 percent came from ordinary taxes. The 405,110,000,000 yuan in nongovernmental education funds was generated in the main by: Tuition and miscellaneous fees, 234,930,000,000 yuan, the schools’ institutional incomes (shiye shouru), 101,780,000,000 yuan, investments by operators of private schools, 6,980,000,000 yuan, donations from society, 10,270,000,000 yuan, and other income, 5,150,000,000 yuan.[3] Institutional income in secondary and elementary schools consists mainly of fees paid by students for choosing the schools they wish to attend and, in institutions of higher learning, of research funds other than governmental. From elementary schools to higher education institutions, the ratio of public education funds decreases progressively with rises in the level of education. In 2008, the ratios of the public education funds

used at ordinary elementary schools, junior middle schools, senior middle schools, and institutions of higher education respectively were 92.9 percent, 893 percent, 600 percent and 476 percent Due to differences in levels of economic development and financial resources, fairly large disparities existed in the amounts of non‐compulsory education funds raised in diverse localities. In 2008, the ratios of public education funds at ordinary senior middle schools and institutions of higher learning in Beijing were 74.9 percent and 67 percent respectively, whereas they were only 560 percent and 309 percent respectively in Jiangxi Province. The ways for raising funds differ for public schools and nongovernmental schools. The funds for most Source: http://www.doksinet public schools are provided mainly by the government. However, parents of students at non‐ compulsory education schools must pay fairly high tuition and miscellaneous fees, and the funds for nongovernmental schools come

mainly from fees collected from their students; the government invests very little public funds in them. Although China’s nongovernmental education has developed rapidly since the 1990s, its proportion in the entire educational system is still quite low. In 2008, the ratios of students in the various levels of nongovernmental schools were 39.7 percent in kindergartens, 46 percent in elementary schools, 7.7 percent in junior middle schools, 116 percent in senior middle schools, and 22.8 percent in ordinary institutions of higher learning (2) The Investment System for Public Education Funds Shared in Common by the Five Levels of Government There are no clear‐cut regulations in terms of the delimitation of responsibilities for sharing of education funds among China’s five levels of government, and the old tradition of “those who operate schools pay for them” is basically still in use. Due to the existence of education fund transfer payments from higher‐level to lower‐level

government but the absence of publicized figures on the transfer payments of funds between governments, there is no way of precisely calculating the ratios of public education funds shared by each of the five levels of government. Very little government investment goes to kindergartens; for many years, the public education funds used for kindergarten education has accounted for only about 1.3 percent of the total amount of public education funds. This bit of public education funding consists mainly of investments by prefectures, counties, neighborhoods, and township governments. Where government responsibility for compulsory education is concerned, responsibility prior to 2001 was borne in the rural areas mainly by the counties and townships and in the cities, by city districts. After 2001, the central government proposed that compulsory education funding should be borne, in the main, by the counties. The Compulsory Education Law revised after 2006 stipulated that overall arrangements

for compulsory education funding were to be made by governments at the provincial level. New mechanisms for guaranteeing funds for rural compulsory education were implemented in 2006, after which the central and provincial governments bore a much larger share of the funding for compulsory education. However, expenditures Source: http://www.doksinet for the wages and welfare of teachers and staff members were still borne mainly by the prefectural and county governments, and for that reason the funding for compulsory education on the whole still fell, in the main, on the prefectural and county governments. Responsibility for senior middle school phase education funds has always been borne by the prefectural and county governments. After the system of subsidies for secondary vocational school students was implemented in 2006, such subsidy funds have been borne mainly by the central and provincial‐level governments. However, these subsidy funds are for the students, quite limited as

compared to the all‐round funding for the senior middle school phase, and their provenance remains mainly the responsibility of the prefectures and counties. Governmental responsibility for college and university education funding rests mainly with the provincial‐level governments; funding by the central and prefectural/municipal governments is supplementary. In 1998, prior to the decentralization of institutions of higher learning, the proportion of central government funding was somewhat higher, but subsequently declined. In 2008, the central government accounted for 35.5 percent of the public education funds for ordinary institutions of higher learning, while the provincial, prefectural and municipal governments accounted for 64.5 percent 2. Regulations in the Guideline for Education Finance Policy The regulations in the Guideline for education finance policy were put forward as measures to guarantee the realization of the 2020 educational development targets. The provisions on

education finance policy are to be found mainly in Chapter 18 of the Guideline’s Section IV “Guaranteeing Measures.” The title of the said chapter is “Ensuring Education Input,” and the main contents of the education finance policies in this chapter are three: (1) Increasing education investment. The Guideline points out that education funding is a basic and strategic investment in support of long‐term national development, a material foundation for the cause of education, and a major function of state budgeting. The system, in which education funds are raised from various sectors with government input as the main source, shall be strengthened, and the overall investment in education shall be increased by a large margin. The Guideline makes demands on governments at all levels with regard to education input: Governments at all levels shall optimize the structure of fiscal expenditures, coordinate various revenues, and give priority to education in the field Source:

http://www.doksinet of fiscal expenditure. The Guideline posits a quantitative requirement for government input in education: The proportion in the GDP of fiscal public expenditure on education shall be raised to four percent by 2012. (2) Improving the distribution mechanism. The Guideline proposes that the responsibilities of governments at all levels with regard to offering public education services be further defined, and the education fund distribution mechanism be improved at all levels, so as to ensure stable sources for school operations and growth; and that the state shall, in light of basic school‐running requirements and basic education and teaching needs, formulate standards for per‐student outlay and per‐student fiscal appropriation. The Guideline proposes that compulsory education be fully guaranteed by fiscal expenditure, and be brought under an input system where responsibility is shared by the State Council and local governments at various levels and

implementation is planned and coordinated by the people’s governments of provinces, autonomous regions and directly administered municipalities. For noncompulsory education, it proposes implementation of an input system in which government funding is the main source, learners also bear part of the cost, and funds are raised from multiple channels. (3) Improving fund management. The Guideline proposes that state financial funds be managed according to law and that financial systems and economic discipline be strictly enforced; that a consultancy commission for higher education funding be established to enhance the scientific nature of fund distribution; that institutions of higher learning set up the system of government appointed chief accountants; that school financial and accounting systems be tightened up; and that internal audits and control of funds be strengthened. It proposes that a surveillance system over fund spending be stepped up and that major construction projects be

subject to strengthened overall auditing. This chapter also proposes that the national financial support policy system should be improved. As well as improving the existing financial support systems for the compulsory education, secondary vocational education and higher education phases, financial support should also be gradually extended to the children of rural needy families and urban poor families for preschool education, and a system of state financial support should be set up for needy‐family students at ordinary senior middle schools. In addition to Chapter 18, other portions in the Guideline also touch upon on aspects of education finance Source: http://www.doksinet policy, such as increasing government investment for preschool education, improving mechanisms for rationally sharing the costs of preschool education, and improving the policies for public finance support for nongovernmental education. II. Considerations in the Guideline on Defining Education Finance Policy

1. Considerations and Discussions on the Policy for Increasing Education Input The problem of insufficient education funds had long existed during the development of China’s education and was still quite salient even up to recent times. For example, the shortage of funds for rural compulsory education has resulted in the hiring of large numbers of unqualified substitute teachers, schools at various levels still owing hundreds of billions of yuan in debts, and large numbers of transient children being unable to enter public schools for an education (Yuan Liansheng, 2009). The provision of necessary education funds is a basic condition for realizing the 2020 targets for educational development. Hence, the Guideline regards increasing investments in education as the principal target for educational finance policy. In the system for raising education funds where government investment is the main factor, increasing education investment should consist first and foremost of government

increases of public education funds. However, past government performance as regards increasing education investment had not been very satisfactory. A salient manifestation of this is that the target for the proportion of public education funds accounting for four percent of the GDP by 2000, as put forward by the CCP Central Committee and the State Council in the “Outline for China’s Education Reform and Development,” was not realized even by the year 2008. [1] Scholars and government officials held many discussions on the reasons why this target was not materialized. Some maintained that the shortfall in government education investment was due to government officials who exercise the actual powers of financial decision‐making evincing no interest in education (Yuan Liansheng, 2004); others posited that the proportion of financial revenue in the GDP was so low that it constrained the government’s ability to pay for education (Wang Zitai, 1996; Wang Rong, 2008), and still

others believed that unclear Source: http://www.doksinet responsibilities in terms of education finance at all levels of government were an important reason for the insufficient government investments in education (Yuan Chunlin and Li Bin, 2008; Yuan Liansheng, 2009). To push forward government increases in education input, the Guideline has once again proposed that the proportion of public education funds should account for four percent of the GDP in 2012. The initial draft had proposed that the proportion of public education funds reach five percent of the GDP by the year 2020, but this target did not appear in the final draft because it was opposed by the relevant departments. To provide greater guarantees for the increase in public education funds, the Guideline reiterates the policy of levying in full an education surtax accounting for three percent of the value‐ added tax, business tax and consumption tax. This policy is reiterated because many localities had failed to

strictly implement this policy. In 2008, 52,740,000,000 yuan in education surtaxes were actually levied, but the figure should have reached 85,470,000,000 if levied in full. Considering the fact that the Chinese government’s revenues consist of both general taxes and non‐tax revenues, that the proportion of non‐tax revenues have always been fairly large (accounting for about 31.5 percent of overall revenues in 2009), and that public education funds have always been defrayed from general taxes (except in the case of education surtaxes), the Guidelines for the first time proposed that all revenues should be pooled and that education be prioritized as a key domain for fiscal expenditure. This has, policy‐wise, expanded the revenues basis for investments of public education funds. Social investment (nongovernment investment) has always been an important source for China’s education funds, for which reason the Guideline reiterates the policy that the ways by which social resources

enter education are to be expanded and that education investment is to be increased through multiple channels. In order to encourage social investment, the Guideline proposes to perfect preferential policies in terms of finance, taxation, financing, and land use, and to encourage and guide nongovernmental donations and investments into the running of schools. It also proposes in particular that the public finance policy of aiding nongovernmental education is to be perfected so as to stimulate the development of nongovernmental education. Tuition revenue is the main source of social input for noncompulsory education; the Guidelines proposes to improve the mechanisms for sharing the training Source: http://www.doksinet costs of noncompulsory education and to adjust its tuition standards in light of economic development conditions, training costs, and the fee‐bearing capacity of the masses. Donations from society are an important channel for social investment. However, the amount of

donations for education is still very small in China, the income from such donations amounting to only 10,270,000,000 yuan in 2008 and accounting for a mere 0.7 percent of all education funds An important reason for the sparseness of donations for education is the lack of tax incentives and the imperfect implementation of current preferential tax policies for donations. To stimulate donations for education, the Guideline proposes to perfect the mechanisms for stimulating such donations and to carry out regulations to ensure that such donations to public welfare are deducted from the donors’ pre‐tax income. 2. Considerations about the Policies for Improving Education Input Mechanisms There are two main aspects to the policies for improving education input mechanisms proposed by the Guidelines. One is to require all localities to formulate standards for per‐student outlays and per‐ student fiscal appropriations for schools of all levels, and the other is to further define

government responsibility for input into education of all levels. The purpose of requiring that all localities formulate standards for per‐student outlays and per‐student fiscal appropriations for schools of all levels is to ascertain the needs for education funds, define government procurement responsibilities in light of such needs, and measure the extent to which the governments fulfill their responsibilities. For quite some time, there have been no strict standards for judging whether education funds are ample and whether government appropriations have met their obligations, nor has there been agreement among scholars and government departments on such matters. By formulating for per‐student outlays in light of school‐running standards and formulating standards for per‐student appropriations in accordance with the cost‐sharing principle, it will be possible to calculate the needs for education funds, provide grounds for sharing costs and for fiscal appropriations, and

objectively evaluate the circumstances of governmental fulfillment of education finance responsibilities. The Guideline sticks to the system, formed since 2006, whereby compulsory education is entirely subject to financial guarantees. However, governmental responsibility for investment in various levels of noncompulsory education remains unclear – a long‐standing problem in Chinas’ education investment mechanism. For noncompulsory Source: http://www.doksinet education, the Guideline proposes implementation of an input mechanism in which government funding is the main source, learners bear a reasonable part of the cost, and funds are raised from multiple channels, and it endeavors to further define government responsibility for input in various levels of noncompulsory education. Of preschool educational institutions, nongovernmental ones account for about 60 percent, and there is basically no governmental input in these. Nor is there much governmental input in publicly‐run

preschool institutions (Liu Zhanlan, 2009). The fairly grave problems, in recent years, of insufficient supply of pre‐school education and excessively high and arbitrary fees are due in great part to insufficient governmental investment. Hence, regulations on vigorously developing public kindergartens and increasing government investment in preschool education were added to the final draft of the Guidelines. However, in consideration of the pressure that would be caused by substantial increases in government investment and the as yet unclear specific method by which investments would be increased, the Guideline articulated the investment mechanism as government investment, input by sponsors in society, and reasonaable contributions by the families, and did not clearly propose making government input the main source. The input mechanisms proposed in the Guideline for other forms of noncompulsory education are: For ordinary senior middle schools, government input is to be the main

source and is to supplemented by fundraising through other channels; for secondary vocational education, the mechanism to be implemented is of government, trades, enterprises and other forces in society raising funds according to law; for institutions of higher learning, the mechanism for raising funds shall have the sponsors contributing the main input, students bearing a reasonable portion of the costs of training, and the schools raising funds through diverse channels such as foundations and donations from society. For the same reason as for preschool education, neither ordinary middle school education nor secondary vocational education is clearly designated to receive government input as their main source of funds. That is because the entities that operate these types of education are diverse, many being public schools, and not few regionally‐operated public schools also relying mainly on income from tuition and miscellaneous fees. And so it is not yet possible to make government

input their main source of income Source: http://www.doksinet 3. Considerations about the Policy of Enhancing Management of Education Funds While education funds have for long time been in short supply, there are in China such situations as inefficient use and even embezzlement and wastage of education funds, and also inequitable allocations of such funds and incompetent school supervision over financial matters. [1] The Guideline proposes policy measures to strengthen management over education funds, the purpose of which is to make the allocations of school funds more scientific and equitable, increase the efficiency of school supervision over financial affairs, reduce instances of embezzlement and corruption in education, and make more efficient use of education funds. The Guideline proposes a reform measure that would establish a higher education appropriations consultancy commission. The main consideration for doing so is that much of the Chinese government’s appropriations

for institutions of higher learning are project funds, for the distribution of which no objective standards exist. This is likely to give rise to unjust situations, such as distributions based on connections and power, and even corrupt practices. Establishing a higher education appropriations consultancy commission, and having it offer suggestions and advice about such matters as appropriations standards, appropriations focuses, and appropriations procedures will be conducive to increasing the scientific and equitable nature of the distribution of higher education funds. It was proposed, during the discussions, to establish a higher education appropriations commission that would independently exercise fund distribution powers. However, in consideration of such realities as the imperfection of China’s intermediary institutions, the power of administrative departments, and the difficulty the appropriations committee would face in making independent decisions, a higher education

appropriations consultancy commission was set up instead. The Guideline proposes that institutions of higher learning implement a system of government appointed chief accountants. Establishing government appointed chief accountants in institutions of higher learning will raise the professional standard of fund use and assets management and, more importantly, enhance the government’s supervision over the finances of institutions of higher learning. Theoretically, the financial activities of institutions of higher learning should be subject to supervision by the people concerned, including the government, students and their parents, alumni, and the Source: http://www.doksinet general public, but China’s institutions of higher learning have never publicized information about their financial affairs, do not accept auditing by registered accountants, and in fact have never been subject to due supervisions. The emergence of corruption among leaders of institutions of higher learning

in recent years and the large debts incurred by these institutions are manifestations of incompetent supervision over financial affairs. The setting up of government appointed chief accountants is an endeavor to enhance government and social financial supervision at institutions of higher learning and to standardize these institutions’ financial conduct. The Guideline also proposes to set up a system for evaluating fund‐use efficiency and place funds on major projects under intensified evaluation and examination, the purpose of which is to improve the scientific nature of the allocations and use of funds, enhance accountability among the relevant personnel, and raise the efficiency of fund use. 4. Considerations about Policies for Improving the Student Financial Assistance System Since the year 2000, China has initially formed a system for assisting students from impoverished families in the compulsory and higher education phases, but problems still exist, as financial assistance

systems have yet to be formed for preschool education and ordinary senior middle school education. Hence the Guideline proposes a number of policies for improving the student financial assistance system. The first is to raise the livelihood assistance standards for boarding students from impoverished families in rural compulsory education and to improve nutrition standards for secondary and elementary school students. After 2006, tuition and miscellaneous fees and textbook fees were waived for rural compulsory education students, and livelihood subsidies were provided to some students from impoverished families, but the coverage of such living subsidies was fairly limited and the monetary amounts low, and some students, in particular boarding students from impoverished families, still found it difficult to defray living expenses and suffered from malnutrition (Yuan Liansheng et al., 2009) To help these rural students, it is necessary to expand the coverage of the subsidies and raise

the livelihood assistance standards for students who live at school. The second is to gradually provide financial assistance to preschool phase students from impoverished Source: http://www.doksinet rural families and low‐income urban families. Preschool education requires that students’ families bear fairly high fees, and most regions in China have yet to set up preschool education financial assistance systems, so that some young children from impoverished families have no opportunity to obtain preschool education. Providing financial assistance for preschool education to the children of financially strapped rural and urban families is helpful for improving equity in preschool education. The third is to set up a national financial assistance system for students from impoverished families studying in ordinary senior middle schools. The circumstances at ordinary senior middle schools is similar to that of preschool education in that students’ families are also required to

defray fairly high fees, most regions have not yet set up financial assistance systems for students from impoverished families, and some of these students lose their opportunity to obtain a ordinary senior middle school education. The Guideline’s proposal about setting up a national financial assistance system for students from impoverished families studying in ordinary senior middle schools indicates that the central government will participate in establishing a financial assistance system for ordinary senior middle school students. This will help build up the system fairly rapidly and increase fairness in terms of opportunities to ordinary senior middle school education. III. Forecasts Regarding the Results of the Guideline’s Education Finance Policies and Suggestions for Reform 1. Forecasts Regarding the Results of the Policies on Increasing Education Input and Suggestions for Reform The Guideline’s renewed proposal to have public education funds account for 4 percent of

the GDP, and its request that this be attained as early as 2012, will put pressure on all levels of government and especially the central government to increase investment in education. The policy of pooling various government revenues for investments in education will expand the channels for investment of public education funds. Actual practice in Chongqing and other localities shows that this has a substantial effect on increasing local public education funds. Thanks to the comprehensive effects of the two above‐mentioned policies and to the fact that the terms of office of the current central government Source: http://www.doksinet leaders who reiterated the four percent target in the Guideline run out only in 2013, it is highly possible that the four percent investment target will be realized on schedule. Levying in full the education surtax and increasing donations to education by means of preferential taxations will require great efforts on the part of the taxation department

and will not produce significant results in a brief period of time. Because the levels of tuition and miscellaneous fees are already quite high in noncompulsory education, there is very little latitude for raising tuition fees, nor will improvements in cost‐sharing bring any great increases in education funds. In order to maintain long‐term and stable increases in education investment, it is necessary to improve and reform the education finance system, and, in particular, to reform the public education budgeting system, the education funds cost‐sharing system among various levels of government, and the accountability system for education fund investment. The people’s congresses should be turned into the true decision makers for education budgets and the central and provincial‐level governments that possess ample financial resources should bear more responsibility for investment in education. Also, performance in terms of developing education and investing funds in education

should be linked with the evaluations and promotions of government leaders and officials in charge of finances, so that investment of funds in public education is determined by the system instead of by the biases and preferences of government officials. 2. Prospects Regarding the Results of Improving Education Investment Mechanisms and Policies and Suggestions for Reform Formulating the standards for per‐student funding at schools of various levels and the standards for per‐student fiscal appropriations is work of a highly technical and policy nature and that cannot be completed in short order. Nor will it be possible for this policy to produce results in terms of investment in education within a brief period of time. If governmental responsibility for input in all levels of education were clearly defined, that might produce the effect of improving the mechanisms of educational input and increasing educational input. However, except in the case of compulsory education, the

Guideline does not define government responsibility for any other levels of education. In particular, the imbalance in the fiscal structure – of Source: http://www.doksinet public education funding being borne mainly the financially weak county‐level governments and less by the financially strong central or provincial‐level governments, and of economically‐developed regions being able provide relatively ample public education funds with little fiscal effort and economically backward regions finding it difficult to come up with the necessary public education funds despite strenuous fiscal efforts – has not been resolved, and the Guideline’s policy to improve mechanisms for educational input will hardly attain the anticipated results. The most important aspect of improving the mechanisms for educational input consists in rationally defining the input responsibilities of the governments and individuals and among various levels of government. Under China’s present

circumstances, input responsibility should be determined by differentiating between public and nongovernmental schools, and between various types of education. For nongovernmental schools at all levels, the main source should be input by individuals (tuition and miscellaneous fees); governments should implement preferential policies in such aspects as land‐use and taxation, provide financial assistance to students from impoverished families, and disburse appropriate amounts of fiscal funding support. For public schools, in addition to compulsory education being included comprehensively within the domain of financial guarantees, noncompulsory education of all levels should also receive government investment as their main inputs. In view of the advantage enjoyed by the central and provincial‐level governments in terms of fiscal revenues and compulsory education’s need for balanced development, compulsory education, like higher education, should receive government investments as its

main input. Preschool education and senior middle school education should depend on county‐level governments for their main inputs, but the central and provincial‐level government should defray the financial assistance funds of these two levels of education for their students from needy families and provide support to county‐level governments with financial difficulties. 3. Forecasts Regarding the Results of the Policies on Enhancing Fund Management and Suggestions for Reform The reform measures of setting up a higher education appropriations consultancy commission and the systems of government appointed chief accountants at institutions of higher learning and for evaluating Source: http://www.doksinet fund‐use efficiency are applicable mainly to the management of public education funds and public schools. If smoothly implemented, these measures will help to improve the equitable and scientific nature of the distribution of public education funds, enhance supervision over

financial affairs at public schools, and improve efficiency in the use of higher education funds. Apart from the above reforms, measures should also be taken to improve the structure of financial governance at schools of all levels and to set up a system whereby parents, alumni representatives and other interested parties outside the school participate in the schools’ major financial decision‐making. One should also set up a system for publicizing school financial affairs, and request that schools submit their financial affairs reports to auditing by registered accountants, publicize the reports in society, and accept supervision from the general public. This would prompt strict compliance with fiscal laws and regulations and financial systems on their part, and raise efficiency in the use of higher education funds. 4. Forecasts Regarding the Results of the Policies on Improving the System of Financial Assistance to Students and Suggestions for Reform All such reforms as raising

the livelihood subsidy standard for boarding students from impoverished families in rural compulsory education, furnishing assistance to the children of economically‐strapped families for pre‐school education, and setting up a national financial assistance system for students from needy families in ordinary senior middle schools will lighten the burden of education for financially‐strapped families and improve equity in education. It must be made clear which levels of government will provide the financial assistance funds needed for these reform policies. The experience of existing student financial assistance in compulsory education and higher education indicates that the funds for financial assistance must be provided in the main by the central and provincial‐level governments for these financial assistance policies to produce the anticipated results In addition to the above financial assistance policy, it is also necessary to improve the system of student loans at

institutions of higher learning. The most important shortcoming of the current system is the absence of government vouchers for the loans of students at institutions of higher learning. Source: http://www.doksinet Commercial banks, out of considerations of their own interests, are unwilling to provide loans to needy students at non‐key institutions of higher learning and cannot meet the needs for loans. The central government should assume responsibility for providing vouchers for the loans to college and university students, urge commercial banks to increase the scope of student loans, and increase the opportunities for students from needy families to get into institutions of higher learning. Notes in the Chinese text: (P.1) [1] Source of data: Ministry of Education, 2009 National Education Development Statistical Bulletin: 2010[EB/OL]. http://newsxinhuanetcom/edu2010‐08/03/c 12405082htm 2010‐8‐16; [2] CCP Central Committee and State Council, Outline of the National Plan

for Medium‐ and Long‐Term Education Reform and Development (2010‐2020) :2010[EB/OL]. http://www.moe/edu/cn/edoaswebsite18/30/info1280446539090830htm2010‐9‐16 (P. 2) [3] There is, in China’s education funds statistics, no entry for public education funds, only an entry for fiscal education funds. Fiscal education funds comprise four items: Budgetary education funds (from ordinary taxation), taxes levied by governments at all level for used on education, enterprise appropriations for enterprise school running, and funds from school‐operated businesses and income from social services used for education. In terms of their nature, the last two items do not pertain to public education funds. However, the amounts of these two items are quite small and constitute less than 0.7 percent of the entire amount of fiscal education funds Hence, China’s fiscal education funds may be seen as being similar to what are generally referred to as public education funds in other countries.

Source of data: Ministry of Education Finance Division and National Bureau of Statistics Social and Technology and Science Statistics Division: China Education Finance Statistics Yearbook 2009, China Statistics Press, 2010. If no other explanations are given, data on 2008 education funds referred to in the following text come from the same source. Source: http://www.doksinet [1] Source of data: Ministry of Education Development Planning Division, China Education Statistical Yearbook 2008, People’s Education Publishing House, 2009. (P.4) [1] China’s public education funds accounted for 2.61 percent of the GDP in 2000, and for 345 percent in 2008. (P.5) [1] Dai Xiaolin, “Installation of a Tourist Elevator at Renmin University Third Floor Refectory Called in Question”: 2006 [EB/OL]. http://news.sinacomcn/c/edu/2006‐08‐16/02109758200sshtml2001‐08‐16: Liao Jing and Liu Jiajing, “Why the High Incidence of Corruption at Institutions of Higher Learning” (serial

coverage): 2009 [EB/OL]. http://politics.peoplecomcn/GB/1026/10188072html2010‐8‐16 References: [1] Liu Zhanlan, “Preschool Education Must Retain It Educational and Public Benefit Nature,” Education Research,2009, (5): pp. 31‐36 [2] Wang Rong, “Increasing Education Finance Investment Requires Improvements in the Related Systems and Mechanisms,” People’s Education, 2008, (9): pp. 2‐5 [3] Wang Zhitai, “Doing a Good Job of ‘Getting a Poor Country to Operate a Big Education’,” The Beijing Daily, 1996‐6‐30, (1). [4] Yuan Chunlin and Li Bin: “The Finance Ministry Gives a Detailed Explanation of Why the Target of Education Funds Accounting for 4 Percent of the GDP Was Not Achieved”: 2008 [EB/OL]. http://www.educn/081hdt 6273/20080310/t20080310 283956shtml2010‐8‐16 [5] Yuan Liansheng, “A Political‐Economic Interpretation of China’s Education Finance Issues,” Thesis at the National Economics of Education Annual Conference, Beijing, 2008, pp.

1‐4 Source: http://www.doksinet [6] Yuan Liansheng, “The Reasons for the Insufficiency of Chinese Governmental Investments of Education Funds and Countermeasures,” Journal of Beijing Normal University (Social Sciences Edition), 2009, (2): pp. 5‐11 [7] Yuan Liansheng, Liu Zeyun, Du Yuhong and Wang Shaoyi, “Progress on the Student Financial Assistance System of the Compulsory Education Stage: A Study,” Du Yuhong and Sun Zhijun, Studies on China’s Compulsory Education Finances,” Beijing: Beijing Normal University Press, 2009, pp. 91‐129