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7
Investing in China’s
Education Industry
By Dezan Shira & Associates
Editor: Zhou Qian
Despite China’s promise to gradually open up
its education sector to the world following its
accession to the WTO in 2001, the country’s
education industry is still a highly sensitive area
for foreign investment. This is mainly due to how
closely intertwined it is with Chinese ideology and
identity and its propensity to influence children’s
beliefs, resulting in foreign investors engaging in
education in China usually being faced with closer
scrutiny.
Market Entry Policies
According to China’s Catalogue of Industries for
Guiding Foreign Investment (2015) (
外商投资产
业指导目录
), the education industry is divided
into three separate categories. While compulsory
education institutions (primary andmiddle schools)
and special training institutions (such as military,
police, political, and Chinese Communist Party
schools) are still considered prohibited areas,
foreign investors are allowed to invest in pre-school
educational institutions, high schools, and tertiary
educational institutions in the formof Sino-foreign
joint ventures, in which foreignmajority ownership
is allowed but only when the Chinese party is in a
leading position. That is to say, the principal or key
administration officer in such institutions is required
to be a Chinese national and the council, the board
of directors, or joint administration committee of
the school must be majority Chinese.
In contrast to these restrictions, foreign investors are
encouraged to invest in sports t
raining and non-
academic vocational training inst
itutes (such as IT,
accounting, English, etc.), primarily because these
industries are considered to have talent shortages.
The only way for foreign investors to circumvent
the restrictions listed in the Catalogue is to establish
international schools for the children of foreigners.
According to the Interim Provisions on Set-up of
Schools for Children of Foreign Nationals in China
(
关于开办外籍人员子女学校的暂行管理办法
),
qualified foreign organizations, enterprises, and
individuals legally residing in China are allowed
to establish wholly foreign owned and controlled
pre-schools and K12 schools that are only open
to the children of foreign nationals. However, it’s
important to note that this kind of international
school is forbidden to have any branches – it can
only be a single school.
Non-profit or For-profit
Another acute consideration for foreign investment
in China’s education industry is whether foreign
parties can profit from their investment. In China,
education is traditionally regarded as a public cause,
and the government has therefore been reluctant
to privatize the sector. As such, China’s laws and
regulations usually require education institutions
to be non-profit organizations, but there are several
holes and contradictions across different pieces
of legislation. Article 28 of the Implementation
Measures on Establishment and Operation of
Sino-Foreign Cooperative Educational Institutions
(
中外合作办学条例实施办法
) specifies that all
Sino-foreign cooperative educational institutions
are prohibited from for-profit activities.