This year China's public universities are facing the challenge of repaying their high loans.

Since 1999, China has been reforming the universities' management system by establishing new policies to enlarge public universities. However, to avoid increasing public debt the State has encouraged the universities to borrow from the banks.

As a result, massive borrowings took place in 1999 to 2000 with most of the loans being used to expand campuses, build more classrooms, office buildings, dormitories and other facilities.

According to the Chinese Society Analysis and Forecast for 2006, a blue paper published by the Chinese Academy of Social Sciences, loans by universities nationwide stood at 150 billion yuan to 200 billion yuan (about $19.48 billion to $25.97 billion at the current exchange rate) in 2005.

Shao Hong, a member of the Chinese People's Political Consultative Conference (CPPCC) Standing Committee and Vice Chairman of the Jiu San Society, one of China's democratic parties, estimated the total borrowing could reach 400 billion yuan ($51.95 billion). "Apart from bank loans, many other debts occurred from investment companies, including units undertaking the construction", he said.

Zhu Yongxin, vice mayor of Suzhou and also a member of the CPPCC Shanghai Committee, said the huge debts have become obstacle that impedes the development of public universities. This problem is expected to cause an invisible bankruptcy crises to China's universities.

Xi'an International Studies University President Hu Sishe, who is also deputy to the National People's Congress (NPC), said that if university today went bankrupt like the debt-ridden state-owned enterprises (SOEs), what can the government do? He urged the government to face this issue and develop a solution as soon as possible.

Wang Xuming, spokesman and also deputy director of the General Office of the Ministry of Education, said the issue is expected to be resolved with an increasing of funds by the central government, reducing university construction, and strengthening management.

Wang made these remarks on April 17 after it was revealed that Jilin University had debts over 3 billion yuan ($390 million).

"Most higher educational institutions finance their development by means of loans," said Wang.

Statistics showed that the number of higher education institutions jumped from 1,000 in 1997 to the current 2,000. The number of enrolled students expanded from less than a million to 5 million.

Regarding university debts, Wang pointed out several ways to reduce the accumulation of debt:

First, the Ministry of Education issued notices to require universities to make accurate assessment for the loans needed and to control the loan amount. Risk assessment will be done to control the borrowings in an orderly way.

Second, the central government as well as governments at all levels increased their investment in education. Scholarships and stipends have reached 9.8 billion yuan ($1.27 billion) this year and are scheduled to hit 20 billion yuan ($2.6 billion) in 2008. These funds can be used to reduce the financial burden to the schools.

Third, infrastructure facilities built over the past six to eight years will last for dozens of years, so schools will not need to construct new ones. This will reduce the pressure for new construction.

"Presidents of universities need to know not only management, but also finance and economics", Wang noted.

Education Minister Zhou Ji said last month that "the bankruptcy critique" of public universities stretches the truth, for the education industry will not become the educational SOEs, because the current total assets of higher educational institutions accounted for over 500 billion yuan ($64.9 billion). The issue of over borrowing from banks by universities will be resolved, he added.

(Source: Xinhua, Beijing Youth Daily and Beijing Morning Post)