Sino-foreign cooperation in education (part 2)

In Part 1 of this article, we discussed the legislation governing Sino-foreign cooperation in education, particularly with respect to the establishment of cooperative institutions and projects (see China Business Law Journal volume 1 issue 6). Sino-foreign cooperation in running schools has been a hotspot in the area of cooperation between Chinese and foreign educational institutions, the operation and management of which has given rise to a number of issues that are puzzling these institutions themselves. Because of this, this article will focus on these issues as well as the regulations and policies that relate to the operation and management of running schools jointly by Chinese and foreign educational institutions.

Establishment and management

Under the PRC Sino-foreign Cooperation in Education Regulations, Chinese and foreign organizers can cooperate in running a school by contributing cash, in kind, land use rights, intellectual property and other property. However, IP so contributed may not, under normal circumstances, account for more than one-third of any one party’s input. If a contribution takes the form of IP, its value must be determined on a fair and reasonable basis following negotiations between the Chinese and foreign parties, or evaluated by a qualified appraisal agency. Relevant information about the IP has to be submitted to the approval authorities, such as a copy of the IP certificate, its validity and the basis upon which the evaluation of the IP was made.

After obtaining a licence, a Sino-foreign cooperative educational institution must, pursuant to relevant laws and administrative regulations, register with the civil affairs department as a private non-corporate work unit; register with the Administration for Code Allocation to Organizations in order to obtain a registered organization code; and register with the tax department and the department of foreign exchange control. A Sino-foreign cooperative educational institution must set up a council, a board of directors or a joint management committee as its governing body comprising at least five members, of whom the number of representatives from the Chinese side must not be less than 50%. A Sino-foreign cooperative educational institution with a legal person status must also have a legal representative who should be selected from either the president of a council, the chairman of a board of directors or the school principal, to be decided by negotiation between the Chinese and foreign parties. The selection of candidates for the position of principal or principal administrator of a Sino-foreign cooperative educational institution is usually one of the most controversial areas between both parties. Under the PRC Sino-foreign Cooperation in Education Regulations, the principal of a Sino-foreign cooperative educational institution must be of Chinese nationality and reside in China. A foreign national can serve as the legal representative of a Sino-foreign cooperative educational institution, but not as the principal or the principal administrator.

Enrolment and fees

The enrolment of students by Sino-foreign cooperative educational institutions or projects that offer higher education or degree certificates recognized by the Chinese government must be incorporated into the national enrolment programme for institutions of higher education. Prior to the public promotion of annual enrolment, enrolment brochures and advertisements should be reported to the education department for approval and filing.

Sino-foreign cooperative educational institutions are required to establish a financial and accounting system according to the law. For cooperative projects, an account must be set up which is dedicated to the management of tuition fees and discrete from the financial accounts of the parent institutions. Cooperative institutions and projects should charge fees in accordance with the standards published by the commodity price departments in the places where such institutions or projects are located, and apply to the commodity price departments for a licence. In practice, given that some Chinese and foreign institutions have invested substantial amounts into cooperative institutions or projects, but the fee scales stipulated by the commodity price department have been too low, students have been required to pay extra fees disguised as other items. It is very likely that cooperative institutions or projects which engage in this practice will be investigated by the education and commodity price departments.

Dual campus model

Full-time colleges or universities can adopt a “dual campus” model in organizing a Sino-foreign cooperative education project. However, to do so they must bring high-quality foreign educational resources into China. Favoured candidates will therefore be renowned colleges, colleges which are strong in certain disciplines or specialized fields, or colleges with contemporary teaching philosophy and advanced management standards.

In order to attract such high-quality educational establishments, the education department has set out rules requiring the courses conducted by a Sino-foreign educational institution to account for more than one-third of the total number of courses of a cooperative project. In addition, foreign educational institutions must recruit teachers whose standards are recognized by Chinese educational institutions.

Some Chinese colleges and universities offer foundation courses for foreign universities, and even pure language training programmes in which foreign universities are not involved in carrying out any teaching activities in China. By signing an agreement relating to credit transfer, Chinese and foreign parties can provide an opportunity for students to continue their study in foreign universities and obtain a degree from a foreign university upon completion of their studies abroad. This type of arrangement does not meet the requirements of the education department for Sino-foreign cooperation in education, nor is it conducive to the development of Chinese education or the attraction of quality educational resources into China. Accordingly, the education department is expressly not supportive of such arrangements. However, due to the high thresholds set by the education department for Sino-foreign cooperation in running schools, complex approval process and lengthy approval time, in practice many Chinese and foreign colleges and universities carry out teaching activities by way of credit transfer in order to commence enrolment in China as quickly as possible.

Sally Wang is an associate at Martin Hu & Partners (MHP Law Firm)