Enterprise and Education: A View from China

Executive Summary

by David Stern

A few weeks ago a small delegation from NCRVE spent 10 days looking at schools and colleges in China. What we saw surprised us. Instead of the clear separation between schools and businesses that is familiar to us in the United States, we found enterprises running schools and schools operating businesses on a substantial scale. This raises some interesting questions for our own country.

The delegation consisted of Cathy Stasz, Norton Grubb, Rong Wang, and myself. The cost was paid by a U.S. foundation, and in China we were guests of the State Education Commission, which oversees education at the national level. We visited secondary schools and postsecondary institutions in Beijing, Xi-an, and Nanjing.

Most of the schools we saw offer vocational programs for students who had just finished their nine years of compulsory schooling. Some of these same schools also enroll students in two-year postsecondary programs, and we also visited two colleges that offer only two-year postsecondary study in technical fields. The vocational and technical areas of study in these schools and colleges include mechanical and electrical engineering, machining and machine tool manufacturing, business and accounting, hotel and food services, desktop publishing, and others.

Every vocational-technical school or college we visited also operates at least one substantial business. For example, the school for machining near Xi-an runs a factory that produces noncomputerized, multipurpose machine tools, some of which are exported to several countries including the United States. One school for food services owns two full-scale commercial restaurants that compete with many others on the busy street in Beijing where the school is located. On our last night in Nanjing, we were served an elaborate meal in a school-owned restaurant that is part of a school-owned hotel.

In addition, we visited Beijing University, China's most selective institution of higher education. Some inventions and discoveries by faculty members have been turned into commercial businesses directly owned by the university. One example is the technology to digitize Chinese characters for typesetting and word processing. Beijing University has kept a majority shareholding interest in the company that commercialized the technology. Last year the company's total sales amounted to about half a billion dollars.

School-owned enterprises are not unknown in the United States, of course. Many high school and college vocational programs run small businesses, and medical schools own teaching hospitals. These school-sponsored productive activities give students a place to practice what they are learning under the eye of supervising instructors, and to rotate among a variety of jobs within the enterprise.

In China, compared to the United States, there is more interest in school enterprise as a source of money. Though precise data are not available, we were told by school officials that profits from their businesses supply about 10 percent of the school's total revenues. Indeed, some school-owned enterprises in China, like the big company at Beijing University, are purely commercial ventures and do not involve students at all. The national education law explicitly encourages schools to operate enterprises to help pay their expenses, and school-owned enterprises are exempt from certain taxes.

The possibility of raising money through enterprise may be especially advantageous for vocational schools and colleges. On one hand, special equipment is an additional cost for vocational and technical education in China, as is true everywhere. On the other hand, if schools are free to compete aggressively in business, vocational and technical schools may be able to recover that additional cost through school-based enterprise. Vocational-technical schools are probably in a better position than nonvocational schools to operate profitable enterprises because they have the productive equipment and know-how.

Aggressive expansion of school enterprise raises difficult questions, however. Nonschool enterprises may object to competing against school enterprises that receive special tax breaks or other advantages. This kind of complaint has sometimes arisen in the United States, and we heard that it is also being discussed in China. Part of the solution may be to require that school enterprises, as one aspect of their programs, perform socially beneficial--and unprofitable--functions that other enterprises would tend to shun: for example, serving needy people, or attending to environmental concerns.

Observing the institutional strategies that are being tried in China will be instructive for the United States. In recent years, U.S. policy makers have been intrigued by Germany and other European countries where employers take major responsibility for education and training of young people. China has schools run by enterprises, too. But it also has, apparently on a larger scale than in Europe or the United States, enterprises run by schools. Developing a variety of approaches to combining education and enterprise may give China unusual flexibility in adapting to demands of the emerging global economy, where learning and production are increasingly intertwined.

David Stern is a professor of education at U. C. Berkeley. Prior to becoming the director of NCRVE, in 1995, he spent two years at the Organization for Economic Cooperation and Development in Paris, where he coordinated several comparative studies of education in industrialized countries.

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