By Sean Gallagher and Geoffrey Garrett
University leaders supported Trade Minister Craig Emerson’s recent trip to China to champion diversifying Australia’s exports to the world’s growth engine beyond mining. But behind closed doors vice-chancellors were worrying that the Trade Minister was chasing the wrong problem where higher education is concerned.
After all, Chinese students today comprise about one-third of all international students in Australia. Over the past decade, Australia’s China strategy has been so successful that we are currently the world’s single biggest foreign educator of Chinese students.
The problem is that this pre-eminence is under serious threat, and the China business model used by Australian universities is looking increasingly outmoded.
According to Austrade, new enrolments of Chinese students in Australian universities decreased by 2 per cent over the past year. This might not seem a lot. But it is a stunning reversal from the two previous years in which new enrolments increased by a combined 43 per cent, and indeed from the previous five years when growth averaged 16 per cent a year.
Like manufacturing and tourism, higher education has been hard hit by the strong Australian dollar. But this is not the only challenge.
The China market is increasingly competitive both because American and British universities are focusing much more of their attention there and because the quality of the best Chinese universities is rapidly improving.
How should Australian universities react to this looming China challenge? The two obvious moves are equally unattractive—reducing prices or lowering quality.
Given the importance of international student fees to our universities’ bottom lines, lowering price would inevitably hurt Australian students and the research enterprise. Lowering the quality bar would adversely affect the classroom and tarnish the international reputation Australia has worked hard to establish.
Therefore, vice-chancellors need more innovative China strategies. One surprising place to look is elite American universities that have never shared Australia’s zeal for bringing large numbers of Chinese students to their home campuses.
US universities are doing two things in China today. First, they are engaging in joint ventures with local institutions, companies and governments to create new universities in China issuing their own degrees. And second, they are using China as a base for high-end Sino-American research collaborations.
Duke University recently announced the creation in partnership with Wuhan University of Duke Kunshan University an hour outside Shanghai. DKU will leverage the global quality of Duke’s Fuqua School of Business but tailor its programs to address local needs by working closely with the Chinese Ministry of Education. DKU business degrees, for example, will offer classes focused on improving service delivery in the Chinese health system—a major goal of China’s new 12th five-year plan.
But there are big benefits to Duke, too. Its Wuhan partnership will enable Duke quickly to evolve to meet the rapidly changing demands for higher education in China, while at the same time increasing the China expertise of its academics and its soft power with Chinese elites. Duke will also gain a valuable revenue stream without affecting the campus experience for students at its headquarters in Durham, North Carolina.
The China strategy of Yale University, based in New Haven, Connecticut, is focused more on research. Yale has three joint research centres with two of China’s top universities, Fudan University in Shanghai and Peking University in Beijing — the Fudan-Yale Biomedical Research Center, the Peking-Yale Joint Center for Plant Molecular Genetics and Agro-Biotechnology, and the Peking-Yale Centre for Microelectronics and Nanotechnology.
These centres are at the global cutting edge of science and technology, combining Yale’s global brand and world-class academics with China’s unparalleled capacity to build quickly first class infrastructure as well as its vast pool of high-quality scientists and technicians working at much lower salaries than they would command in New Haven or elsewhere in the US.
Again, the benefits to Yale and their Chinese partners are clear. Like Duke, Yale benefits from their Chinese partners’ willingness to underwrite much of the financing and the risk for the new endeavours, coupled with access to the best Chinese talent. China, in return, benefits from its institutions working hand in glove with some of the world’s best, knowing that this will help China’s efforts to ramp up the quality in its own universities.
Call Duke’s approach to exporting its educational model through a Chinese joint venture the General Motors strategy. GM sells more cars today in China than it does in the US. But it makes the cars in China not Detroit, helping China develop its auto industry and delivering big profits to GM shareholders at home.
Yale’s approach to leveraging China’s comparative advantage in new infrastructure and cheap talent is more like Intel, whose large research centre in Beijing is focused on creating the next generations of processors and platforms. In addition to the attractive infrastructure and talent mix, Intel also knows that its research joint ventures maximise its access to and knowledge of the Chinese market.
Australia’s China strategy today looks less like GM or Intel than like a western steel manufacturer struggling to export to China. Now is the time for our universities to move beyond the exports thinking that has served them so well over the past decade and embrace the brave new world of universities as multinational firms slicing up the global value chain.
Dr Sean Gallagher and Professor Geoffrey Garrett are both from the US Studies Centre at the University of Sydney.