Pearls and Irritations

 My remarks today are very much a personal perspective, drawing on my past engagement with China as a foreign policy practitioner and informed by my current role, but it is not an official University of Queensland position.

Today I wish to talk about what China means to Australian universities: what are the issues we face, how best to think about the relationship with China and, importantly, how do we manage risks while expanding opportunities.

To understand where China fits into the world of Australian universities you must start with budgets not geopolitics.  Put simply, China has proven to be the easiest answer to the budget pressures facing all Australian universities.  But like all easy answers it creates its own complications.

It is no coincidence that the large rise in the number of Chinese and other international students in Australia has paralleled the steady dilution of federal funding as a share of total university funding.

In 1986, when universities were first allowed to offer fee-paying places to international students, more than 80% of university funding came from the Federal Government.

International student numbers expanded by 129% from 1987 to 1992, and further doubled between 1994 and 2000.

By 2002 there were approx. 125,000 international enrolments in Australian higher education. By 2017 that had increased by 180% to ~ 350,000 enrolments.

Today across the most research-intensive universities (the Go8), federal support averages below 40% (excluding the Higher Education Loan Program, HELP).  As the number of international students has grown federal support as a proportion of total university budgets has halved. 

At The University of Queensland this year for the first time, income from tuition fees, overwhelmingly from international students, will surpass income from Commonwealth Supported Places, including HELP.

Moreover as the numbers of international students at Australian universities has grown so also has the mix changed.

In 2002, enrolments from China comprised 14% of total international higher education enrolees.

By 2017, enrolments from China had grown to 38% of international students.

Emeritus Professor Frank Larkins (former Deputy Vice-Chancellor of Melbourne University) recently wrote that of the 28 nations with more than 1000 enrolees in Australian higher education in 2017, seven nations had fewer students enrolled than 25 years ago. Among them are some of our most important Asian partners – Indonesia, Singapore, Thailand and Japan.

At UQ, Chinese students will account for close to half of all international students in 2018.  We are towards the middle of the spectrum. Many other universities are more highly geared to China and to international students in general.

There is nothing inherently wrong with this.  Quite the contrary.  International students bring many benefits.

International education is now Australia’s largest services export, contributing ~$32B to our export earnings with multiplier effects through the economy.  In a recent study commissioned by the Group of Eight universities, London Economics estimated that every 3 Go8 international students generate $1M in economic activity during their enrolment.  London Economics also estimated that $1m of off-campus non-fee spending  by overseas students supports 8.78 jobs throughout the Australian economy.

There used to be those who argued that international students stole university places from Australian students.  Now we know that they actually subsidise our universities, especially our research programs.

And beyond the economic benefits, international students deepen our regional links, reinforce our foreign policy objectives, strengthen Australia’s soft power and broaden the horizons of Australian students.  They also create a network of alumni in Asia who know Australia first hand, occupy significant positions and for the most part have a very positive attitude towards us.

We should bear this balance sheet in mind when we hear calls to restrict the work rights of international students or unworkable suggestions that we direct international students towards regional universities or blaming international students for the congestion in our cities.

The issue here is not the benefits to Australia of international students but whether demand from China will hold up. In the short to medium term it is more likely than not that demand will remain strong.  But, like any market, the market in international students can be cyclical and influenced by external factors and universities would be wise to plan on this basis.

There are two potential threats to demand from China.

The first is the extraordinary investment China is making in its own university system.

Unlike Australia, government investment in Chinese universities has been growing strongly.

The highly-ranked Tsinghua University, which has about 36,500 students, received ~$AU3.9 billion from the Central government in 2017, close to 40% more than in 2016.  Indeed when you take into account purchasing power parity it makes it a very well funded university and highly competitive.

Peking University, with some 43,000 students, received ~$AU2.9B from the central government, an increase of more than 50%.

Shanghai Jiao Tong University, approaching 41,000 students, received ~$AU2.2B in 2017, a 37% increase on 2016.

Actual government funding is even higher than the these figures, as Chinese universities also receive financial support from provincial and local governments and other granting agencies.

By comparison government funding to UQ, which has some 39,500 full time equivalent students including international students, was $739 million excluding HELP and the trend line over time is down not up.  And this decline in investment in universities is part of a broader trend of falling behind in knowledge investment in Australia.  For example, Australia’s expenditure on research and development and development as a proportion of GDP continues to be below the OECD average.

And if we look at research funding, the budget of the Chinese National Science Foundation has grown almost 300 fold since its inception 31 years ago. It has a similar role to the Australian Research Council, which has a budget that is shrinking in real terms.

If an objective of such investments is to improve China’s stocks in global university rankings, then it is working. China now has one university in the top 30 of the Times Higher Education rankings.  Australia has none.

The bolt into the top 30 prompted the rankings’ chief knowledge officer, Phil Baty, to declare: “China’s leading universities are truly now part of the global elite and overtaking prestigious universities in the US, UK and Europe.” And he could have added, Australia

Given the weight that most rankings methodologies give to research performance, China’s movement up global rankings is likely to continue.

As it does research collaboration between Australian and Chinese scholars and institutions will only increase.

UQ has already produced more than 3000 co-publications with China since 2013, but it’s the quality of these publications that’s really noteworthy.

Using citation count – a key measure of an article’s impact and reach – UQ’s co-publications with China are above world average. In fact, measured by the Category Normalised Citation Impact (CNCI), at 2.84, UQ-China co-publications are considered almost three times the world average.

It’s interesting to note that UQ-China co-authored publications have actually performed better, in terms of normalised citations, than the average of all UQ papers (which have a CNCI of 1.58). This is testament to the strength of UQ’s relationship with leading Chinese institutions such as the Chinese Academy of Sciences, Peking University, and Zhejiang University.

China became the world’s largest producer of research papers (by volume) in 2016, when it passed the USA to produce almost 19% of the world’s papers. The quality of Chinese papers – as judged by the percentage of papers in the top 1% of cited papers – continues to improve although it is still well behind the US, UK and Australia

It would be naïve to believe that this trend in investment in China’s university system will not have a negative impact over time on the demand in China for an Australian education.

Peter Varghese is Chancellor of The University of Queensland, to the 2018 National Conference on University Governance, 4 October 2018, Adelaide.He was formerly Secretary of DFAT.

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