Caixin Weekly | Education Finance Sounds Alarm (AI Translation)

财新周刊｜教育财政响警钟

The article discusses China's evolving approach to educational funding and the challenges faced by its education system amidst fiscal constraints and demographic changes. Ahead of the release of the "Education Powerhouse Construction Plan Outline (2024-2035)," there's speculation about how China plans to fortify its education sector. Fiscal strategies must quickly address questions about sourcing and allocating funds as education expenditure at the national and central levels has doubled from 2013 to 2023.[para. 1]

Despite increased investment, education spending has slowed, hovering around 4% of GDP, which is a warning signal according to international standards. In 2023, education expenditure stood at 4.001% of GDP, but GDP recalculations in 2024 revealed it was actually 3.897%, marking a decline from the "red line" threshold. This economic scenario necessitates careful financial planning for national educational strategies.[para. 1][para. 2]

The article highlights grassroot-level financial struggles in nine different regions. Principals in Henan, Yunnan, and Gansu provinces have reported financial difficulties, such as delayed per-student funding, high levels of debt, and operational challenges in schools. In some areas, schools are forced to take loans to keep functioning. Issues are compounded by local governments’ delayed or incomplete disbursement of funds, and financial improprieties where allocated funds are diverted for other uses.[para. 9]

[para. 8] In 2024, audit reports identified misuse of funds meant for school nutrition programs and educational expenses. Some funds were used to repay government debts or misappropriated through fraudulent procurement activities. Weak supervision was noted, indicating gaps in financial management that affect the delivery of educational services, especially in rural areas where infrastructure projects do not align with the population's needs.[para. 8]

[para. 15] As demographic trends shift, with declining birth rates, kindergarten closures increase, and school-age populations drop. The Western and coastal regions feel this impact, necessitating a reevaluation of educational resource allocations, school infrastructure configurations, and balance between urban and rural educational needs.[para. 15]

[para. 5] Additionally, large urban populations disperse school enrollment pressures. There's potential for making urban schools more inclusive for children of migrant workers to balance educational opportunities amidst shifting populations. In rural areas, infrastructural projects remain underutilized due to urbanization as school-age populations relocate.[para. 5]

[para. 14] In higher education, challenges of quality and demographic shifts remain. Universities struggle with growing financial pressures, partly due to reliance on government funding amid increasing costs. A 4% decrease in higher education allocations in 2024, driven by construction cutbacks, demonstrates financial strain. The government seeks diversified funding through donations, science-education integration, and increased tuition fees to improve sustainability.[para. 14]

The central government aims to deepening fiscal system reforms to enhance resilience in education investments. The focus is on strengthening central fiscal authority and promoting coordinated local financial autonomy to ensure flexible, inclusive, financially robust education systems essential for long-term national strategic development goals.

In conclusion, future education finance reform must foster a diversified investment ecosystem to enhance fiscal resilience. This includes integrating social funding mechanisms alongside central and local government contributions.[para. 8][para. 14]