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Pains of Going Public

Parents who invested in real estate projects tied to private schools partnered with public schools worry the new crackdown on private education will leave their children in limbo

By Xu Dawei Updated Dec.1

Hongfan Middle School in Chongqing was built in 2008

Parents in Chongqing are protesting a local government’s decision to bring private elementary and middle schools into the public education system.  

The schools targeted were established by reputable public schools in partnership with private enterprises, which proved attractive to parents. One such private school is Hongfan Middle School Attached to Chongqing No.8 Secondary School, a venture between the school and HIFETE Group, a Chongqing-based enterprise engaged in real estate, hotels, tourism and engineering. Chongqing No.8 Secondary School already had a high reputation for getting results in the annual national high school entrance exams. Buying an apartment in a complex built by HIFETE means students can enroll at Hongfan Middle School, which benefits from the educational resources of its parent public school. 

In the wake of the new policy announcement, parents submitted a letter to education authorities demanding the teaching staff be retained. Parents told media they fear Hongfan Middle School will be forced to cut ties with Chongqing No.8 Secondary School and therefore lose its access to good teachers. They are concerned the money they spent buying apartments close to the school, already costing up to 5,000 yuan (US$714) per square meter higher than average, will be a bad investment.  

After central education authorities released an update to rules managing the private education sector, cities and counties across the country are taking similar measures to Chongqing. The amendment to the Regulations to the Implementation of the Private Education Promotion Law, effective from September 1, states that public schools for compulsory education can no longer convert to a private school or establish one solely or in partnership with a private enterprise. Compulsory education refers to primary and junior secondary education, or grades 1-9, which cover ages 6 to 15. If social organizations other than State institutions run private schools, they must be non-profit.  

Existing private schools operated by a public school will have to convert to a public school, remain private but sever the connection with the founding public school, or close altogether. The Ministry of Education (MOE) expects the changes to be in place within two years.  

Buying In 
Liu Wei, a Chongqing resident, stretched himself financially to buy an apartment near a private school in Yubei District, more than 30 kilometers from downtown. “The quality of the apartment was not good, slightly better than affordable public housing,” he told NewsChina. He said that it was to ensure his son had access to good teachers from the affiliated public school, but now he complains he has to reconsider plans for his son’s education.  

Yubei District is a hub for affiliated private schools like Hongfan Middle School. They attract so many high caliber teachers because of their public school partners that Yubei, where education standards had been low, has become a byword for quality education.  

Many urban governments use partnerships between public-private schools and real estate companies to develop new districts – a good public school attracts people into a new area once it brings in good educational resources, mainly teachers, and when the area gets increasingly prosperous, more private schools emerge and more residents and businesses follow.  

Newspaper Chengdu Business reported that seven of Chongqing’s top-rated public middle schools have established 41 branch campuses. Only 15 are public. Some schools have only established affiliated private schools, most with real estate companies. Buying an apartment comes with automatic school enrollment.  

“The public school generally gets half the total stake in the private school because they bring their reputation and teachers,” an insider in Chongqing’s education sector told NewsChina on condition of anonymity.  

“This is win-win for all three parties,” Ma Xuelei, deputy director of Beijing Private Education Commission, a social organization, told NewsChina. “Good affiliated private schools provide a magnet for real estate projects, and tuition fees help with the public schools’ tight budgets, and local governments get education resources distributed to the suburbs at little cost,” he said.  

According to Ma, some local governments, although not all, decide which public school partners with which enterprise depending on the size of the investment. “The best school will of course be given to the biggest investor,” he said.  

The appeal for parents is high. Apartments in a real estate development which included a place at Shoudi Renhejie Elementary School established by Renhejie Elementary School, one of Chongqing’s best primary schools, and its partner Capital Airport Holding Corp, reportedly sold out in two hours.  

“This is quenching a thirst with poison,” Cheng Fangping, a professor at the Renmin University of China in Beijing and deputy director of the Education Commission under the Central Committee of the China Association for Promoting Democracy, told NewsChina. “These private schools have just transferred the cost of education, which should be borne by local governments, to parents,” he said.  

“The private schools are essentially public,” Yang Dongping, a member of the State Education Consultation Commission and director-general of the 21st Century Education Institute, told NewsChina. “Those schools enjoy both the public schools’ resources and private schools’ freedom to charge... This is unreasonable,” he said.  

Criticism has grown as people find it unfair that good educational resources flow into private schools and rich people benefit.  

At a press conference on the new rules in May, Liu Changya, director of the MOE’s development and planning department, said that joint public-private schools have on one hand diluted a public school’s brand and resources, and expanded education anxiety among parents, and on the other created unfair competition between private and public schools by using public schools’ reputations and resources.  

Teacher Quality 
Chongqing had already tried to sort out the public-private school business in 2019, when it halted approvals and banned apartment sales connected to enrollment. Chongqing said it will split up 48 private schools from their public school partners by the end of this year, with 39 expected to become public schools in their own right. Eight will stay private but with no involvement from the public school, and one will close.  

The biggest concern for parents is the quality of teaching. “We chose the private school just to get good education resources [from its public school partner],” said Li Fang, mother of a student at Shoudi Renhejie Elementary School in Yubei District. She told NewsChina the school charges 15,000 yuan (US$2,143) a semester. If you bought an apartment, fees were discounted by 20 percent.  

Li worried the good teachers at her child’s school will return to the public school system. “We pay for those teachers,” Li emphasized. The parents have demanded the teachers are retained and the transition period is extended to five to eight years against the government’s announced two-year transition period.  

According to the minutes of a meeting in May between Yubei District government and representatives of parents of Hongfan Middle School students, the school is to become public, but with promises to retain the management system. The government will guarantee the cost of running the school and teachers will be employed on the same basis and salary as those at Chongqing No.8 Secondary School. After the transition period ends, the school will enroll students from the neighborhood by lottery, although parents who already signed an enrollment contract with the real estate developer will not be affected.  

A Chongqing official who refused to reveal his name told NewsChina the government has banned public schools from poaching teachers from private schools during the transition. They will encourage teachers to stay at the private school during the transition period, but once it ends, the teachers may choose whether to stay or return to the original public school.  

Li complained that two years is far too short for elementary schools to transition when students are enrolled for six years.  

Liu Wei told NewsChina that when he bought his apartment, the developer promised to open a private middle school in the community, but now he does not know if it will. He is considering whether to return to the downtown, and said he will decide according to which has better teachers.  

“Teachers are the key element in well-distributed education resources, making it a core factor for reform... We can’t hoard all the good teachers in one school,” Ma said.  

Cheng Fangping agrees. “The government should make sure all schools have good teachers and encourage them to mentor other teachers,” he said.  

Financial Pressure 
The reform is causing problems for local governments, particularly those in poorer central and western regions. If many private schools are forced to become public, and therefore State-supported, the financial burden on already cash-strapped authorities will be huge.  

“Money shortages are generally why some regions encourage private schools,” Chu Zhaohui, a researcher at the National Institute of Education Sciences, told NewsChina.  

In Zhoukou, Henan Province, private schools are a calling card for the city. In 2001, Zhoukou promoted the education industry and granted incentives to private schools. Zhoukou even listed private education as the government’s No.1 project, attracting many investors.  

Zhoukou has 462 private schools for K-9 with 433,371 students, 34.2 percent of the total number of students enrolled.  

In July, Wang Ye, president of No.1 Senior Middle School of Huaiyang, Henan Province, a private school with a good reputation in Zhoukou, said he would “donate” his school to the local government after authorities pledged to reduce the ratio of private school students from nearly 35 percent to below 5 percent within two years.  

The task will be hard, as a private school can cost millions of yuan in annual operating costs. Zhoukou government’s total education expenditure in 2020 was 12.1 billion yuan (US$1.7b). Based on the 5 percent limit, Zhoukou plans to allow 40 private schools to continue, purchase 60 and close the rest, with students sent to other schools.  

Hunan and Jiangsu provinces have also released a similar plan to cut the ratio of private school students to 5 percent or below.  

Wu Hua, former director of the Private Education Center, Zhejiang University, conducted a study on private education ratios, and concluded that it will be difficult for some regions to achieve the 5 percent limit, especially where the segment of private school students has exceeded 30 percent, and even 60 percent in some regions.  

In a 2017 interview with financial portal Caixin, he revealed that the private education sector saves authorities billions of yuan, and the amount increases every year. In 2014, it saved governments nearly 400 billion yuan (US$62b), 100 billion yuan ($15.5b) of which was for compulsory education.  

Investors Withdraw  
Ma Xuelei is telling investors to stay away from the sector now, warning that there are no longer benefits from the real estate-private school model.  

Some investors are already pulling back. On July 30, Virscend Education, a Chengdu-based private education supplier listed in Hong Kong, announced it would sell all its shares in the elementary schools affiliated to the Chengdu Foreign Language School and a kindergarten.  

Virscend’s statement claimed that the government’s revision to the private education law has brought uncertainties for those providing K-9 schooling, so the group will shift its focus to non-compulsory education.  

The private education law states that private education for grades K-9 must be non-profit, which is expected to be enforced now. Wu Hua told Caixin in the 2017 interview that he opposed this, worrying it would become an obstacle to the development of private schools, although the government cares more about fairness in education.  

“There are only two routes for K-9 private schools – become a public school or a private non-profit, since the government believes public interests should be the main focus of compulsory education. Even though these private schools are an industry, they should not focus on making profits,” Xue Eryong, a professor at the China Education Policy Institute under the Beijing Normal University, told NewsChina.  

According to MOE statistics, in 2020, China had 186,700 private schools, 34.76 percent of the total with 55.6 million students enrolled. China Merchants Bank said that 21 Chinese private education groups were listed in Hong Kong and two in the US. Those groups own and operate dozens of private schools in different cities and if other parts of the country require the 5 percent ratio, it will be an enormous blow, analysts said.  

Beijing, Shanghai and Zhejiang and Jiangsu provinces have issued compensation policies for education investors engaged in publicprivate school cooperation. Interviewees warned that local governments should carefully consider each stakeholder when making changes.  

“The rectification should be reasonable and legal and on the premise of protecting private property. Local authorities should make necessary purchases and compensation based on the actual situation other than just confiscating private schools. This is unimaginable in a rule of law society,” Yang Dongping said. 

A private middle school in Xi’an, Shaanxi Province conducts admissions interviews, July 6, 2018