Rebound in student applications from China: A Blessing or a curse for UK HEIs?

Since China alone accounts for more than 30% of all international Higher Education students in the UK, it is not surprising that the recent economic slowdown in China  has caused consternation in many UK HEIs. The prospect of student demand from China suddenly drying up has understandably struck fear into the heart of many a financially challenged Vice Chancellor. The business models of whole university departments and in some cases near enough whole institutions are predicated on future growth in demand from China continuing at more or less the same heady rates as seen over the last ten years.

Chart 1.4Given the 18 month lag in publication of official data from HESA, it is not absolutely clear what has been happening
to aggregate demand over the last couple of years but there are some strong clues in visa data published by the Home Office. These show that Vice Chancellors have indeed had good reason to fret; for a whole year between Q2 2014 and Q1 2015, four quarter on previous four quarter growth in HEI sponsored visa applications from China was virtually zero.

But the data for Q2 and the crucial Q3 2015 periods show a dramatic bounce-back in application volumes which suggest that enrolments for the 2015/16 academic year from China have risen strongly again. In the four quarters between Q4 2014 and Q3 2015 there were nearly 64,000 visa applications from Chinese students using UK Higher Education sponsor acceptances –  a 10% increase on the volume of applications made between Q4 2013 and Q3 2014. Applications in the crucial Q3 2015 period alone were up 8% on Q3 2014.

Chart 2.5

One possible explanation for this resurgence in demand is that domestic economic uncertainty in China has actually
become a driver rather than an inhibitor of growth in international education.  Chinese students (and their parents) are attrac
ted to the UK as a study destination by the quality of education on offer, the internationally recognised qualifications as well as the opportunity to experience UK life and culture (Chart 2). In the light of recent economic slowdown, more families may be seeing education in the UK as the most reliable long term investment in their future – whether that future is in China or in the wider world.

It is also possible that the recent demand rebound reflects multiple efforts made by both the British and Chinese governments to strengthen relations over the past few years. China has been a major focus of the UK’s cross-governmental GREAT Britain campaign. Prime Minister- in-waiting George Osborne’s first major trade mission to China took place back in 2013 and this year he made a more ambitious trip whose agenda included educational and cultural ties in the widest sense. Of course, this laid the platform for President Xi’s historic visit to the UK earlier this year. Like it or not, pictures of the Presidential couple gliding down the Mall in a fairy coach may well eclipse the sector’s total marketing budget in terms of future impact on international student demand.

The local market may well also be adjusting to the new visa rules around biometric passports, Secure English Language Tests (SELTs) and the NHS surcharge which proved unpopular with prospective students and, more importantly, with many local Chinese education agents.

So can the sector relax, secure in the knowledge that the Chinese student money machine will keep on delivering?  It is of course possible that the return to growth for 2015/16 admission will only be a blip, reflecting the desperate efforts of once moneyed Chinese to pay for an international education before economic reality finally catches up with them. Further turmoil in Chinese stock markets and currency depreciation at the start of 2016 must increase the risks of this scenario.

But most forecasts still suggest a relatively soft rather than hard economic landing for China and the aspirations of the expanding middle class will still prioritise educational achievements for their children above almost anything else.  Further, one of the outcomes of President Xi’s recent visit to the UK was increased support for partnerships between Chinese and British Universities. These extend an already complex pattern of  trans-national (as opposed to purely international) UK educational opportunities for Chinese students.

Transnational  pathways are already a significant, although poorly understood route to the wider HE market in the UK.  All the signs are that their number and formats will continue to develop and that almost all HEIs serious about the Chinese market will have to invest greater efforts both in understanding the TNE market and in forging their own presence and/or transnational relationships to take advantage of them.

Yet, the development of TNE itself points to why any resurgence of Chinese demand may ultimately turn out to be something of a double-edged sword for the sector. While expanding the lucrative Chinese Undergraduate market, by definition TNE means that host institutions don’t get the full financial benefit of three or four years fees from students in the UK.  More generally, a resurgent Chinese market may lull HEIs into a false sense of security and lead even more institutions to becoming beholden to a monopoly market with all the risks and challenges that entails. Prominent among these risks is that institutions become even more dependent on Chinese education agents whose growing power and control of student flows continues to drive up the costs of doing business.

While a dramatic collapse in demand from China is obviously in nobody’s interest, in the longer term a flat or even slowly declining Chinese market may well actually be a positive for the sector.  It would give real urgency to the push for diversification and expansion into new and underdeveloped markets which is clearly required.