NN37, May 2006
Special Theme on Education and Training out of Poverty? A Status Report
EDUCATIONAL FINANCE IN CHINA'S WEST
By RONG WANG, China Institute for Educational Finance Research, Peking University
The Chinese government has long recognized the central role played by education in China?s economic development and social cohesion. The Compulsory Education Law was passed in 1986 and the "Ninth-five Year(1996-2001) Plan and 2010 Educational Development Plan" set the goal of achieving the provision of universal compulsory education (UCE), encompassing six years of primary school and three years of junior secondary school, for all children by Year 2000.With strenuous efforts substantial progress has been made in achieving the UCE goals. According to China EFA Country Report released by the Ministry of Education in November, 2005, by the end of 2004 UCE had been achieved in areas inhabited by 93.6% of the population, and in 2774 out of 2862 counties nationwide. In 2004 the total enrolment at primary schools reached 112 million, and net enrolment rate was 98.95%. In 2004 the enrollment at junior secondary schools amounted to 62.58 million, and gross enrollment rate was 94.1%.
To support such a large compulsory education system demands strong financial commitments from the government and the society at large, and it has long been recognized that to mobilize adequate resources for education in this most populous developing country would remain a daunting challenge. Since 1980s two strategies were adopted. First of all, the central government began in the 1980s to advocate a diversification of educational funding for public schools. In 1995 this was written into the Education Law that "the State shall institute a system of educational finance in which fiscal allocations constitute the main source, to be supplemented by funds through a variety of avenues in an effort to gradually increase the input of financial resources directed to education so as to ensure that state-run educational institutions have stable sources of funding". Secondly, local governments have gradually taken on more responsibilities for education. For instance, the responsibility implementing compulsory education lies in urban areas with cities or districts of large cities, and in rural areas with the county.
Over the past decade consensus was gradually reached that under the multi-channel approach to raising educational revenues, heavy burdens were imposed upon farmers and especially in Western rural areas insufficient supply of basic education service in poor areas and towards the disadvantaged groups was the result, and the role of education as a means of redistribution of social resources was highly restricted. In the meantime, there is no fiscal neutrality for China's schools, expenditures per student are closely correlated with fiscal revenues per capita of localities, in particular schools in the west have very poor facilities and conditions due to the stringent fiscal situations of local governments.
Challenges of educational finance are intertwined with those of the transitional public finance system in China, of which there are two outstanding problems. First, while expenditure responsibilities have been decentralized towards local governments, fiscal revenues have been increasingly centralized. Second, the existing inter-governmental transfer mechanism hardly functions with the desired effect of correcting horizontal and vertical imbalance inside the fiscal system. Beginning in the Ninth-Five Year Period, the Chinese government accelerated efforts to increase funding levels for schools in the West mostly with fiscal transfers from the central government and provincial governments, and by 2000, unitary fiscal expenditures at schools in West--both primary schools and junior secondary schools--are already higher than those in the Middle regions. However, such transfer programs are far from being a regularized part of the financing of education. They are just ad hoc instruments for dealing with problems or demographic areas that are perceived to be in need of urgent attention. In the meantime, despite increasing budgetary appropriations, fees collected from parents and burdens thus imposed upon rural citizens directly have been increasing. This became a central concern amid the drive of poverty-alleviation and rural development in Western areas championed by the Chinese government.
On December 23, 2005, the State Council of the Chinese Government issued the Circular on Deepening Reform of the Framework for Guaranteeing Rural Compulsory Education Funding. It is stipulated that first of all, all the students receiving compulsory education in rural areas will be completely exempted from tuition and miscellaneous school fees beginning in 2006, students from underprivileged families will be provided with free textbooks, and a certain proportion of boarding students will be provided with subsidies for boarding expenses. This implies that China will enter a new era of educational development wherein the rural compulsory education system will finally become truly "free for all". It should be noticed that funds needed for the exemption of miscellaneous fees shall be shared proportionally by the central and local governments. In the western region the proportion is 8 to 2, while in the central region, it is 6 to 4. The fund for free textbooks will be totally taken upon by the central government in the central and western regions and it will be solely financed by local governments in the east region. The reform is also intended to increase funding for non-personnel expenditures, expenditures for the repairs and maintenance of buildings, and funding for teachers' salaries for rural primary and middle schools with a regularized transfer mechanism. It is budgeted that during 2006-2010 the Chinese government will increase fiscal appropriations for rural compulsory education by 218 billion, of which 60% comes from the central budget.