Julius...In addition to V.CPTs "first to market" and expansion plans in China, I believe the following article clearly demonstrates why ITT, Apollo and DeVry recognize an opportunity and have therefore hitched up with CPT as a rising star. CPT appears to be consolidating its recent gains here and I "suspect" another leg up is forthcoming quite soon. Caution........ I now have a large position so I am biased. :o)
EIU Business China October 13, 2003 Monday China
The Economist Intelligence Unit Ltd.
All Rights Reserved
EIU Business China
October 13, 2003 Monday
LENGTH: 1051 words
HEADLINE: China: Business 101
Two new laws offer private investors greater access and incentives to tap
into domestic demand for educational services
As home to 23% of the world's students, China will never have trouble
attracting investors to its education sector. It just needs to let them in.
The Chinese government has done this to some extent, allowing private
investors to provide education where it could not. The country now has over
60,000 private educational institutions, ranging from minban (people-run)
schools in rural areas to elite professional schools in China's richest
cities. Foreign participation, for the most part, has focused on such
services as English training and executive education.
Two recently enacted laws pave the way for expanded private and foreign
investment in China's schools, however. With the Private Education Promotion
Law, enacted on September 1st, the central government now officially allows
private schools to earn a surplus (though the educational services sector
retains its non-profit designation). A second law, the Regulations for
Chinese-Foreign Co-operation in Running Schools, also enacted on September
1st, sets clearer guidelines for the establishment of joint-venture schools
and encourages foreign investment in a wider range of services.
Under the new rules, foreign investment will remain prohibited in compulsory
education -- primary and junior-middle school -- and schooling in
security-related or politically sensitive areas such as the military, the
police, politics or religion. But the regulations aim to encourage foreign
participation in higher and vocational education, where demand is strong.
State-sponsored universities, for example, now serve only a fraction (10%)
of the country's secondary school graduates.
Taking roll
China's education market is promising not only for its large number of
potential consumers, but also for the importance attached to education in
the country. In a recent survey conducted by the National Bureau of
Statistics (NBS), 33.5% of respondents said that they were willing to put
their children's education on the top of their list of household spending.
The NBS estimates that total potential consumption power by Chinese
households for education and cultural activities now amounts to Rmb300bn
(US$36.2bn) -- a figure expected to double by 2005.
Foreign investment has entered some Chinese classrooms through joint-venture
schools, but only on a small scale. According to official figures, just 657
foreign-invested schools and institutions had been approved as of November
2002. Instead, overseas investors have focused on training and part-time
schooling services often offered through commercial enterprises (which are
more easily registered than schools). These enterprises are not allowed to
offer mainstream full-time schooling to Chinese students, however. Nor are
they allowed to confer diplomas recognised by the Ministry of Education.
A number of significant private and foreign-invested education projects have
been announced in China over the last few months, testifying to interest in
the market. These include the following:
Besides signalling investor interest, recent investment decisions can also
be seen as votes of confidence in the new laws outlining regulations for
private and foreign investment in Chinese schools. Many foreign educational
institutions have been turned off by the uncertainty of the industry's
regulations in the past. Schools are not the same as a corporate entity,
says Walker Wallace of law firm O'Melveny & Myers in Shanghai. With schools,
you don't have the comfort of that well-defined rulebook. Though investing
in schools in China still requires government approvals, the new laws
improve the regulatory environment.
School rules
The most significant recent legal development is that private schools will
now be allowed to record an official surplus, at least in principle. Under
previous legislation on private education, private schools, as non-profit
entities, were not permitted to distribute any revenue among investors. If a
school closed down, sponsors could take back funds equal to their original
investments, but any extra belonged to the state, according to Jason Yu, an
associate at O'Melveny & Myers in Shanghai.
The new legislation permits schools to make a reasonable return on their
investments, but does not specify how much or how it might be used. It is
expected that the Ministry of Education's forthcoming implementing measures
for the law will cap the rate of return at around 10%. The major
breakthrough is that the law would allow the schools to earn some money
without being labelled as making profits, says Cheung Kwok Wah, acting
director of the Wah Ching Centre of Research on Education in China at the
University of Hong Kong.
Though tuition at foreign-invested schools will continue to be set by a
government pricing policy, schools will have some leeway to charge their
students service-related fees. According to Frank Rocco of Hong Kong-based
law firm Frank Rocco & Associates, the kind and amount of fees that schools
will be allowed to impose (since all must be approved) will, as now, depend
on an investors' government relations.
The regulations are also important in that they give joint-venture schools a
legal person property right and set approval procedures and approving
authorities for different levels of foreign-invested education, bringing
more clarity to how an overseas investor can establish a school.
Moreover, by setting private and public education on an equal plane (again,
in principle), the laws suggest that private schools might be eligible for
the tax exemptions, diploma conferral rights and other permissions awarded
to government-funded schools that have sometimes been denied their private
counterparts in the past, according to Mr Cheung.
The regulations leave some questions unanswered and raise still others. Yet
investors appear confident. O'Melveny & Myers, for example, has recorded an
increase in inquiries for education investments since the announcement of
the new regulations, despite the uncertainty of how they will be
implemented. The law is evolving, Mr Wallace explains, but you can't just
stop doing business.
cheers
C |
