The end of the China growth story?

The Chinese economy is at risk of a slowdown which in turn might trigger yet another global financial crisis. Mirroring these portentous economic trends, the number of applications from China to US graduate programmes (both masters and doctoral) are down for the third year in a row, according to the Council of Graduate Schools, or CGS.

Is this the beginning of the end of the China growth story? I don’t think so. Let us look into the global mobility trends of Chinese students and their future directions.

US gains more interest from China

After the global financial crisis of 2008, the mobility of Chinese students shifted towards the US. The impact of the recession lasted longer in Australia and the UK and they struggled to recapture their market share.

Between 2007 and 2012, the number of globally mobile Chinese students at tertiary level increased by 65%, from 421,148 to 694,365, according to UNESCO. In this period, the US added 111,494 Chinese students to reach a total enrolment of 210,452. In contrast, Australia and the UK added 37,079 and 27,319 to reach a total of 87,497 and 76,913 respectively.

In 2007, the combined total of Chinese students enrolled in Australia (50,418) and the UK (49,594) was almost the same as the number of Chinese students enrolled in the US post-secondary institutions (98,958). However, by 2012 the US had enrolled 28% more students than the total Chinese students in Australia and the UK (164,410).

Clearly, the United States attracted a much larger number of Chinese students compared to its competing destinations. Now let us look deeper into the enrolment patterns of Chinese students in the US.

Undergraduates continue to drive growth

Prior to the recession, a majority of Chinese students in the US were concentrated in graduate-level programmes. In 2006-2007, only 15% of a total of 67,723 students from China were enrolled in undergraduate programmes. By 2013-2014, undergraduates formed 40% of the 274,439 Chinese students, according to the Institute of International Education’s Open Doors data.

In these seven years, US institutions added more than 100,000 students at the undergraduate level, rising from 9,998 to 110,550. In that same period, the number of graduate students grew from 47,968 to 115,727 students.

This rapid growth at the undergraduate level mirrored the expansion of China’s prosperous class. For example, in China, the number of high net worth individuals, or HNWIs, or those holding at least US$1 million in financial assets, increased from 415,000 in 2007 to 757,000 in 2013, according to the World Wealth Report. A survey of HNWIs noted that the US was the preferred choice for sending children abroad for undergraduate studies.

Demand from ‘Explorers’ remains robust

Now, let us look at Chinese students from the framework of international student segmentation.

The increase in Chinese students at the undergraduate level was primarily driven by the growth of ‘Explorers’, those with high financial resources and low academic preparedness. This expanding segment is funded by financially well-off families who want to invest in the experiences and future of a single child. This segment is relatively immune from financial uncertainty and continues to have a strong demand for studying abroad.

In contrast, ‘Strivers’, those with low financial resources and high academic preparedness, are more likely to be graduate-level students. This traditional segment is typically motivated by career advancement and job opportunities.

However, in a post-recession environment, with the limitations of job opportunities due to visa caps and skills gaps, many “sea turtles” or overseas returnees are disillusioned with their investment in studying abroad. This is reflected in the decline of applications for the China Government Scholarship.

What’s the future?

Given the size and scale of the wealthy class in China, the demand for undergraduate and high school education abroad will continue to be strong. However, self-funded graduate education at both the masters and doctoral levels will face challenges for the next couple of years.

Given that more and more Chinese are studying abroad at a younger age and continuing to study longer as “professional students” – starting at high school and continuing to masters degree and beyond – institutions cannot ignore recruiting in their own backyard. The next opportunity for recruiting Chinese students is not necessarily from China, but instead from a local institution or from a third country.

In sum, the overall demand for foreign education among Chinese students will continue to be robust. However, there will be a shift in student segments and their decision-making processes. Proactive institutions will adapt to this changing environment by deepening their understanding of different segments and preparing for the future.

Dr Rahul Choudaha is the co-founder and CEO at DrEducation and http://interEDGE.org. He researches, speaks, writes, and consults on international student trends and its implications for institutional strategies and student success. Choudaha holds a doctorate in higher education from the University of Denver. He is reachable at info@DrEducation.com and @DrEducationBlog.