An Indian Journal FULL PAPER ABSTRACT KEYWORDS. Trade Science Inc.

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1 [Type text] [Type text] [Type text] IN : Volume 10 Iue 4 BioTechnology 014 An Indian Journal FULL PAPER BTAIJ, 10(4), 014 [ ] Analyi of the liting financing problem of private intitution in China Liu Fengming Faculty of Management and Economic, Kunming Univerity of cience and Technology, 65001, (CHINA) ABTRACT In recent year, private al intitution in China ha rapid developed, but financing difficultie eriouly hampered their development. Under thi circumtance, a lot of private al intitution have choen to market finance in foreign countrie, none in the dometic market. In thi paper, through the analyi of private al intitution financing environment, the foreign market financing and foreign public financing of private intitution, we tudy and ue the model tructure to explain the key factor of private al intitution in the dometic market. Propoal were made about the private al intitution in dometic public financing and it feaibility analyi and argumentation. KEYWORD Collectively owned al intitution; Private al intitution; Liting; Financing. Trade cience Inc.

2 15466 Analyi of the liting financing problem of private intitution in China BTAIJ, 10(4) 014 INTRODUCTION In recent year, the number of private al intitution in China, i growing at an alarming rate, no doubt ha made tremendou contribution to the development of in China. However, the problem of financing difficultie faced by the majority of private al intitution eriouly hampered their development. Under thi circumtance, a lot of high-quality private intitution have choen to foreign market financing. If the condition are mature, then private intitution can finance in the dometic market, it will be a great boon for the China' private al intitution. It i alo a hitoric innovation in the ecuritie market for China. The capital market will achieve the breakthrough of " ector". Collectively owned in foreign countrie, alo known a "Private Education", i an oppoite form of public, it i ocial organization or individual who are outide the tate intitution, organized chool and other al intitution uing the non-tate financial fund. There are many related tudie about the financing problem for private al intitution [1]. The tudy of Kevin G. Quinn mentioned in The financing of private chool indicate that the private intitution funding ource rely mainly on tuition revenue, charitable donation, invetment portfolio and the bank loan. However, capital market ha become a more important way for financing. And he propoed that the private al intitution which i in need more than 5 million dollar can apply for iue tax-exempt bond. The cot of the Tax-Exempt Bond i low, and it can be iued at a fixed interet and at any time between 0 to 0 year. Ryan Hahn who work in Intitute for Higher Education Policy ha made a tudy in The rie of private financing of the higher in the world, he pointed out that the public fund in mot countrie could not meet the increaing capital demand of higher, and the private financing ha been an important part of financing in many countrie. Ryan Hahn believe that one way to make a funding of the higher intitution from the private capital market i to iue bond. A univerity iue bond through public market, after a period of time, invetor can recover the principal and interet. He alo think that private equity play an important role in the financing of higher in many countrie. For higher intitution, private equity financing are not traded on the open platform of ecuritie exchange, but directly obtain fund from Private Equity Invetment Firm, invetment companie profit from income of higher intitution. American wetern Illinoi Univerity academic advier Franci Atuahene make a tudy about the Garner' higher finance in "Garner' higher finance" (008) and found that: the Garner Education Trut Fund (GEF Fund) ha made an important contribution to the Garner higher infratructure improvement, tudent and the teacher training, ditance []. UA Boton College profeor Philip G.Altbach in the "private higher : pattern and trend" (008) aid that the ue of foreign capital i alo a good way of financing for the private higher. John Aubrey Dougla in " money, politic and rie of American for-profit higher " (01) pointed out that, in the lat century 90', large of for-profit private al intitution make a financing through the tock market, and the larget one i the America Appollo group []. Due to that there i no one of the private intitution appear on the market, o there i almot no ytematic reearch on it [4]. THE OVERALL PROFILE OF PRIVATE EDUCATIONAL INTITUTION IN FOREIGN PUBLIC FINANCING If the dometic financing need cannot be met, a lot of high-quality private intitution have choen to lit financing in foreign market. The following i a baic ituation lit (TABLE 1) of al intitution lit financing in foreign market: 15 private al intitution overea lited above, include private college, Englih training intitution, IT vocational training intitution, vocational intitution, tutoring in baic intitution, ditance intitution. It how that foreign capital market i welcome public financing of private intitution, ector i part of the overall tock market. IMPLICATION OF THE UNITED TATE PUBLIC FINANCING OF PRIVATE EDUCATION INTITUTION FOR PRIVATE EDUCATIONAL INTITUTION IN CHINA The nature of U.. private al intitution ponoring i very clear, for-profit and non-profit co-exit. They are playing an extremely important role in the ytem. According to tatitic, in 011, the United tate ha 4,18 univeritie, including 484 private college and univeritie, accounting for 59.4%; enrollment in college and univeritie reache 15,11 million tudent,,559,000 in private college and univeritie, accounting for.5% of the total. The U.. Apollo Group, Vocational Education Group, Corinthian College, Dery Education Management, ITT Education ervice and other for-profit private intitution. Many American private al intitution, in order to olve the financial problem, have come through the liting financing. The larget of which i the Apollo Group.

3 BTAIJ, 10(4) 014 Liu Fengming Lit time TABLE 1 : Chinee private al intitution lit financing in foreign market Name Liting place 1 00/8/8 Chongqing Hailian academy Autralia Iue price Main buine Appendix Backdoor liting 006/6/1 Oriental epoch ingapore 0.5 (GD) 006/9/7 New oriental New York 15($) 4 007/10/19 Noah Education Holding Ltd. New York 14($) 5 007/10/9 huangwei 6 007/1/11 Hongcheng 7 008/1/9 Chinee intelligence ervice provider ATA exam company NADAQ NADAQ NADAQ Backdoor liting 10($) Higher Delited in 008 Fundamental Foreign language training Fundamental Ditanced Ditanced 9.5($) Artificial tet upended in 009//1 for financial fault Delited in 01/5/ 8 008/7/0 Zhengbao New York 7($) Ditanced 9 009/7/0 China corporate New York Backdoor Ditanced liting // Xiaoxiao of Zhejiang Autralia 0.5(AUD) Infant /8/5 Anbo New York 10($) Vacation 1 010/10/8 Huanqiu NADAQ Foreign language 10.5($) training 1 010/10/0 Xueeri international Fundamental New York 10($) /11/ Xueda New York 9.5($) Fundamental /4/ Danei technology NADAQ 9($) IT training Delited in 011/1/9 Bought by Peiheng in 011/11/19 Renamed a bright future in 01/8/19 Referred a china No.1 IT training American Apollo Education Group wa founded in In 1978, it became the firt for-profit higher intitution accredited by the United tate, mainly engaged in ditance, to provide tudent with 4-hour online ervice. Currently it ha five branche and a higher operating Company: Univerity of Phoenix, Intitute of financial planning, career development Intitute, International Univerity of Wetern Higher Education companie. Apollo Group i lited on NADAQ in 1994, lited $ 14 per hare, in 011 achieved a revenue of $ 4.57 billion, a for October 1, 011, market capitalization of about $ 7.0 billion, becoming the nation' larget for-profit higher Group, alo the world' larget lited group [5]. ucce and enterprie operation mode of American public financing of private intitution will undoubtedly make our chool private intitution ee the light, and get a lot of inpiration in the chool ytem, it alo bring a new al philoophy for our private intitution. THE MEANING OF PUBLIC FINANCING OF PRIVATE EDUCATION INTITUTION FOR CHINA utainable development need for China' private intitution According to the Minitry of Education, "01 National Educational Development tatitic Bulletin," the data how that in 01, there are 149,000 private al intitution of variou type, an increae of 9,057 over the previou year; enrollment 14, 94.5 million, an increae of million over the previou year; online tudent of variou al type reach 40, 781 million, an increae of million over the previou year. We can ee the rapid development of private al intitution, but at the ame time, there are alo many private al intitution break down becaue of financing difficultie, funding trand. "01 ohu Education White Paper" mentioned, Yii

4 15468 Analyi of the liting financing problem of private intitution in China BTAIJ, 10(4) 014 and Zhihan collaped becaue of funding fracture. In fact, every year, not only a lot of private and training intitution have cloed down due to lack of fund, there are many private college have cloed down due to lack of fund. Therefore, if China' private intitution want to maintain table development, there mut be mooth financing channel. Many high-quality private intitution have reached a certain ize, if achieving public financing, becaue the abundant and continuou funding, they will become even tronger, fater and better and more moothly to maintain utainable development. China' utained and rapid economic development need utained and rapid economic development i ineparable from the variou talent. American economit Edward. Fulton. Denion ha analyzed the U.. economic growth factor in detail, reaching the concluion of the contribution of to U.. economic growth, in hi book "U.. economic growth factor and the choice we face," [6] (196), he aid, the level of U.. labor ha raied (only year of formal increae), contribute % to the economic growth in the U.. Japan' creator of "economic miracle", the famou economit, Diner Takeo ato aid: "Japan' pot-war economic development and take-off i the reult of, technical knowledge accumulated and excellence in buine and commercial factor.". The purpoe of, in addition to the development of culture, it alo improve the ability of the people in a nation to work a well a the ability to manage a variety of matter, and increae national income. Britih claical economit Adam mith in the "Wealth of Nation" [7] (1776) pointed out: conume money, but the fee can be fixed to the learner, uch cot could be reimbured and earn profit. From thee tudie, foreign cholar agree on that al invetment can generate economic benefit for individual and ociety. If China want to maintain a utained and rapid economic development, we mut vigorouly develop, and increae invetment in. On urface, the problem of private al intitution achieving public financing, i the financing difficultie of private al intitution, the ubtance i that it i the problem of China' economic development. Thu, public financing of private intitution i the need of a utained and rapid economic development. Capital market invetment demand While China' Private Education Act declare that, private belong to the public welfare, but many private al intitution, epecially private and training intitution, it i an indiputable fact that thoe intitution are earning profit ecretly. ome private al intitution, in order to achieve profit a well a circumvent the policy rik, will et up an invetment group aociated with, the al intitution become it affiliated invetment intitution. ome private al intitution have a certain profitability but lack of development fund, thee private intitution are detined to be the target of ome of the invetment intitution. For example, in 007, Zhuoyue ha earned $ 8,000,000 invetment from henzhen Daxin; Huayu international Education Group alo received maive invetment from AIF.in 006, Anbo received $ 10 million invetment from the Fuchuang. If private al intitution can lit finance in public, it can both atify the need of capital market and maintain continuity of it financing. Of coure, if the condition are mature, if private intitution can achieve lit financing in the dometic market, it will be a good new for China' capital market. It i going to be a hitoric innovation in the tock market, and alo achieve " ector" in true ene. KEY ELEMENT OF PRIVATE EDUCATIONAL INTITUTION LIT FINANCE IN THE DOMETIC MARKET There are many factor influenced the liting of private al intitution, the mot important factor include, the cot of running private al intitution, the competition among private al intitution, the development of public intitution, national policie, enrollment of private al intitution, financing difficultie and o on. o which factor i the mot critical factor? We explain the tructural model approach to identify the key factor. Interpretative tructural Modeling (IM) i a way to analyze the complex iue related to ocial and economic ytem and development propoed by American profeor J. Fairbank in 197. It i characterized by dividing the complex ytem into everal ubytem (element), taking advantage of people' practical experience and knowledge, and with the help of computer, a multi-level ytem of hierarchical tructure model will eventually be formed. It can turnobcure thinking and idea into intuitive view model with a clear relationhip. There are many factor influencing the liting of private al intitution in the dometic factor lited, alo between the variou factor influence each other. We can identify the key factor through the uing of IM, a follow: Lit all the factor 1 : the cot of running private al intitution : competition among private al intitution

5 BTAIJ, 10(4) 014 Liu Fengming : the development of public intitution 4 : national policie 5 : enrollment of private al intitution 6 : financing difficultie Draw inter-relationhip between the factor a TABLE 1) if i affect j, then it i 1, if not, then it i 0 (i,j=1,,,6) ) a to the interrelated factor, name the dominant factor a the influencing factor. ) elf-influence i 0 TABLE : Inter-relationhip between the factor Building of Adjacency matrix a = [ ] ij 6 6 A= Building of reachable matrix A 1 = A + I A 1 =A+I= A = ( A+ I ) A = ( A+ I ) n n, n i the order of the matrix. When A1 A Ar-1= Ar,r n-1, R i the reachable matrix. Uing Boolean algebra rule, namely, 0+0=0, 0+1=1, 1+0=1, 1+1=1, 0 0=0, 0 1=0, 1 0=0, 1 1= = A = ( A+ I ) = =

6 15470 Analyi of the liting financing problem of private intitution in China BTAIJ, 10(4) 014 A = ( A+ I ) = = Thu A = A, reachable matrix R= A = A = Inter-tage diviion Relevant definition a follow: Reachable et R( i ). The et which element i can reach i defined a the reachable et of i, noted a R( i ). R( i ) conit of the correponding i line element of the matrix with the value of 1. Antecedent et A( i ). We collect the element which are reaching the i et, define thi et a antecedent et, or preceding et, noted a A( i ). A( i ) conit of the correponding i row element of the matrix with the value of 1., the common et. Element of the definition of all the i element of the et up collection R( i )and it antecedent collection of A( i )for the firt et of the interection of A( i ) i a common et repreented by T: T = i N R ( i ) I A ( i ) = A ( i ) { } 4, the maximum et of element of the collection. One of the mot advanced element of a collection of multi-level hierarchical tructure mean that no further advanced than the other element can be reached, it et up R( i )only contain it own et of feature, but the antecedent focu, in addition to containing the element i themelve in addition, it can reach further comprie a lower element. 5, inter-tage diviion. Inter-tage all element of the ytem i divided in order to reach the criteria matrix i divided into different level (layer) time. Firt you can ue to define the mot advanced et of factor to determine the mot advanced multi-level tructure. After identify the mot advanced element, you can reach it from cratch to a correponding matrix of row and column. Then, again looking up from the ret of the matrix element of the new highet, and o on, we can identify the mot enior level of the element contained in the collection, if uing L1, L..., Lk repreent the cla from top to bottom time, the number K of ub-tage ytem i divided between the level L (n) repreented by the following [ L ] 1, L, L, LK formula: L (n) =. According to reachable matrix, tatitic are obtained a following TABLE : TABLE : Inter-tage diviion 1 1,5 1,,,4,6 1 1,,5,6,,4,6,6 1,,,5,6,4 4 1,,,4,5, ,,,4,5, ,,5,6,,4,6,6 Baed on the above TABLE, the upreme element i L 1 ={5}. ubtracting 5 from the reachable matrix, then divide for level- hown in TABLE 4:

7 BTAIJ, 10(4) 014 Liu Fengming TABLE 4 : Level- diviion 1 1 1,,,4,6 1 1,,6,,4,6,6 1,,,6,4 4 1,,,4, ,,6,,4,6,6 Baed on the above TABLE 4, the upreme element i divide for level-: L = { } TABLE 5 : Level- diviion 1. ubtracting 1 from the reachable matrix, then,6,,4,6,6,,6,4 4,,4, ,6,,4,6,6 Baed on the above TABLE 5, the upreme element i then divide for level-4: L = { } TABLE 6 : Level-4 diviion,6. ubtracting, 6 from the reachable matrix,,4 4,4 4 4 Baed on the above TABLE 6, the upreme element i 4 divide for level-5. L = { } TABLE 7 : Level-5 diviion. ubtracting, from the reachable matrix, then Baed on above TABLE 7, the level-5 element of the matrix i L5 = { 4 }. [ L ] 1, L, L, L4, L 5 o, after 5 level diviion, we divide the ix element of the matrix into 5 level: L= obtained the reachable matrix R 1 with order through inter-tage diviion We R1 =

8 1547 Analyi of the liting financing problem of private intitution in China BTAIJ, 10(4) 014 trongly connected block partition After the inter-tage diviion, element in the ame zone i called a the trongly connected block. For example, { },6. Cut reachable matrix Due to the preence of trongly connected block element, and it contituent element are up to each other and each other firt, they contitute a loop. A can be een in the reachability matrix R 1, the correponding element in exactly the, 6 ame element of Level row and column, o jut chooe one to repreent the element can be. Currently elected 6 a the repreentative element get orted reduced reachability matrix R ' R = tructure model Enrollment of private al intitution The cot of running private al intitution Competition among private al intitution financing difficultie The development of public National policie

9 BTAIJ, 10(4) 014 Liu Fengming 1547 Analyzing the tructure model baed on the explanation Baed on the explaining tructure model, the bottom element i the national policy, that i to ay, though there are many factor affecting the private al intitution in China, the mot important one i the national policie. Feaibility Analyi of China' recommendation and their dometic public financing of private intitution The limit to the liting of private al intitution in the dometic market i mainly due to government policy. It i gratifying that our enior leaderhip ha been aware of thi problem and i ready to make change on the relevant law and regulation. FEAIBILITY ANALYI OF CHINA' RECOMMENDATION AND THEIR DOMETIC PUBLIC FINANCING OF PRIVATE EDUCATION INTITUTION The limit to the liting of private al intitution in the dometic market i mainly due to government policy. It i gratifying that our enior leaderhip ha been aware of thi problem and i ready to make change on the relevant law and regulation. In eptember 01, the tate Council Legilative Affair Office publihed the " law a package of amendment to the draft (draft)", aking comment from the public. It alo i ready to modify "Education Law", "Higher Education Act", "Private Education Promotion Law". In the draft, the Article 5 of the "Education Law": "no organization or individual hall be held-for-profit chool and other al intitution", ha been changed to "to financial fund, donated fund to participate in chool-ponored or organized, or other al intitution are not etablihed a a forprofit organization "; the draft alo add " private chool can chooe to regiter a a non-profit or for-profit corporation " in the Article 18 of " Private Education Promotion Law "; it alo deleted the " Running a ucceful private chool deduction aide development Fund and other expene neceary to extract in accordance with relevant tate regulation, the invetor can get a reaonable return from chool balance " in the Article 51 of Private Education Promotion Law " [8]. Thi erie of change to law and regulation, will etablih the profitability of the private al intitution. Then a number of highquality private al intitution will be recognized by invetor, the bigget obtacle for public financing of private intitution i cleared. In addition, the relevant tock market alo ha ome ubtle change in policy. For example, in the hanghai tock Exchange, the claification of lited companie wa amended, the "" appear a a eparate indutry. In July 01, the hanghai government ha alo declared that all for-profit and training buinee can apply for qualification. Therefore, the policy on the private for-profit al intitution and public financing ha been open both from the point of Commiion and from the ector. we hould eliminate the influence of variou obtacle for the liting of dometic private al intitution, ytematically deign from the top, co-ordination involved in the legilative department, tax department, legal department, clearly define profit and nonprofit private al intitution and conduct claified management, clearly define property right of private al intitution, and etablih a fair competitive ytem of private al intitution and public intitution, improve the relevant policie of private al intitution lited, accelerate the pace of private al intitution dometic market financing a oon a poible our dometic market private al intitution, private al intitution for China to open up new area and channel of financing, in order to better promote and accelerate the development and growth of private in China. UMMARY From the above analyi, China' private intitution can receive more adequate funding for utainable development through public financing. There are many ucceful experience of mature public financing of private intitution in foreign countrie, which we can learn from. The dometic market ha a trong feaibility and financing operability. At preent, there i increaing demand in China for liting financing of private al intitution on the dometic market, large dometic public financing of private intitution i imperative. REFERENCE [1] Kevin G.Quinn; Capital financing for private & Independent chool [J], Finacial Advior To Independent chool, 1(5), 5- (005). [] Ryan Hahn; The global tate of higher and the rie of private finance[j], Global Center on Private Financing of Higher Education, 1(), (007). [] Franci Atuahene; Higher finance of Garner [J], International Higher Education, (6), 4-4 (008). [4] John Aubrey Dougla; Money, Politic and the rie of for-profit higher in the U: A tory of upply, Demand and the Brazilian effect, Reearch and Occaional Paper erie - Center for tudie in Higher Education, 11(), (01). [5] Apollo Mode How to Make the world' larget lited company(i)[eb/ol], com/a/605, [6] Edward Fulton Denion, The ource of economic growth in the United tate and the alternative before u[m], U.: Committee for Economic Development, (196). [7] Adam, mith Jingnian Yang tranlated, The Wealth of Nation[M], haanxi: haanxi People' Publihing Houe, (001). [8] A package of amendment to the draft Education Law (Draft) [], (01).