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In a country with official annual growth rates hovering near a blistering 10 per cent, it is not often that an economic statistic trends downwards.

But that is what has happened to the number of mainland China-based students applying for business schools last year.

Figures recently released by China’s National Statistic Bureau recorded a 20 per cent drop in MBA and Executive MBA applications over 2003 - down to less than 37,000. It is possible to attribute some of the decline to the SARS crisis or the slowing in the global economy, but those watching the development of business education in China say there is an important consolidation underway.

After a decade of growth, the drop in applications actually masks a genuine dynamism in China’s business school market - and particularly the market for EMBAs.

Enrolments in high quality degrees are up and the prices of top-tier schools are also trending up. And if the number of international business schools lining up to find the required local joint venture partners is any guide, there is a lot more student growth yet to be had at the high end of the market.

“For some time China’s EMBAs have been oversupplied at the lower quality end of the market,” says China business education analyst, Dr Jonathan Di Rollo. “So while overall applications are down, we are seeing a marked growth in both supply and demand for student places in top-flight EMBAs.”

The guide lists 38 EMBA courses offered by 30 local university and international joint venture courses, on the mainland and in Hong Kong, with more than half the 3,000 enrolments concentrated in Shanghai and Beijing.

The courses range from the US$81,000 Kellogg School EMBA offered in conjunction with the Hong Kong University of Science and Technology, to a clutch of provincial university courses in places such as Harbin and Tianjin, that cost less than US$2,500.

Dr Di Rollo, whose company, Career Development China, last month launched China’s first independent guide to Executive MBAs, says the key tier to watch is the one immediately below the Kellogg School. Highly ranked schools such as Washington Olin and Rutgers, New Jersey have been the early entrants to this tier (in 2002 and 1999, respectively), helping to carve out a quality niche - commanding fees in the US$30,000 to $40,000 range.

They were joined this year in Shanghai by the University of Southern California’s Marshall Business School, which had little trouble finding 52 qualified students at US$45,000 per head for its course, provided in conjunction with Shanghai’s entrepreneurial Jiao Tong University Antai Business School.

“It is true that in this region we are the most expensive EMBA north of Hong Kong,” says the school’s director, John Van Fleet. Research his faculty carried out prior to setting up in Shanghai supports the view that students in China are prepared to pay more for a top quality international degree.

While international business schools in China typically charge their students 30 per cent less than those on their home campus, they are quick to point out that this does not sacrifice quality.

Faculty that USC-Marshall fly out for their five-day per month course sessions include management heavies such as Alan Shapiro and Larry Greiner.

“This is the same course, the same teachers and the same standards as in California,” says Van Fleet. “Which is why 16 of our students fly in to Shanghai from cities around China and another 14 fly in from Tokyo, Taipei, Hong Kong and Jakarta.”

There is general agreement among the schools based in China that the quality tier has yet to become price sensitive, and this will remain the case even with more competition. Most recently, the Smith School of Business at the University of Maryland announced in October that it would expand its EMBA programme with Beijing University of International Business to include a Shanghai campus in November 2005.

The “flight to quality” in China is being attributed to several related trends, including more discerning, self-funding students, and more risk-averse employers.

EMBAs in China are increasingly self-financed because managers with the EMBA qualifications are in short supply, and often find it easy to jump ship to a new company once they complete their degree.

“So companies are saying - pay for the EMBA yourself, and if you come back to us we will promote you and you can pay it off that way,” says Dr Di Rollo. “It is evolving into a more sophisticated market where both students and employers are focused on the return on their investment.”

Other companies agree to pay - or pay in part - for their employee’s degree, but sign a contract that if they leave the company within five years, their next employer will have to buy them, and their EMBA, out.

Another key contributor to the rise in self-financing is the increasing number of entrepreneurs who invest in EMBAs as part of their business start-up process.

“You are certainly getting more students who form small groups at the end of their studies to set up in business together,” says Di Rollo.

While it is early days for China’s new private entrepreneur class, and raising start-up capital locally is difficult, some EMBA courses are boasting up to 15 per cent of their graduates go into family businesses or their own start-ups.

Another indicator of growing market sophistication is the demand for more specialist EMBAs, in areas such as finance and telecommunications, and custom courses. The Smith School has flagged a custom EMBA it will provide to executives of Otis - China’s largest maker of elevators.

While the arrival of more international brands has drawn students from some prestigious local university EMBA programmes, the winds of competition have yet to damp enthusiasm for China’s long-time market leader - the China Europe International Business School (CEIBS). It is a one-of-a-kind joint venture, not with a local and overseas university, but between the Shanghai Municipal Government and EU.

In November CEIBS celebrates its 10th year of teaching EMBA and MBA courses in English and Chinese, and this year its Shanghai and Beijing classes will together graduate more than 1,000 students - making CEIBS the biggest EMBA course in the world.

The attraction, according to students drawn from officialdom and former state-owned enterprises, comes down to a combination of prestige local networking and being able to study in one’s native language. “There will always be a market for a course like CEIBS, because the international schools in China demand high standards of English,” says Dr Di Rollo.

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