Canada's educational exposure to China
We’ll send you a myFT Daily Digest email rounding up the latest China news every morning.
A recent petition at a University of Toronto campus drew on a familiar rhetorical strain. Students felt “offended and hurt”, and believed it was their “obligation to protest”.
The petition, which attracted over 11,000 signatures, had little to do with domestic politics. Instead, the signatories objected to the election of a student union president of Tibetan descent, who “was found to hold the political belief that Tibet should be free”.
There were 140,530 Chinese students in Canada in 2017, which is more than a quarter of the total international student body in the country. The growth rate is like a statistical indicator of China’s rising geopolitical clout. At the University of Toronto, the total has gone from just 523 in 2003 to 10,463 last year – an increase of 1,900 per cent.
This growth has financially benefited Canadian universities, but its political implications have, until now, been mostly ignored. The arrest of Huawei’s chief financial officer, Meng Wanzhou, in December, changed that, by stoking diplomatic tensions between the two countries. It also heightened focus on localised events, such as the petition above, or a protest against a Uighur speaker last week, which highlight the degree of ideological diversity between domestic and international students, often linked to the Chinese government.
If tensions escalate, revenues from Chinese students, which frequently amount to over $40,000 Canadian dollars per student annually, come under threat. This kind of risk was also apparent last summer, during a spat between Canada and Saudi Arabia. There is a particular credit risk associated with flows of international students from countries where the government has the power to stop those flows overnight, if it wants.
Canadian universities have proactively sought out international students through their own recruitment efforts. In a report earlier this month, Moody’s, the rating agency, warned over the credit risks, pointing out that the concentration of Chinese students "exposes universities to the risk of political tensions between Canada and China".
Financial theory asserts that risk can be offset by diversification. And so, the apparent solution to the heavy concentration of Chinese students is to recruit from other countries as well (despite the possibility that diverse assets are more correlated than they seem). Moody’s says:
Universities have recognized the risks this revenue concentration poses and have looked to diversify their international student populations in recent years. This has included recruitment efforts elsewhere in Asia (including India, Vietnam, Korea) and other regions (Latin America, Middle East, Europe)
Meanwhile, fees for international students have been rising. The weighted average undergraduate international tuition fee increase at the University of Toronto in 2018-19, for example, was 6.1 per cent, far above domestic inflation. In its annual report last year, the university said revenues, which were $3.4bn last year, were expected to grow "primarily as a result of graduate expansion, tuition fee increases, and increasing international enrolment".
Depending on how the diplomatic tensions play out, the Canadian example will provide a useful case study for other countries – the UK and Australia especially – which have developed large educational export industries over recent years, partly to subsidise the cost of domestic tuition. Universities might be thought of as leading ideological indicators. In the case of international students, the ideology is only just beginning to enter the picture, more than a decade after the financial flows began.
Get alerts on China when a new story is published