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Tianjin University's major loss from a stock market investment failure highlights the epidemic of financial mismanagement plaguing China's tertiary institutions.

 

Shan Ping, former president of the university, reportedly was personally responsible for lending 100 million yuan (US$12 million) of the university's funds to a company in Shenzhen in 2000. It was recently revealed the company's failed investments resulted in at least 37 million yuan (US$4.46 million) in losses.

 

The Tianjin University's scandal might be an extreme case, but it does highlight poor financial management across many colleges and universities.

 

In recent years, many new buildings have been erected on university campuses. Some cities and towns have even built massive "university cities," which cost billions of dollars. Many of the impressive buildings and projects were funded by huge bank loans.

 

According to a report by the Chinese Academy of Social Sciences, China's universities and colleges borrowed more than US$150 billion yuan (US$19 billion) in banking loans last year.

 

It appears many universities do not have a clear plan about how to repay the loans. The current level of government funding, tuition fees, and endowments are usually not enough to finance the loans.

 

Decision makers at the universities do not seem to care much about defaulting because they know they will not be in their current positions when the loan repayment peak period comes.

 

The banks, on the other hand, believe the government will not allow these public universities to go bankrupt and will bail them out.

 

Major risks will erupt if the problem of this reckless borrowing is not addressed.

 

Irregularities in universities and colleges' financial management do not stop there.

 

Many schools have been raising funds through various channels. Some of the means, such as empty part-time academic programs, are in the grey area of regulation.

 

Others, such as the reported selling of degree certificates, are totally illegal.

 

Universities and colleges do have their reasons for seeking various funding sources.

 

A major complaint is the often inadequate funding from the government.

 

However, the lack of government money does not justify imprudent and illegal activities.

 

The universities' use of their funds either from the government, loans, or fees - are also often problematic, as seen in the case of the transparent elevator set in the canteen building in a major university in Beijing and Tianjin University.

 

It is high time regulators of the country's education sector step in and improve financial discipline and strengthen their auditing system for universities and colleges.

 

(China Daily November 28, 2006)