A total of 200 billion yuan (US$26 billion) in debts owed by Chinese universities should not be regarded as "serious" and is only a "special problem in the country's education development," the Education Minister said today.

The debts, which the National Development and Reform Commission said have affected the operation of some schools, are not mainstream problems or that serious as some people have assumed, education minister Zhou Ji explained at a news conference in Beijing this morning.

But corruption, mismanagements and extravagance were involved in some of the debts, Zhou admitted, without further elaboration.

Universities across China have taken out 200 billion yuan in bank loans since the country started college expansions in 1998.

The expansion, aimed at sharply increasing student enrollment to promote higher education, led to numerous infrastructure projects among Chinese universities—mostly funded by loans from banks.

These infrastructure projects now have an estimated value of more than 500 billion yuan given the country's booming real estate industry, Zhou said.

A survey by Peking University showed that 76 state-owned schools owed banks a total of 33.6 billion yuan, or 440 million yuan on average in 2005, a number which is growing 76 percent a year.

The debts accounted for 51.1 percent of the schools' revenues, which totaled 65.67 billion yuan.

Zhou added that the government will allocate more subsidies from fiscal budgets to help universities solve their financial problems.

The central government will ask banks to change some short term loans into long-term debt to give a break to indebted universities while selling part of the land owned by the schools is another option.

Land sales would be a reasonable choice to offset the financial crisis at Jilin University, the biggest university in China by area of school size, Zhou noted.

The university, a key school in China's northwestern Changchun City, came into the spotlight after the authorities posted a letter on its Website on March 19 revealing its financial problems.

The letter read that the school is almost three billion yuan in debt after having built eight branch campuses across China since 1987.

The university has to pay up to 170 million yuan a year in interest payments alone to banks for the loans it borrowed to build these branches, which are home to more than 63,000 students, the letter said.

However, Zhou said that the university expansions were necessary as they may play an important role in the country's future education development.

China last year recruited 5.4 million college freshmen, five times the number in 1998 while the university admittance rate also climbed to 23 percent, making higher education accessible for more people, Zhou added.

(Shanghai Daily September 12, 2007)