WHAT if there is a sudden decline in overseas enrolments?

The Unconventional Economist has written numerous articles on this very same issue … and the negative consequences for Australian students, and Academics …

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Australian universities treating overseas students as cash cows

Our universities have become dangerously dependent on overseas students whom they treat as cash cows.

Salvatore Babones

August 20, 2019

Students hold placards during a protest at the University of Queensland against funding agreements between Australian universities and Chinese government funded education organisations.
Students hold placards during a protest at the University of Queensland against funding agreements between Australian universities and Chinese government funded education organisations.

China’s 40-year economic boom may be coming to an end, but you would never know it from a walk around Sydney’s universities.

There are approximately 14,500 Chinese students at the University of Sydney and a similar number at UNSW, with ­another 7500 at UTS. That’s a total of 36,500 people, more than twice the population of central Sydney itself.

Each of those three Sydney universities enrols more Chinese students than any university in the entire US.

The University of Sydney and UNSW alone enrol more Chinese students than the entire 10-campus University of California system. Throw in UTS, and you can cover the 23 campuses of the Cal State University, too.

ABC’s Four Corners called international students the ‘cash cows’ of Australian higher education, and for good reason. At Sydney and UNSW, Chinese students alone account for more than 20 per cent of all university revenues. It’s 19 per cent at UTS. Add in international students from other countries, and total international revenues are over 30 per cent at all three.

Such figures are sure to raise questions, and the biggest is: what happens if the boom suddenly turns bust?

The research has identified nine risk factors that could lead to a catastrophic decline in Chinese student numbers and throw our universities deep into the red.

The three greatest risks with the highest potential impact are all economic:

a serious recession in China, a suspension of the convertibility of the yuan, or a sharp rise in the value of the Australian dollar. Even worse, two or three of these events could happen at the same time. They could all happen next year.

Notwithstanding official statistics that say China’s economy is growing at more than 6 per cent, nearly all ­reports out of China suggest that a ­recession is imminent, if not already in progress.

Donald Trump’s trade war has driven China’s exports into decline, and companies are moving production offshore in droves. Car sales are down, phone sales are down, and unwanted Australian coal is piling up in Chinese ports.

These are not the signs of an economy enjoying robust 6 per cent growth.

If China’s recession deepens, it could affect the ability of Chinese families to afford the luxury of an Australian education.

That hasn’t happened yet.

But outbound Chinese student numbers have stalled since 2017, both in Australia and globally. It would take only a nudge to throw them into reverse. A push could throw them into free fall.

As a partial offset to Trump’s tariffs, the People’s Bank of China (PBOC) has allowed China’s currency to depreciate slightly against the US dollar.

If the market had its way, the yuan would drop even further. If the ­decline turned into a rout, the PBOC might further restrict currency ­exports rather than risk its reserves in defending the exchange rate.

If foreign currency suddenly ­became hard to get, China’s overseas students would be caught in a bind.

When Malaysia introduced partial currency controls during the 1997-99 Asian Financial Crisis, the number of Malaysians studying abroad fell by roughly 25 per cent. China’s all-powerful Communist Party could ­impose much stricter controls, ­especially if it felt threatened by challenges to its authority resulting from economic distress.

Finally, the Australian dollar itself is currently trading close to its all-time low against the Chinese yuan. Combined with rising incomes in China, that makes Australian degrees cheaper than they’ve ever been for Chinese families.

But when the Reserve Bank eventually raises the cash rate from its current all-time low, the Aussie could skyrocket.

That would raise the price of an Australian degree just as Chinese families are facing the economic squeeze of their first recession in 40 years.

Put these three risks together — comprising a Chinese recession that leads to currency trouble just as the Australian dollar is strengthening — and you have the perfect storm for the Chinese students and the universities they support.

A sudden 25 per cent decline in Chinese student enrolments could cost Sydney, UNSW, and UTS a collective $290 million a year, more than 5 per cent of their total revenues.

The seven leading universities highlighted in the research are taking massive financial risks in pursuit of this pot of gold.

*They should act now — by raising admissions standards and reducing international student enrolments to mitigate the risk of a sudden revenue collapse.

As public and publicly accountable institutions, they enjoy an ­implicit guarantee that the government will come to the rescue if things go wrong.

No one knows exactly how the universities would respond if such a scenario came to pass; but it’s a sure bet that they would ask the government for help.

And that puts us all on the hook for the bill.

Associate Professor Salvatore Babones is an adjunct scholar at the Centre for Independent Studies and author of the paper The China Student Boom and the Risks It Poses to Australian Universities.