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Overseas Chinese students under pressure amid economic uncertainty

by SuperiorInvest

As a growing number of Chinese students abroad face financial difficulties due to their families' declining wealth, many are going online to express their grief and seek advice on how to cope.

Andersen Ross Photography Inc | Digital vision | fake images

When Xiao Zhang went to the United States to study in 2019, he never expected that one day he would have to look for odd jobs to help finance his college expenses.

The 24-year-old Chinese student is currently studying design at a university in Alabama. So far, his parents have spent 1.5 million Chinese yuan, or about $211,500, to finance his studies and living expenses abroad.

But in October last year, his parents told him they were facing cash flow problems and could no longer offer him financial support. At that time, Zhang had only enough money to cover three months of rent. He still needed to pay tuition for one more semester, he said, without specifying the amount.

Zhang is not alone. His experience has become increasingly common.

Since last year, there have been more than 4.58 million views of the hashtag “funding for overseas studies was cut off” on the social media platform “Xiaohongshu,” often seen as China's Instagram. As a growing number of Chinese students abroad face financial difficulties due to their families' declining wealth, many have gone online to express their struggles and seek advice on how to cope.

A 2023 survey by New Oriental Education and Kantar shows that among students and parents who intend to pursue postgraduate studies abroad, 27% said their financing plans have been affected by the pandemic. That's much more than the 19% who said the same in 2021 and 2022.

“I didn't have time to feel sad because I needed to earn money to pay tuition and rent as soon as possible,” Zhang told CNBC in Mandarin.

Zhang's father invested in the pharmaceutical industry during the Covid-19 pandemic, but has since suffered huge losses. He watched as his wealth and investments dwindled, and he eventually told her daughter that he could no longer finance her education in the United States and instead offered to pay her fare. from plane to home.

Zhang began looking for part-time jobs, such as babysitting or working on campus, but it wasn't easy. Just a month later she managed to get a temporary job in another state.

“Between November and January, I had to work from 7 a.m. every day,” Zhang said. “I was exhausted and didn't have time to study during that time. But at least I made enough money to cover my next semester.”

Brighter prospects with a degree abroad?

Chinese parents place great emphasis on providing their children with a good education.

As the world's second-largest economy grew, it became increasingly integrated with international markets, leading more parents to send their children to study abroad and gain exposure abroad.

According to the latest data released by China's Ministry of Education, the number of Chinese students studying abroad reached 703,500 in 2019, an increase of 6.25% year-on-year. By comparison, in 2003 there were only 117,300. The ministry stopped publishing that data after 2019.

“Some parents are professionals like lawyers, doctors or business executives who want the best education for their children,” Zhimin Yan, CEO of an overseas education consulting firm, Shenzhen Botong Management Consulting, told CNBC.

“Some are business owners. They want their children to learn new and advanced ideas through study abroad and then return home to help grow the family business.”

In 2018, about 90% of Chinese students studying abroad were self-funded and did not receive scholarships or government funding, according to China's Ministry of Education.

That level of financial contribution has meant that international students from China have become an important group to attract to US and UK universities.

Yan, who has worked in the industry for more than 15 years, said most Chinese parents plan their children's overseas studies well in advance in financial terms. It is very rare for them to run out of money and be forced to reduce funding for their children's education abroad, she added.

China's economic problems

China's economic recovery after the pandemic has been lackluster and many Chinese families are feeling the strain.

Michael Bai is a 21-year-old Chinese second-year Economic and Social History student at the University of Glasgow.

After completing his first semester in December 2022, his father announced that his real estate business had gone bankrupt.

Bai had no choice but to find ways to pay his bills. She tried many different jobs to cover her costs, including food delivery, working in restaurants, selling products in boutiques, and making bubble tea.

His father had previously made a fortune with real estate investments, but was severely affected by the severe crisis in the Chinese real estate sector.

“Things were going well at first,” Bai told CNBC. But problems related to one of the resorts her father took over in a coastal city in southern China began to arise when it became clear that there was not enough investment in the maintenance and management of the hotel.

Losses in his property business were already mounting before Bai left to study in the UK in 2022. Eventually, the business had to close.

In recent years, the Chinese government has cracked down on developers to reduce their reliance on debt for growth, leading to a slump in the property market. Real estate and its related sectors once accounted for around 25% or more of China's economic output and a significant proportion of household wealth.

According to a recent KKR report, China's real estate woes are far from over and will continue to drag down overall economic growth if not addressed quickly. KKR forecasts that China's economy will grow modestly, 4.7% this year, and that real estate and Covid-related factors will drag the economy down from 1.4 percentage points in 2024 to 0.7 percentage points in 2025.

University fees skyrocket

While students face funding challenges, rising tuition fees in popular university destinations like the United States and the United Kingdom have made matters worse.

A recent report showed that college fees in the United States increased significantly for the 2023-2024 academic year compared to 20 years ago and, in some cases, doubled.

International students pay higher fees at top UK universities. The UK government has capped tuition fees for local students to access post-secondary education, and the tuition fees paid by international students are a key source of income for universities.

Bai told CNBC that he managed to get out of his financial crisis.

Since then, he started a business with friends selling used cars and providing related services and claimed that the company can generate a turnover of £60,000 (approximately $75,100) per month.

He said the income from the business is enough to sustain him through his studies and that he plans to stay in the business even after earning his degree.

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