Impact of Internationalisation of Education on China’s Economy

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Impact of Internationalisation of Education

on China’s Economy

Tina Hsieh


Ershad Ali

Senior Lecturer, International Business Programme

Auckland Institute of Studies


Working Paper No. 25

December 2011

During the last three decades, China has sent more than 1.2 million students to study in different countries in order to obtain higher education and training. About 26 percent of those international students have returned to China and brought with them improved skills, knowledge and technology which impact positively on the economic growth of the country. The remaining 74 percent, who have not returned to China, contribute indirectly to the Chinese economy in the form of trade, foreign investment, international networking, etc. The purpose of this study is to examine the impact of international education on the economic growth of China. Data for this study were collected from the Department of Statistics, Ministry of Education, and Ministry of Commerce and Trade of China. The study, based on data from 1978 to 2007, found that the impact of international education on the Chinese economic growth is positive. The findings of this study might be of interest to policymakers, educationalists, development planners and researchers.

Key words: International education, China, Economic development, Growth, Direct Foreign Investment, GDP.

  1. Introduction

Because of globalization the dependency of inter-countries’ economies has been increasing during last few decades. Internationalisation of education has been playing a significant role in achieving economic growth in this process for both education exporting and importing countries. China is one of the largest education importing countries in the world. From 1978 to the end of 2007, the total number of Chinese international students was 1.2117 million, of which about 319.7 thousand students returned to China, and approximately 657.2 thousand students were to complete their studies till that time towards achieving bachelor’s, master’s, or doctor’s degrees, or undertaking further research studies. China nowadays is recognised not only as the largest population country in the world, but also as the majority supplier of international students to the world.

By the year 1978, China had reformed its economy through four approaches: the formation of rural enterprises and private businesses; liberalised foreign trade and investment; relaxed state control over some prices; and investment in industrial production and the education of its workforce (Hu & Khan, 1997). The reforms enhanced China’s productivity, attracted foreign direct investment, encouraged market competition, and captured overseas knowledge. International education plays a significant role in pushing some industries towards boom, international trade and logistics affairs for example. Moreover, the latest and upgraded applications of business methods are brought back to China by the returning overseas students.

From China’s official websites such as the Ministry of Education of the People’s Republic of China and the National Bureau of Statistics of China, international education is put in the category called higher education. In this study, higher education, overseas education and tertiary education mean international education for those students who are educated outside China.

The aim of this paper is to examine the impact of international education on the economy of China, and it has used secondary data collected from the department of statistics, different websites and the relevant departments of the government of China.

The structure of the paper is as follows. The Introduction is presented in section 1, while the literature review is presented in Section 2. Section 3 presents a discussion and findings regarding the impact of international education on the economy of China, and is followed by conclusions in Section 4.

  1. Literature Review

Chinese economic development in recent decades has surprised the whole world. China has not only become the third biggest economy in the world, but also one of the biggest exporting countries and the leading supplier of overseas students to the world. China’s economic development is measured by several factors, including domestic and global ones. Domestic factors include China’s economic development policies, high savings rates, government control of investment capital, Chinese Confucian culture, literacy progress and upgrading of the education level (Thomas, 2007). Examples of global factors include the global economy, trade opportunities, foreign direct investment, export-led development opportunities, export processing zones, etc. (Thomas, 2007). Education contributes to economic development because it has a positive influence on economic growth. It also contributes to reducing population growth, creating a social environment that improves productive investment, making workers more productive and voters more prepared to choose a good government and promote reasonable socio-economic policies (Carmen, 1997).

There are basically two types of educational path for students to choose; one is from domestic institutions and the other is from overseas institutions. The most common path in Chinese society is to acquire education domestically. Traditionally, China’s education system provided opportunities for students to attain a higher education level through a national examination and enrolling in domestic universities. In recent decades, however, the trend has changed. Because of the global integration of information, and transportation and communications revolutions, a borderless world has been formed, and globalisation has obviously improved the speed of overseas education. Upper-middle class families tend to send their children abroad to study as the new information and knowledge are faster in Western and Northern countries than in Eastern and Southern areas. There are several advantages for children in those countries, such as the cultivation of independent skills and acquisition of foreign language. Since China opened its economy to the whole world, more and more foreign firms have established themselves in and cultivated this large market. Students who have graduated from overseas help companies to understand the Chinese market and apply and set up market strategies faster. Meanwhile, the slight unchangeable Western organisation cultures may collapse little problems as employees were with a minimum preparation and knowledge of Western cultures.

Overseas education is significant for a county’s development. Unlike factors such as international trade figures and foreign direct investment numbers, the contribution of education can hardly be identified as having a strong connection with economic development. However, no country can achieve sustainable economic development without substantial investment in human capital (Ozturk, 2001). Education not only enhances people’s knowledge of the world and helps them to find out their potential abilities and interests, but also enriches people’s living standards by equipping them to work in a skilled position. Moreover, the benefits that people gain from an overseas education can influence the general society by improving productivity through the acquisition of advanced management methods and technological skills for example. China's progress in higher education enrollment places it in the mid-range of the enrollment status of major developing and industrialised nations. The gross enrollment ratio in tertiary education reached 20 percent in 2005 from 6 percent in 1999. China's percentage is higher than India’s 11 percent or Vietnam's 16 percent, yet it remains well behind that of Japan at 55 percent and the United States at 83 percent (National Bureau of Statistics of China 2007). Since 1978, China began the advancement of its economy based on boosting the productivity of manufacturing industries and upgrading to the world’s advanced technology by setting up a joint-venture policy for international firms willing to do business in China. The country needs skilled people far more than before. Investchina (2004) has said that in China’s investment environment with the raising of educational level and the amplification of opening up degrees, the people's intellectual capability improved, their ideological ideas changed greatly, and discrepancies of languages, cultures and customs dwindled, thus offering an appropriate social environment for foreign investment. International education is also one of the important contributors to technological capability and technical change in industry. Statistical analysis of the clothing and engineering industries in Sri Lanka, to cite just one example, showed that the skill and education levels of workers and entrepreneurs were positively related to the rate of technical change of the firm (Deraniyagala, 1995).

It appears from the above comments that the internationalisation of education contributes to foreign investment in China, skilled manpower, and the creation of a positive attitude towards international trade. It also appears that there are two categories of international student: one category is those who return to China after completion of their study, and the other is those students who stay overseas permanently after completion of their study. The issue of how these two categories of students have been contributing to the Chinese economy has not been addressed. This paper aims to fill that gap.

3. Findings and Discussion

The number of students studying abroad and returning home

When China again opened its market to the world in late 1978, it found that its development was far behind the world. In order to catch up with communication and advanced information, China started to send students overseas to study. In 1978, 860 Chinese nationals left China as the first batch of overseas students, and the government sponsored most of them Ali and Hsieh (2009). The table below shows the number of students studying abroad from 1978 to 2007.

Figure 1: Number of students studying abroad

Source: National Bureau of Statistics of China, 2009.

From the data shown, in general, the number of Chinese students acquiring international education is increasing since China had the role in sponsoring and supporting overseas education. Since the first pioneer students in 1978, the number of Chinese students studying overseas increased sharply because China’s domestic economy was able to support them. Moreover, an unsatisfying domestic higher education resulted in a continual increase in the number of students studying abroad (China Internet Information Center, 2002). Besides, overseas degrees have a higher recognition level and an image of greater quality of education and knowledge. Interestingly, although the yearly figure for Chinese students studying abroad is increasing, the data calculation shows a regular cycle for the growth in numbers of Chinese overseas students.

Figure 2: Growth of students studying overseas (%)

Source: National Bureau of Statistics of China, 2009.

From the graph above, three obvious growth cycles are shown from 1985 to 1991, 1993 to 1999, and 2001 to 2006. The cycles show China’s changes in national competitive advantage and overall recruiting environment. Based on China’s fast growing economy, more and more students are willing to study abroad to acquire an overseas degree, a certificate and second language ability. However, due to the changes of the potential job market demand and the country’s competitive advantages, students re-evaluate future tendencies from time to time. Once the trend is obvious and clearly defined, students again rush out for an international education. China’s economy begins with the labor-force supply as the cheap labors. In the period from 1980, however, more and more management personnel were needed in order to take efficient control of the workforce. Also, the huge amount of exports made China slowly shift its labour force demands to the financial and international trade sectors. People with financial or international trade skills replaced those with managerial skills. In the intervening periods between changes, most students chose to wait until the market trend became clear before moving to study overseas again. As a result, the growth rate declined in the intervals between trend changes,.

While the number of overseas students increased, the number of returned students also slowly rose. Figure 3 shows the number of students returning home from 1978 to 2007.

According to the National Bureau of Statistics of China (2009), the number of returned students has been increasing for most years since 1978. In China, the returned students are called Haiguis, which means coming back from overseas. Figure 3 indicates that the number of returned students before 1994 was very low. However, since 1995, the curve climbs gradually until 2001. Students before 1995 seem to prefer to work overseas after completing their degree.

Figure 3: Number of students returning home from 1978 to 2007 to 2

Source: National Bureau of Statistics of China, 2009

Since China’s overall economic environment was changing positively and was more stable in 1995, the willingness of overseas students to return home was higher. Through taking advantage of a booming economy, increasing wage offers, a better recruiting environment and government policies, Chinese overseas students are being attracted to work in their home country. The curve rises sharply from 2001. It shows that the Chinese overseas students are displaying a greater willingness to return home and join the workforce to meet local demand, which has also been increasing. Government policies are another reason attracting overseas students to return to China. On August 12th, 1992, the General Office of the State Council issued to the whole nation a Policy Guarantee to Haiguis (People, 2004).

  1. In order to provide the conveniences on any sectors and technology area which are in the world leading position or with the high international competition possibilities, returnees can apply for government financial support.

  2. According to international precedent, the companies which cooperate with government should pay reasonable wages to returnees.

  3. Every province, government department and human resources department should set up a particular fund to provide certain financial support according to the needs of talented staff and financial capabilities.

  4. Protect the knowledge right of overseas students.

  5. Returnees can avail of preferential policies if they undertake technology development and scientific projects in an Economic Development Zone, Innovation and High-Technology Industrial Development Zone or Business Incubator for Returned Personnel. To those who structure an enterprise domestically, any relevant departments must advocate and simplify procedures to reduce possible barriers (People, 2004).

The policies worked positively until 2003 while China established 110 Business Incubators for Returned Personnel, and there were more than 6,000 companies in total. More than 15,000 returned overseas Chinese students joined in and contributed to the revenue of 32.7 billion yuan in technology, industry and trade (Ali and Hsieh, 2009).

The numbers of returning Haiguis for the years 1980 to 1985 are very different. There was a negative growth rate of -34.7% in 1980. However, in 1985, the growth steeply climbed to 79%. To observe the clear growth of returning numbers, data from 1986 to 2007 have been chosen and the variations are shown in Figure 4.

Figure 4 shows that there are two clear periods when growth went from high to low, and these were from 1989 to 1991, and 1993 to 1996. The two periods were very close to the overseas student growth cycles from 1985 to 1991 and 1993 to 1999, and the two fluctuations move similarly.

Figure 4: Growth of students returned home (%)

Source: The National Bureau of Statistics of China, 2009.

When a country is passing through the process of developing other forms of industrial bases, for instance transforming from an agricultural base to an industrial base, the demand for experts is different. This situation shows that as the economic environment is changing, not only will students hold the pace to enter international education, but that students who have graduated from overseas will also slow down and re-evaluate the current environment before deciding where to search for a job, whether to remain overseas or return as Haiguis to work in mainland China.

The number of students achieving foreign degrees and returning home is increasing year by year. This shows that China’s economy is on a certain growth so that Chinese families are able to offer sufficient financial support for their children to study overseas. At the same time, the growing overall economic environment attracts students to return and work in their home country. After completing their qualification and returning to China, they bring advanced skills, sophisticated technology and funds for investment. This shortens the development gap between China and other developed countries, helps China’s economy attain higher growth, and changes China’s national competitive advantage.

3.1 Impacts from returned overseas students

3.1.1 Skilled workforce

Without a doubt, when Haiguis go back to China, they mainly bring three elements to enrich China’s economy: skills, technology and funds. In recent years, the number of returning students from overseas has been rapidly increasing due to the economic development of China. According to the National Bureau of Statistics of China (2009), from 1978 to 2007, there were more than 1 million Chinese nationals who went overseas for study, and 0.27 million of them went back. In fact, the qualified returning students have started to play an important role in China’s economic development. The overseas education and training of the returned students is important, as their professional and prestigious knowledge make them a specialised workforce fit for most occupations requiring expertise. By the end of 2003, more than 80% of academia of the China Academy of Science, and 54% of members of the China Academy of Engineering, the top niche of China’s talent, were Haiguis (Ali and Hsieh, 2009).

The most valuable skills Haiguis brought back were business-associated skills such as marketing, financial management, international trade, and advanced management concepts. Henry Wang, the chairman of and president of WRSA Chamber of Commerce of China stated that Chinese are well known for their capabilities of learning and developing technologies. What Chinese lack is the spirit of teamwork, concepts of leadership, and the way to manage a team? The skills and knowledge of those students who acquire education locally are different from those of internationally educated students.

Haiguis actually shorten the managerial distance between domestic firms and global firms so that the local firm on the one hand can more clearly understand the operating model and tendencies, ideas and the thoughts of the international market, while on the other hand, the skills can possibly cut down on the cost of human resources. The Haiguis have already attained a certain second language ability and better understanding of overseas markets. Companies have no need to hire staff from other countries in order to deeply understand the overseas market. Besides, compared with foreign employees, the Haiguis do not suffer from sociocultural gaps in communication, culture and language misunderstanding. These skills and advantages of returned students have strengthened domestic companies’ competitive advantage in both local and foreign markets, and overall, they have upgraded China’s economy format from labour-based to management-based. According to EconStats (2009), the new economic structure is beginning to take shape, so employment is shifting from being concentrated in factory work to commerce and office administration. The demand for educated professionals has encouraged people to attain higher education standards. Moreover, the skills which returning overseas students bring have a close relationship with technology improvements.

3.1.2 Technology

China’s technological advancement is associated with the skills that returned students have brought back to the home country, China. Previously, China had less knowledge of sophisticated technologies, such as developing or producing electronic or computer products. Since the last century, China was famous for manufacturing for the whole world due to its cheap labour. However, its economic focus is no longer on only simply manufacturing, but partly on the design and development of new products also. In order to fit the changing trend, China needs a more skilled workforce to be involved in many research and development activities.

The more skilled professionals China gets, the higher the speed of development which China can achieve. The most influential sector is the information technology (IT) industry. The returned students have brought innovation in management and technical skills, capital, talents and new mentality with them. They have introduced China to venture capital and launched startups which were necessary for the development of the IT sector (Shen and Bail, 2008). For example in 1999, Tan Haiyin and Shao Yibo, two MBA students at Harvard University, created The other IT-related sector to which Chinese students have been contributing is E-commerce. Although China has been developing its economy during the last three decades, its financial credits and online banking areas are still immature. In the turbulent IT sector, the idea of the fastest information receiver becomes the returned students’ competitive advantage, especially as regards the shortage of programme test engineers or project management professionals. The capable returned students are a bridge for both technology and economic improvement in China.

3.1.3 GDP growth

Since 1978, the number of overseas and returned students has been increasing every year, China’s economy is booming, products are improving, industries are developing their technologies, and the GDP growth is increasing as well. China’s GDP is growing at an amazing speed since China opened its great gate to welcome the whole world. This growth is shown in Figure 5. The data shown in this graph are calculated at constant prices. Every year with an average 9.86% GDP growth rate, China in recent decades has turned into the world’s third-largest economy. Its per capita GDP grew from USD 50.4 in 1978 per capita to USD 2,144.5 in 2006.

Figure 5: GDP growth from 1978 to 2006 (in percent)

Source: Data before 1990 from EconStats (2009); data from 1990 from the National Bureau of Statistics of China (2007 and 2009).

From an economic point of view, students studying overseas means importing services for China, as Chinese students are buying education services from other countries. This is a negative contribution to GDP growth. However, the expense of importing services could be deemed an investment if it is explained in another way. The returned students are skilled and better human capital for China’s economy. The important relationship between the returned students and GDP growth can hardly be quantified in monetary terms, as the knowledge and the overseas working or studying experiences can barely measure the value. As a result, the relationship between Haiguis and GDP growth is indirect and not immediately obvious.

3.1.4 Investment capital

China has always been seen as a profitable market due to its huge population and potential demand for products and services. From a different perspective, China is also seen by companies as a tough market to get into because of its sociocultural conditions. Although the market is very promising, having a different market mentality and consumer behaviour from Western countries, as well as government restrictions and regulations on foreign firms all conspire to make international companies slow down their investment plans (Zhung, 2008).

Yet the returned overseas students indirectly make China’s market attractive and easier for foreign investors to enter. FDI may increase the relative demand for skilled labor and lead to a rise in the skilled labor share of total wages, as multinational firms are often more skilled-labor-intensive than the rest of the economy. When the students return to China, they not only bring the advanced information and skills or technology, but also bring some cultural elements such as the thought pattern, the methods of dealing with matters, the idea of cooperation, and the ways they deal with customers and so on. In other words, they are more flexible and able to handle different scenarios when they talk to customers or colleagues from other countries. At the same time, they were born in China and have the basic understanding of Chinese culture. Since Haiguis are a better communication bridge between international firms and the Chinese domestic market, international firms are more willing to enter China to expand their businesses. In fact, the relationship between the number of investors and the capital inflow in a country is positive.

Another facet which catches the attention of international firms and spurs their willingness to invest is the Chinese government’s policy for foreign investors. On September 20, 1983, the Bureau of Legislative Affairs of the State Council of the People’s Republic of China promulgated a Regulation for the Implementation of the Law of the People’s Republic of China on Chinese-foreign equity Joint Venture (Rule of Law, 1991).

Based on this policy, four Special Economic Zones or Special Export Zones (SEZs) in Shenzhen, Zhuhai, Shantou and Xiamen were established in 1986 by Provision of the State Council for the Encouragement of Foreign Investment (Law Lib, 1991). Zhuang (2008) stated that for further openness for FDI, the Chinese government designated 14 coastal cities as the first group of Economic and Technological Development Zones (ETDZs) between 1984 and 1986. The 10 ETDZs are located in Taianjin, Heibei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shangdong, Guangdong, Guangxi provinces. The another 18 ETDZs are the second group of ETDZs built in Beijing, Jilin, Heilongjiang, Anhui, Hubei, Sichuan, and Xinjiang between 1993 and 1994. A third group contains ETDZs located in Shanxi, Inner Mongolia, Jiangxi, Henan, Hunan, Guizhou, Yuan, Tibet, Shaanxi, Gansu, Qinghai, and Ningxia from 2000 to 2002. The primary purpose of establishing ETDZs is to develop high-tech industry and industrial projects and absorb foreign investment.

The setting of regulations, SEZs and ETDZs shows China’s interest in attracting foreign capital. Due to the cheap labour force and cost of acquiring land, in the beginning of the gate-opening period, China’s foreign investment attraction policies were liked by the global multinational firms and they shifted their manufacturing lines to China.

Figure 6 illustrates that during the years 1985 to 1991, international firms were reluctant to enter China. During this period, China offered several regulations to attract foreign investment; however, the amount of FDI in those 6 years was still not significant. It can also be said that global firms did not notice until that time the impact and the advantage that China’s market could possibly offer. However, there were some companies who would like to try the new market, and the amount of FDI was actually increasing, but at a slower speed. Meanwhile, three regulations were promulgated in the years 1986, 1988 and 1990, two years after each other, and FDI increased from USD3,300 million to USD5,800 million.

Figure 6: Foreign Direct Investment (USD 100 million)

Source: Govt. of China (2007). China Statistical Year Book 2007

It then went to USD6,600 which is double the amount for 1986. It can thus reasonably be said that the regulations played a vital role in creating a favourable economic environment for investment in China.

In 1991, China’s foreign investment inflows increased sharply. FDI rose 4.5 times from USD12,000 million in 1991 to USD58,100 million in 1992. However, FDI reduced in the year 1999 as the demand for a skilled labour force was getting higher, and the wages that workers expected were also higher (Zhung, 2008). As a result, the cost of production increased, and the Haiguis who were working in the mainland expected much higher wages compared to other staff who had been educated locally. As the costs might increase, multinational firms began to consider whether China was the proper market to keep on investing in. The second reason influencing FDI inflow in China was a political matter. In 1999, China had a serious political issue with Taiwan, and the unstable political situation affected the inflow trend of FDI in that year. However, China’s FDI came back to an increasing trend from the year 2000.

Due to the presence of large numbers of international firms in China, the demand for a skilled and talented workforce capable of working in both world culture and Chinese culture rose. Haiguis connected the differences in business operating styles and acted as a shock absorber to reduce the impact of culture shocks from the business environment for foreign investors. Therefore the contribution of returned students to the economic growth of China is unique.

3.2 Impacts from students staying overseas

The purpose of Chinese students studying overseas is not the same for everybody. Some may simply wish to acquire higher education or a better quality degree, while some may entertain the hope of enhancing second or even third language abilities. However, for some certain overseas students, what they want to achieve the most is a living environment different from the home country. The number of students staying overseas is shown in Figure 7. We have calculated only the changes in the overseas Chinese student numbers from year to year. The overseas Chinese who have already got a foreign passport or who have family in foreign countries were not included.
Both sets of figures for the number of students who went overseas and returned to China increased every year since 1993. Figure 7 shows the number of Chinese students who stayed overseas during the period of 1978 to 2007. The number of student who stayed overseas after completion of their study was calculated as follows:

Number of students staying overseas = Number of students studying abroad – Number of returned students

Figure 7: Students staying overseas

Source: National Bureau of Statistics of China, 2009.

Some students choose to work in foreign countries or even settle there. Those overseas Chinese are called Huaqiaos. Hua means Chinese in Mandarin and the term qiao commonly designates a civil servant working for a period far away from home (Shen & Bail, 2008). The overseas Chinese have a population of around 54 million (Lasserre & Schutte, 2006). If Hauguis are defined as the bridge for China to understand the world, Huaqiaos are the model for the world to observe the characteristics of China. The contribution of Huaqiaos to the Chinese economy can be explained in two ways: culture exchange and international trade.

3.2.1 Culture exchange

The overseas settled Chinese help the culture exchange activities more active and optimistic in foreign countries. Like Asia, western countries are also curious to know about Chinese culture. Attempting to learn about Chinese culture through the media, the Internet and publications to understand its background, history and traditions seems to be not enough. On the other hand, the best information will be from local residents’ word of mouth. As a result, foreigners can understand China’s culture directly and correctly compare this with the knowledge from other sources. Huaqiaos help with the overseas market experience of Chinese products and services. There are many different styles of Chinese food in China. Nearly every province has its special dishes or tastes, for instance, Szechwan style is the symbol of very spicy food. Foreigners may find it difficult to experience the special taste in person in China, so Huaqiaos are the best way to access such food. The same method is applicable for foreigners’ knowledge about Chinese services. The most famous Chinese typical and symbolic service is acupuncture and massage, for example, and there are more and more overseas Chinese doctors opening Chinese clinics in their respective countries.

3.2.2 International trade

It is difficult to change the mentality one is born with, for instance the taste in food. For most overseas Chinese, they still prefer to purchase goods in Chinese supermarkets. Figure 8 shows the fluctuation line of the numbers of students staying overseas. According to the line, it clearly shows that the numbers studying and staying overseas is constantly increasing. There is an obvious surge as numbers increased in China, and this happened in 2000. The sharply increasing curve means not only that the number of students staying overseas increased, but it also means that the demand for Chinese food and services would increase overseas as well.

Figure 8: Numbers of students staying overseas

Source: Govt. of China (2007). China Statistical Year

Figure 9: Total export (USD 100million)

Source: Govt. of China (2007). China Statistical Year Book, 2007

Because of the increasing needs of the Chinese overseas market, businesspeople will satisfy the niche markets’ needs so that products and services will be imported from China and international trade will occur. Nowadays, more than 80 percent of products are made in China, and China is nowadays the biggest exporting country in the world. Figure 9 shows that the curve keeps increasing at an accelerating speed.

In fact, not only the international Chinese students, but also the global Huaquiao communities contribute to the growth of exports, too. According to Lassette and Schutte (2006), the overseas Chinese have a population of around 54 million, and the Chinese immigrants concentrate on economic activities related to trade, finance and devices. The demand from 54 million of people equals considerable revenue. The total demand for Chinese goods and services from the Huaqiao communities and overseas Chinese students contribute parts of ratio for China’s export figure and also on the balance of payment.

Investment capital

Not only can the returned Haiguis attract FDI to invest in China, but these students and Huaqiaos can absorb funds to invest in China, too. Haiguis magnetise foreign investment for the reason that they make the Chinese market less unfamiliar than how it was before. Those Haiguis can be the bridge between the Eastern and Western countries’ differences so the foreign firms do not suffer too much culture shock in managing their organisations. In the same way or even better, these Huaqiaos were born or stayed and were educated overseas, Western firms are more willing to hand business activities over to them. In recent decades, the overseas Chinese have become important investors. Lassette and Schutte (2006) have indicated clearly that the overseas Chinese have been the partners of choice for Western interests, and there is also a massive investment by the overseas Chinese conglomerates in China, partly encouraged by the incentive given by the Chinese government which wants to use their expertise and money. During the first decades following the opening of China toward FDI, the overseas Chinese became the most important investors in the country. Data show that the overseas Chinese are significant investors in real estate and take advantage of networking.

The Chinese government acknowledges the importance of the overseas Huaqiao for the economy. Accordingly, several policies were announced, for example, the Provision of the State Council for the Encouragement of Taiwan Investment in 1988, and the Provision of the State Council for the Encouragement of Overseas Huaqiao, Hong Kong and Macau Investment in 1990 to encourage overseas Chinese investment.
  1. Conclusion

International education is relevant to China’s economic growth and development through the contribution from two categories of students: students who are staying overseas after completing their study, and students who return to China, their home country, after completion of their study. Each group provides some specific contributions to the different sectors of the Chinese economy.

Data show that more and more Chinese students are willing to study for international degrees due to the requirements of the local working environment and the perception among Chinese students that Western countries are always great and wonderful. Knowledge, sophisticated technology improvement and advanced information about business are quite important for doing business in China. This is important because as the “closed door” policy makes China lag behind many Western countries. Until 2007, the average amount for students studying abroad was 36.7%. However, the sharply booming economy, China’s rising international position and nationalistic spirit drove more and more international students to prefer to return and work in China. Until 2006, the returned students’ number stood was 42,000. The yearly growth rate of returning student from overseas in 2006 was 21.3%. Initial expense for studying abroad is a negative influence for China’s GDP as an education service import; however, it turns into a potential investment for China’s economy as the human capital is improved and applied to the economy. Meanwhile, the returned students, Haiguis, have a direct contribution in providing skills, technology innovation and indirect contribution to GDP growth and FDI attraction in China. Both the students who stayed overseas and the Huaqiao have been contributing to cultural exchange and international trade due to the need for Chinese products and services and investment capital gathering due to the preferences of Western companies. Therefore it is clear from the above analysis that internationalisation of education has been contributing positively to the economy of China.


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