It’s funny what you stumble upon when surfing the web. Yesterday I was checking out a few Chinese websites and found this. Coincidently only last week I learnt the characters for this 破产 pochan (bankrupt) but I didn’t expect to find a story quite as interesting as this.

Sources: Readingchina CDT (proxy) Zhaomu Yulung
Jilin University is crying for help from whom? Zhao Mu Jilin university is in financial crisis. It cried for help a few days ago. A few days ago, the finance office of the Jilin University put up a notice on campus internet: “Notice: A consultative conference on the solution to the financial difficulties of the Jilin University ”

“Since 2005, the Jilin University has paid loan interest as high as 150 million to 170 million each year. The university increasingly suffers from expenditure over revenue. The debt is mainly used in two areas. The first one is infrastructure. Another one is salary. We have increased salary to the high level.” From the annual interest payment as high as 150 million to 170 million yuan, one can estimate the huge amount of loan (it is estimated 3 billion yuan). The crazy loan is for infrastructure and raising salary.

Are the banks, who went so crazy that they lent such a huge amount of money to the Jilin University, really brave enough to force the university to apply for bankruptcy through legal procedure? Would the court close down this university and liquidate its asset? Would the banks sell the campus by auction to get back their huge amount of money? Ah… ah. I can prove to Minister of Education Zhou Ji and the supporters of “bankruptcy” theory that this possibility does not exist at all. And I strongly believe that our great state-owned bank will write off most debts of colleges. Despite without complete statistics, this huge debt already reaches as high as 400 billion yuan.

The debt is apparently as high as 4 billion yuan (250million pounds) just to see how big a figure that is:

4,000,000,000.00元

So the biggest university in China is out of money. Jilin University is a mammoth of an institution, I’m told there’s more than 50,000 students here and according to some it’s one of the best universities in China . It’s got to be one of the most federated universities in the world, It has so many departments, colleges, associated colleges, campuses, branches, sister schools, feeder schools, the list goes on…

To be honest it doesn’t surprise me and in some ways it’s no wonder the cash has run out. As it happens I do a lot of work here myself and can confirm that the article is true, there were posters up over the campus saying as much. My initial selfish thought was that I hope this doesn’t have an impact on my salary but then I remembered something. Going back a few weeks, a certain university bigwig (name withheld for obvious reasons) thought it would be amusing to bugger around over my holiday pay i.e reneging on the contract (nothing changes!) it now occurs to me now that he/she perhaps had prior knowledge of what was to come This is another story in itself, will write about it another day.

I asked some of my students about this and the reaction was typically assuaged. All of them said things like ‘this is a problem all over china‘ ‘many universities have such problems‘ and ‘the university will get enough money‘, which of course is true, but for me, misses the point.
When I pressed about ‘where will the money come from?’ they said the government will pay for it, which is probably what will happen. There’s huge face value here, bail the university out far exceeds the potential economic losses involved in fixing up the bad debts. There’s also recent historical government precidents of bailouts of industries over stridden with debt.

I was surprised that very few were concerned about the fate of their education but not so shocked that (for obvious reasons) nobody asked whether those in charge should be sacked or prosecuted!
I resisted the urge to ask ‘but this university is one of the few directly run by the central government – the Ministry of Education in Beijing’. (Of course all the better universities in China are all under the control of the Ministry!)
‘Therefore this is a government problem!’ Imagine a university in the UK under the direct control of the Department for Education announcing that it’s university has run out of money because it took on too much debt and now is unable to service the repayments! It would be a scandal, heads would roll. There has been some coverage of it here but very little in the mainstreem media and of course it’s always ‘a China problem’ nobody ever takes the flack or considers the deeper reasons behind such things.

So more money arrives, people get on with their jobs, end of story.

What has happened at Jida is just a small example of how many organisations operate here and is probably a warning for the future.
People may ask (actually they probably wont!) ‘how did this happen?‘ and even though I’m not privy to the politics of this, for what it’s worth, there are probably two principle factors at work.

Firstly, an absolute lack of financial competence. People in important, powerful positions of responsibility who you wouldn’t trust to run a tap. The only reason they have the job is because they’re the uncles 2nd cousin to the president of the school ‘关系’ – Of course this happens everywhere but here it is king. This is coupled with a serious lack of a ‘business way of thinking‘, money doesn’t grow on trees anymore – this isn’t helped by constant state bailouts and easy access to capital from friendly bank managers.
There’s no real financial transparency and accountability here, many tell me this is because ‘发展中国家’ ‘China is a developing country’. That’s as well as maybe but it cant keep on being like this forever, there comes a point, when things must change and move on. When people will be able to ask – Where does the money go and what is is it spent on? Can anybody show me detailed breakdowns of where every single fen is spent?
Sometimes, It’s not diffficult to see where some of the money is used , anyone who has been to the south campus at Jida will tell you how nice and modern it is – there has been a lot of money spent there on new buildings and infrastructure. It’s nice compared to western campuses and in Changchun that really is saying something.

However there are other more disturbing questions about where some of the money goes. Here there exists a culture of embezzlement and backhanders that is historical, cultural and constantly perpetuated through inadequate checks and balances and a lack of the rule of law. I also truly believe that many people who have access or ‘operate’ the accounts think they can simply print more money when they need it and use the organisation as their own piggy bank – acting with total impunity. Which, of course, they can.
The thing is everybody else knows this goes on, but understandably, is too frightened/disaffected/uninterested to say so.
I’m sure this kind of malpractice goes on in the west too but the difference is here they don’t try to hide what they are doing, it’s open and to an extent accepted. Infact I think some people strive to get into the high managerial positions – through patronage- if only so they can do exactly this themselves and In many ways I don’t blame them.