Expensive Education Dampens Chinese Households' Buying Sentiment

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Last updated at: (Beijing Time) Thursday, September 26, 2002

Expensive Education Dampens Chinese Households' Buying Sentiment

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The ever increasing education prices are sapping Chinese households' purchase power, directly discounting the intended effect of the central government's efforts in prodding at the dormant domestic consumption.

If left unchecked, the rocketing education prices will make it harder for China to shake off the irksome bite of a looming deflation and maintain the currently rapid economic growth, according to the Beijing-based China Economic Times.

A joint survey by the National Bureau of Statistics (NBS) and central China's Hubei provincial government shows that during the first half year, the education fees of Yichang, a medium-sized city in Hubei, had on the whole risen by 7 percent, compared with the same period of last year, driving the consumer price index (CPI) of the city up by 0.65 percent, according to the newspaper.

On average, the monthly educational expenditure by each respondent stood at 45 yuan (US$5.4), up 50.64 percent compared with the same period of the previous year. Of the expenditure, the tuition and the miscellaneous payment constituted 24.50 yuan (US$3), 137.4 percent more than one year before.

Of the total household spending during the first half year, the educational expenditure made up 9.44 percent, 2.47 percent higher than the same time period of last year.

All the above statistics does not include the charges inflicted upon students by schools themselves, which, in sundry names, are another hidden but key means for schools to increase their prices.

The high educational fees have dampened the Yichang city households' willingness to buy, said the newspaper.

By June of this year, the local families' consumption propensity dropped from 93.12 percent in 1996 to 81.33 percent, down 11.79 percentage points. Meanwhile, their saving propensity rose from 6.88 percent to 18.67 percent, up 11.79 percentage points.

It is largely the same with the whole nation.

During the first half year, the average monthly net income of urban families was 657 yuan (US$79.4), up 17.5 percent compared with the same period of last year, according to the NBS. The figure for rural families also increased by a little margin.

But during the same period, the urban households' consumption propensity was only 73 percent, 1.3 percent lower than one year before.

For farmers, their inclination to spend money can only be by far weaker.

On the one hand, the growth rate of their net income in general has been slowing down since 1996; on the other hand, they have to shoulder the ever-mounting taxes and fees levied upon them by grassroots governments.

As for the education expenditure, it's obviously rising as one of the most pressing burdens upon them.

Some experts estimated that from 1985 to 2001, rural education fees in some provinces have increased by 200 or even 500 times.

While farmers only saw a less than five-fold increase of their net income during the same period.

The rising education fees, together with the expected expenditure increase of medical and old-age care, has forced over 80 percent medium-and-low income families to cut their consumption, the newspaper quoted statistics official as saying.

Over the first eight months in this year, the nation-wide CPI dropped by 0.8 percent compared with the same period of the previous year, despite the edge-up price level of the service industry, including of course the education sector.

The expensive education and the dampened consumption desire have increased the stockpile of most products.

A 2001 year-end survey by the State Economic and Trade Commission (SETC) indicates that about 88 percent of the 600 key products in the market were oversupplied, up 1.7 percentage points compared with the first half year. Only about 12 percent of the surveyed products were in a supply-&-demand equilibrium. No products were undersupplied.

Given the slow-down pace of fixed assets investment in the second half year, the yet uncertain world economy, and the increasingly intensified foreign competition coming with China's entry of the World Trade Organization, the market glut might get worse during the following months, according to the SETC.

By PD Online staff Forest Lee

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