Loss of Chinese students rocks $1.7b education industry

By FRAN O'SULLIVAN and ALAN PERROTT


New Zealand's $1.7 billion foreign-student industry is bracing for a tough time early next year after a dramatic slump in visa applications from Chinese students.

New Zealand Trade Commissioner Grant Fuller says there has been a "significant falloff" in applications.

About 20,000 new visa applications were made by China students last year.

"I'm not saying it's a halving of the market - but it almost is," said Mr Fuller.

"When I left Shanghai at the end of October, the trend was looking towards 11,000 to 12,000 this year."

He says universities are well-placed for next year, but the drop will affect private training providers, language schools and some secondary schools.

The high-profile collapses this year of two private New Zealand schools - Modern Age and Carich - combined with rising exchange rates and quality concerns have taken a toll. The Chinese Government has made its concerns public.

Other nations such as Ireland, Britain and Canada are also trying to attract foreign students.

"It's become very competitive at a time when New Zealand's image in the market has taken a bit of a hit," Mr Fuller said.

The export education industry's growth rate has been phenomenal.

Foreign exchange earnings have risen by 50 per cent a year, from $545 million in 2000 to $1.7 billion last year, making education New Zealand's fifth-largest export industry.

The biggest effect of the education boom has been felt in Auckland.

A report commissioned by the Auckland City Council estimated the industry brought $930 million into the Greater Auckland economy in the 12 months to June last year, helping the region to a growth rate of more than 4 per cent.

"That's like having an America's Cup here every year," boasts Auckland Mayor John Banks.

Consultants Infometrics said about 50 per cent of the region's fee-paying international students came from China, and there was a significant risk from a downturn.

Auckland City councillor Mark Donnelly, who heads a council strategy committee, takes a more optimistic view.

"It's levelling off an unsustainable growth pattern and gives us a breathing space," he said.

"It's one of those industries that has a big impact on the city.

"If you set a factory up in Penrose, we've got the district plan rules and know what to do.

"But for a language school we're trying to figure out what the regulatory environment should be like."

But industry insiders - who are nervously gauging the effect on their cash flows - question whether the boom has gone bust, or whether the slowdown can be contained to the Chinese section of the market.

Efforts to cushion the effects of a slump have started, and industry leaders will go to Wellington next month for a "pan-industry strategy" meeting organised by Education New Zealand.

Education New Zealand chief executive Robert Stevens diplomatically described this year as "challenging", and said he expected the situation to get worse before it improved.

But there is confidence that plans to diversify the market from an over-reliance on Chinese students will work.

High on the agenda will be proposals for greater regulation of the industry.

"We've had 100 years to learn how to regulate agriculture, but just four or five years to grapple with international students," said Mr Donnelly.

In February, a programme of high-level university visits to China will begin, starting with a delegation from the University of Auckland.

Mr Fuller said it was essential that the universities "lead that charge".

Eighty per cent of Chinese students coming to New Zealand had plans to obtain a degree from one of its eight universities.

"If New Zealand starts to focus back on quality students, quality relationships, building strong relationships with the Chinese Government, then our future is very bright," he said.

"To me it's never been about numbers - we got that wrong a little bit."

Cabinet ministers are also keeping a watching brief.

Foreign Affairs Minister Phil Goff conceded in a Herald interview that more language-school failures were inevitable as the market sorted itself.