This blog was kindly contributed by Professor David Law, Academic Director: Global Partnerships, Keele University.
How valuable are higher education exports to China?
James Pitman, the Managing Director of Study Group, asked in a blog published by HEPI in March 2017, ‘Why does the Office for National Statistics (ONS) fail to measure and monitor the UK’s educational exports?’. The question has become more relevant in the light of shifting trade relations with China.
Over several years HEPI has produced valuable reports on the economic importance of international students both to UK higher education and to the UK economy. See, for example, the HEPI / London Economics / Kaplan reports: The UK’s tax revenues from international students post-graduation and The costs and benefits of international students (including by parliamentary constituency) .
The cost of failing to deal well with COVID will be expensive for the UK. The OECD has forecast that China will grow in 2020 by 1.8 per cent, compared with a 4.2 per cent decline globally and an 11.2 per cent fall in the UK.
During the pandemic, the UK’s imports from China have risen, but exports have declined. At the start of December, The Times reported:
One pound in every seven of goods bought by the UK came from China in the second quarter. Chinese companies sold goods worth £11 billion to Britain, with a big jump in textiles, such as medical masks for the NHS, and electrical machinery, such as home computers for remote working.
What I believe to be our main export to China, higher education, has certainly declined in 2020 in comparison with 2019. International student recruitment is down at many universities. One of the reasons for this is the slow and inconsistent response of government to the pandemic. As yet, we do not know the extent of the decline in recruitment. Publication of data will take some time. Here I am less concerned with exact measurement and more interested in relativity.
Education exports are significant for the UK and, according to the latest publication from the Department for Education, higher education accounts for 69 per cent of the total (two percentage points higher than last year). In March 2019, the Government published an International Education Strategy which declared ‘higher education is a valuable export’ and then told us very little about its comparative value and what the component parts contribute. At the time HEPI commented: ‘
as the first proper official statement on educational exports since 2013, it is welcome. The spotlight should now be put on reaching the new targets, which are upward and positive.
How can we know whether our main export to China is higher education? The ONS still does not count higher education as a service industry despite the massive contribution it makes to the UK’s balance of payments. Fortunately, there are other agencies that make professional calculations and provide a basis for good estimates, although clearly it would be better if ONS analysed the data.
The Department for Education has been publishing data on education exports since July 2017. The first report, UK revenue from education related exports and transnational education activity 2010-2014 used ‘a new experimental data series for the value of export income to the UK from education-related sales of products and services’ and on this basis subsequent reports have been published.
The latest report was published on 17 December 2020 and reports on the value of education exports in 2018. It uses much the same methodology and ‘experimental data’ as its previous reports. From this report we can roughly estimate the value of higher education exports to China although there is no breakdown of figures by country domicile. A further complication is that the data are published on a calendar year basis whereas HESA publishes data on populations for the academic year.
To estimate the value of higher education’s exports to China I have divided the total by three. This is conservative but easy to use. In 2017-18 Chinese students were almost exactly 33.3 per cent of all non-EU students in the UK and in 2018-19 this rose to just over 35 per cent. For the calendar year 2019, there would have been an increase because the Chinese intake at the start of the 2019-20 academic year was above the previous year.
I have used the same proportion for both tuition fees and living costs although the data from Department of Education assumes that Chinese undergraduate students are only in the UK for 42 weeks in a year. I have disregarded the cost of scholarships in making these calculations because Chinese students are not eligible for some scholarships.
This figure, which is inevitably approximate, should be compared with data produced by other sources. Cambridge Econometrics produced two reports this year for the China Britain Business Council. UK Jobs Dependent on Links to China was published in July and followed by a second report, Subnational jobs analysis, in October.
The brief provided by the China Britain Business Council was to provide estimates of the number of UK jobs supported by links to China. Alongside figures for jobs in UK production supported by the export of goods and services to China, there is analysis of expenditure by students enrolling at higher education institutions in the UK and shows regional and city impact. The report, somewhat surprisingly, is not prepared to estimate how many jobs are supported by tuition fees paid by Chinese students. The authors argue that there is no reliable methodology to do this.
Cambridge Econometrics, using HESA data for 2018/19, estimates that the total tuition fees paid by approximately 120,000 Chinese students amounted to £2.1 billion. The expenditure of Chinese students is estimated at £1.9 billion for 2018/19. This gives a total of £4 billion.
If we were to make detailed estimates we would need to add visits by friends and family to Chinese students in the UK. This figure is included in the total sum of tourism earnings. Tourism is also the category used for students who attend British universities for shorter courses. For the purposes of this blog, it is not possible to make a detailed estimate. Also, there is still transnational higher education to consider.
Unlike Cambridge Econometrics, the Department for Education does consider transnational education. The report states that the total value of transnational education, including schools and language education, was more than £2 billion and it estimated that higher education’s share was about one-third of the total. In 2018, according to Department for Education figures, the value of transnational higher education was £650 million.
We know from HESA data that China is the most important location for UK transnational education at higher education level. It seems reasonable to consider transnational education in China as 12 per cent of the total value of transnational higher education, basing this on 78,175 students registered in 2018-19 and comparing this number with all transnational registrations globally (including EU). This suggests that £78 million is the approximate value to higher education of transnational in China. Clearly this is small by comparison with inbound recruitment.
How do we compare the value of other UK exports to China in 2019?
In the House of Commons Library there is a briefing paper (number 7379: 14 July 2020) for the use of MPs. Statistics on UK trade with China reports that in 2019 China was the UK’s sixth largest export market in 2019, accounting for 4.4 per cent of all UK exports of goods and services. In 2019, the value of UK exports to China was £30.7 billion, this is just over one-tenth of the value of UK exports (goods and services) to EU countries taken as a whole and it is about half the value of exports to Germany.
Briefing paper 7379 fails to mention universities or higher education, a somewhat staggering omission in a paper intended to inform MPs.
The UK export trade with China has increased dramatically in recent years. Twenty years ago, in 1999, China was the UK’s 26th largest export market: 0.7 per cent of total UK exports. Of course, over the same period, the recruitment of Chinese students to UK higher education has also increased dramatically. In 1998, there were 3,850 Chinese students in the UK. At that time, the leading non-EU supplying country was Malaysia (12,000). A major report that helped shape the plans of many UK universities, Vision 2020, is still available online. Interestingly, their baseline prediction for UK recruitment from China for 2020 was 131,000.
If we take the value of higher education exports to China as £4 billion (including transnational, student expenditure in UK, short-term students, and visits by family and friends), we can say that in 2019 education was one-third bigger, as an export sector by value, than motor vehicles (the largest manufactured category).
The value of higher education exports appears to be lower than exports of gold and of petroleum products. In 2019, the UK’s single largest export to China was non-monetary gold, valued at £6.4 billion (27 per cent of all UK goods exports to China). Petroleum products were valued at £5 billion. After road vehicles (£3 billion) came medicinal and pharmaceutical products, (£2 billion). These sectors appear to be large because the gross value is calculated.
The real value of gold exports should be discounted by the original cost of imports. Apart from a small goldmine in Scotland there is very little extraction of gold in the UK. A similar comment could be made about petroleum products. Production of North Sea oil on the UK’s continental shelf peaked at 2.6 million barrels per day in 1999 and then declined sharply until 2014 when it stabilised. There has to be a deduction from the export value of petroleum products to take account of the import of oil. The UK imported in 2019 approximately the same amount of oil as it produced from its own waters.
During 2020 some public figures spoke out about the extent to which many universities are financially dependent on recruitment in China. There is a current of thought amongst Conservative MPs, especially those who oppose the Huawei involvement in 5G developments (Huawei Interest Group), who would like to see greater distance between British universities and China.
The supporters of the pressure group Onward, like the MPs Neil O’Brien and Tom Tugendhat who are both on the Advisory Board, might find themselves moved to argue in the House of Commons for the conclusions advanced in Trading Places by Will Tanner, published in summer 2020. This polemic presents a case for restricting international recruitment to UK universities, meaning primarily recruitment from China. If this case were to be made with any vigour there would need to be an authoritative response. A crucial part of the response will be fact-based evidence about the size of the UK’s education exports to China.