To begin with, I would like to greet and thank all the friends and guests participating in the Forum on behalf of Peking University as one of the organizers. The title of my speech is “the Strategies of China’s Research-Based Universities in Response to Financial Crisis.” However, to be honest, my studies on this topic are still far from being comprehensive or thorough. I hope that my speech today will interest and inspire more scholars to research and ponder related issues.

As you all know, since the sub-mortgage crisis broke out in the United States in the middle of 2007, the financial crisis has been magnified, with more people becoming affected around the world over the past two years. Despite the fact that most countries have made plans and taken measures to stimulate the economy, the economy has in fact been damaged by the financial crisis. At present, there are few signs of economic recovery worldwide.

Although the financial system in China has received minor blows compared to the level of damage worldwide, the real economy has been damaged greatly, especially those industries with foreign investment. In the first six months of 2009, the total value of China’s export and import was 6.12 billion USD, a 23.5% decrease compared with that in the last year. The export value was reduced by 21.8% and the import value 25.4%.

Higher education in China is not an exception.

Firstly, the growth of the government budget for higher education is estimated to slowed down significantly.

Secondly, the non-government budget for higher education has stopped growing for the following two reasons.

On one hand, it’s difficult to increase the tuition revenue. The tuition fees for higher education in China have remained fixed in recent years, and the enrollment expansion rate has also begun to slow down. What’s more, due to the financial crisis, some parents will probably lose their jobs or make less money. With the increasing financial burdens for students, the colleges and universities cannot (and should not) increase their tuition fees.

On the other hand, the private spending on education has been decreased. Take Peking University as an example, the private donations to PKU this year is likely to be decreased than that in past two years. Some enterprises which have signed donation agreements with PKU have applied for payments postponements due to the financial crisis; the investment return of the fund does not look promising; meanwhile, the fund reserve of the University is also affected by the financial crisis. In a declining stock market, it’s hard for investments to gain much return; some funds may even obtain negative growth.

Thirdly, the higher education does not benefit from the Chinese government’s 4 trillion RMB package to stimulate the market. Only about 4% of the package is spent on social causes such as education, sanitation and culture; to add to that, the investment on education is mainly for the primary or secondary education in Western China, little is meant for higher education.

Fourthly, the financial crisis has exerted negative effects upon college and university graduates. Enterprises with foreign investment and medium and small sized companies are all severely stricken by the financial crisis, which shrinks job opportunities in the labor market. This year, the first employment rate published by the Chinese government is only 68%. In 2009, the estimated number of college graduates in China will reach 6.11 million. An employment rate of 68% means there will be more than 2 million graduates left unemployed upon their graduation.

Though the financial crisis has affected the whole world, yet the degree of its influence varies in different countries, areas, and industries. Thanks to the economic development and relatively stable national revenue, the higher education in China on the whole has not been severely damaged, the reason for which, however, is not because we are more capable of resisting risks. Likewise, the financial system in China is affected to a less degree only because it’s relatively underdeveloped and closed. As the old Chinese saying goes, “A person without foresight will have immediate worries.” As the leaders of higher education, we should get prepared for any potential risks, learn from the crisis, and reflect upon the mission and challenges facing higher education and our corresponding strategies.

As to the responses to the crisis, counterparts such as Harvard and Yale, though stricken heavily by the crisis, have set a good example for us. For the two universities, the investment return of their funds has become one of the most important sources for recurrent and capital expenses. Though funds have shrunk dramatically due to the financial crisis, placing the two universities in great financial difficulties, they took a series of measures in response to these difficulties, such as aborting some infrastructure projects, cutting off personnel expenses, increasing centralized purchase and so on. More importantly, their response to the crisis has demonstrated their insightfulness and mission and social responsibilities as prominent educational institutions. For example, despite the financial difficulties, the budget for students, teaching activities and research projects remains intact. Undoubtedly they have set an example for their Chinese counterparts in terms of attitudes and measures taken against the crisis.

As a representative of the research universities in China at the present time of global economic crisis, Peking University has also rethought the financial crisis, or to be more accurate, the impact of the economic cycle on higher education and strategies to deal with it. Here, I would like to share my thoughts with you.

First, the financial crisis has taught us that university should have long-term plans and development strategies. Its long-term plan and strategy should be based on the historical responsibility, the cultural conception and the fundamental values of the university. The primary historical responsibility of the university is to contribute to human knowledge and to facilitate the exploration of knowledge, or in other words, producing knowledge and instructing how to seek it.

The secondary job of university is to discover and hold fast to the universal values and principles as illuminated by the Chinese classic The University that “to glorify the virtues, to know the common people and to reach the supreme goodness.” The responsibility and the value of the university should never be forgotten especially when encountering difficulties and crisis.

Secondly, the university should take into account the social-economic fluctuations and shifts which include the rationales of economic cycle and its change patterns, while mapping out the strategies and methods to minimize the risks and weaken the shock. The university should plan in advance for the crisis, preparing the resources and establishing the early warning systems. Such measures should be included in the long-term plan and strategies.

Thirdly, the long-term plan and strategy mention above inevitably require some flexibility in university institutions. Above all, university should agree on the priorities for its numerous and complicated affairs due to its core missions, ensuring the application of the most critical projects and removing the rigid restrictions on some less important ones. In addition, flexibility in employment and wage are also need.

Fourthly, universities in China should be aware that despite the potential risks and possibly huge loss, they should not fear and draw back from the markets. In fact, universities can (or should) keep themselves away from the market, but they can not fear the risks of markets. University’s spirit and wisdom should contain the spirit and wisdom to participate in the market. Although Chinese universities do not have a long history of resource mobilization in market economy (which is actually not mature), it is an important direction. Chinese universities should stick to the multiple funding approach, learning how to operate the funds, mitigate and control risks in the market economy, these should be modern qualifications for an “open” university.

Fifthly, Chinese universities should not lack the sense of cooperation. Global crisis needs to be dealt with global-level. Therefore, Chinese universities should strengthen international cooperation, assume their international responsibilities and contribute to passing through the difficult times together.

Finally, leaders of the university should be fully aware of the importance of willpower and confidence. In face of crisis, it is important for the leaders to influence and help build up confidence and the related academic communities. As institutions in the spotlight, universities should transfer beliefs and confidence to the public and led the society out of this difficult time.

To summarize, what are the core missions of the research universities in modern China today as they are faced with the financial crisis? Deepening reforms, improving research and instruction quality and strengthening the “core competitiveness” are what I consider the most essential. As a public research university, I think, our responsibilities and missions have been clearly stated. I hope we can work together to accomplish these goals and make a contribution to a bright future of higher education in China and the whole world. Thank you!