Date
14 December 2017
City University of Hong Kong is said to be on the verge of selling its Community College to an Australian University. Photo: HKEJ
City University of Hong Kong is said to be on the verge of selling its Community College to an Australian University. Photo: HKEJ

CityU community college deal: The economics and politics

A new cross-border initiative is in the offing in the city, but it has nothing to do with the Shanghai-Hong Kong Stock Connect.

City University of Hong Kong is set to hand over the associate degree program run by its Community College to an Australian University, providing chance for an overseas entity to tap into one of the most lucrative segments in the local education sector.

According to media reports, the suitor could be one among these four: University of Wollongong; University of Newcastle; University of Technology, Sydney; or Macquarie University.

There is speculation that an announcement could come as early as this week.

Now, why is a Hong Kong sub-degree program being sought after by all the foreign universities? 

The short answer: it is a hugely profitable business!

To get some concrete figures, I pored through the City University’s annual report, but it didn’t prove to be of much help. So, I am making my own calculations here.

According to documents submitted to the Legislative Council yesterday, the Community College of City University (CCCU) admitted 2,500 students last year, down nearly 30 percent from the 3,500 students enrolled in 2012.

That is consistent with CCCU’s own statement that it provided two-year tertiary education for 6,000 students. Now, I presume that each of the students is paying HK$40,000 in tuition fee per year.

A 20 percent profit margin would yield a net profit of close to HK$50 million. And I have not counted the enrollment deposits that the college receives from students who pay up to reserve their seats. Some students who reserve their seats fail to show up when they find other schools.

According to Legco disclosure, the enrollment deposit amount at CCCU was over HK$10 million. (Incidentally, the Polytechnic University’s College of Professional and Continuing Education topped the list in enrollment deposits receipts — at HK$22 million).

The profitability of sub-degree programs, which provide a transitional course for students who were unable to make it to university, first became known when Lingnan University disclosed that it made HK$41 million in 2010/11, the year when it referred some admitted students to other institutions because of over-enrollment.

That kind of profitability has not only made the segment a much better money play than, say, many small to medium-sized brokerages, it has also prompted City University, which set up the community college 10 years ago, to look at reaping a handsome gain through a sale.

The buyer is expected to eventually turn CCCU into a private university after five years, offering a course to fill in the gap between sub-degree program and a regular university program.

That is the economic side of it, but there is also a political factor to be considered. The CCCU union is already demanding that any new owner honor the existing employment criteria, but that will not be the sole challenge facing the buyer. A higher authority could come into the picture.

One should note that it is a rather sensitive period in the city when it comes to foreign involvement in local affairs. Hong Kong’s leader CY Leung is aware of the fact that he needs to do something to meet the aspirations of the city’s residents.

Leung has, in fact, promised that he will try to make some key announcements in his next annual policy speech.

Now, as for protecting Beijing’s interests, here is a suggestion: perhaps Tung Chee-hwa’s new “Our Hong Kong Foundation” can play a role in screening the cross-border university deal.

One of the tycoons in the think tank can have the buyer vetted and make sure that the transaction is not something Beijing should worry about.

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BK/JP/RC

EJ Insight writer

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