WITH LOSS OF CHINESE STUDENTS, NEW ZEALAND'S

C O N F I D E N T I A L SECTION 01 OF 02 WELLINGTON 000569

SIPDIS

STATE FOR EAP/ANP, EAP/CM, EAP/PD, ECA, ECA/A/E/EAP
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ABENAISSA

E.O. 12958: DECL: 07/21/2015
TAGS: ECON PREL NZ CH
SUBJECT: WITH LOSS OF CHINESE STUDENTS, NEW ZEALAND'S
EDUCATION INDUSTRY SUFFERS DECLINE

REF: 03 WELLINGTON 1295

Classified by Charge d'affaires David R. Burnett. Reason:
1.4 (b) and (d).


1. (U) Summary: A sharp drop in the number of
English-language students from China -- partly orchestrated
by the Chinese government -- has reduced overall foreign
student enrollments in New Zealand schools. To revive the
international education industry, the New Zealand government
is refocusing on promotion of its universities to foreign
students. End summary.


2. (U) There were 102,136 fee-paying students in New Zealand
in 2003-04, down 15 percent from the previous year. But that
drop in headcount barely nudged the revenue that New Zealand
collects from the tuition paid by international students, the
nation's fourth-largest source of foreign exchange after
agriculture, tourism and wood products. The international
education industry generated NZ $2.19 billion (US $1.5
billion) in revenue in 2003-04, about a 1 percent decrease
from the previous year. That was the first decrease since
1998, when both revenue and enrollment numbers dipped amid
the Asian financial crisis.


3. (U) Over the last year, the fall in enrollment and income
was largely due to fewer foreign students enrolling in
English-language courses and secondary schools. By contrast,
enrollments were up for foreign students attending university
and post-graduate programs, which charge higher fees. The
government changed the law in 1989 to allow full fee-paying
foreign students.

Fewer Chinese students
--------------

4. (U) China is the source of 32 percent of foreign students
in New Zealand. Although that is the largest group of
foreign students here, the number of Chinese students in New
Zealand has declined in each of the last two years. From
2002-03 to 2003-04, the overall number of Chinese students
fell from 37,150 to 32,877, or 11.5 percent. In terms of
those who came to New Zealand to study English, the decline
was 32.7 percent.


5. (U) That decrease is the result of stiffer competition
from other countries for Chinese students and a stronger New
Zealand dollar, which reduced New Zealand's attractiveness as
an educational destination. It also resulted from negative
media stories in China on the collapse of two private
English-language schools in New Zealand that enrolled
substantial numbers of Chinese students and on Chinese
students' involvement in prostitution, gambling, drug abuse
and gang activity in the country (reftel).


6. (C) The decrease also reflects an effort by the Chinese
government to reduce the number of Chinese who study
overseas. The government's primary aim has been to prevent a
drain in foreign exchange. The Chinese Embassy's education
consul in Wellington also has been working actively to reduce
the numbers of Chinese students in New Zealand, according to
Robert Stevens (protect),chief executive of Education New
Zealand. The consul -- who has openly admitted he does not
like living in New Zealand -- has sent messages back to
Beijing portraying the country as inhospitable to Chinese
students, its teachers as incompetent and its people as
racist, Stevens said. Education New Zealand is a private
industry association that promotes the country as a study
destination.


7. (C) While unhappy over the growing numbers of its citizens
studying in New Zealand, the Chinese government also has
accused the New Zealand government of failing to maintain
high educational standards and adequate pastoral care of
international students, Stevens said. He added that Chinese
officials' displeasure with New Zealand especially hardened
after the collapse of the two English-language schools.
Chinese Ministry of Education officials insisted that the New
Zealand government compensate the schools' Chinese students
for their financial losses.


8. (C) New Zealand officials feel they have bent over
backward to satisfy the Chinese, and Stevens believes that
New Zealand is rebuilding the relationship. The New Zealand
government pressured other private language schools to accept
the Chinese students abandoned by the two failed institutions
and paid their accommodation costs and some tuition fees.
Minister of Education Mallard makes frequent visits to
Beijing. The education consul in Wellington is expected to
finish his assignment soon.

9. (C) Meanwhile, a growing number of English-language
schools are springing up in China, against which New Zealand
cannot compete on cost. While Stevens expects the number of
Chinese students to increase again in New Zealand, he does
not expect them to reach their peak level of 2001-02. More
English-language schools are expected to close in New Zealand.


10. (C) In the China-New Zealand negotiations over a
free-trade agreement, which began in December 2004, Education
New Zealand has asked the New Zealand government to pursue
provisions that would allow free and open trade in education
services. In particular, Education New Zealand has urged the
government to obtain commitments by China to the General
Agreement on Trade in Services that would match New
Zealand's. While New Zealand negotiators expressed optimism
over achieving an overall agreement with China, they also
warned Stevens that obtaining Chinese concessions on services
would be extremely difficult.

More university students
--------------

11. (U) Meanwhile, the New Zealand government last year
decided that it must attract more foreign students to its
university and postgraduate programs to sustain and increase
revenue from its international education industry.


12. (U) With that goal in mind, the government has allocated
NZ $70 million (US $47.5 million) to be spent over five years
beginning in 2004-05 -- more than a fivefold increase in
government spending on international education. The funds
will go toward scholarships. They also will compensate
universities for reducing fees charged to foreign doctoral
students and will pay the school fees charged for those
students' school-age children. The allocation will fund four
overseas educational counselors to monitor education policies
in key markets, including China, the United States, Malaysia
and Belgium. A counselor is in place in Beijing, and a
counselor is now being selected for Washington.


13. (U) The government also changed its immigration policy
with a view to luring more foreign students. Beginning July
4, foreign students can work 20 hours a week in New Zealand,
as well as six months after they complete their studies.


14. (C) Stevens noted that Americans compose the
fastest-growing group of foreign students at the university
level in New Zealand. From 2003 to 2004, the overall number
of Americans studying in New Zealand rose 44.5 percent, to
1,917. Stevens said that most American university students
stay for one or two semesters and that most come "to have
fun." They are attracted to New Zealand for the same reasons
growing numbers of tourists are: its natural beauty, its
outdoor activities and its reputation as a relatively safe
destination.


15. (U) The United States -- along with Australia, Canada and
the United Kingdom -- also serves as a growing competitor to
New Zealand for foreign university and postgraduate students.


16. (C) Comment: While the New Zealand government has
scrambled to appease Beijing's complaints, Chinese student
enrollments continue to fall. The New Zealand government's
efforts appear not to have paid off, partly because of market
forces beyond its control. It is unclear whether the
government has taken this lesson into account in its
negotiations with China on a free-trade agreement.
Burnett