US colleges look to insure against impact of trade war
An increasing number of US universities are looking to buy insurance policies against a drop in revenue from international students, fearing they are overexposed to China at a time of mounting trade tensions between Washington and Beijing.
A 10 per cent decline in new international student enrolments at US universities — which rely heavily on revenue from Chinese and Indian students — over the past two academic years has already cost the US economy $5.5bn, according to a report from Nafsa, previously known as the National Association of Foreign Student Advisers.
Educators fear a further drop in international enrolments this year as US President Donald Trump’s trade war with China grinds on.
Two colleges at the University of Illinois at Urbana-Champaign — the Gies College of Business and the College of Engineering — bought insurance in 2018 worth $60m from USI Insurance Services in Champaign, Illinois. The policy pays off if both the colleges suffer an 18.5 per cent decline in revenue from Chinese students year-over-year due to a government action such as visa restrictions or a “health event”.
“We did so out of recognition that we faced significant exposure to the China market and that a political or a public health event beyond our control could lead to a decline in students and revenue,” said Jeffrey Brown, dean of the Gies College of business.
Anthony Ackerman, an insurance broker from USI, said the company was in talks with six other US universities, as well as a number in Australia, looking to protect themselves against a decline in enrolments from international students.
“What happens to universities here if China decides to restrict its students to come to America?” he asked.
In June, the Chinese government warned students and academics about the risk of studying in the US in the light of visa refusals. Hu Xijin, editor of Global Times, a newspaper in China, linked the warnings to the trade war. “This warning is a response to a recent series of discriminatory measures the US took against Chinese students and can also be seen as a response to the US-initiated trade war,” he tweeted.
The rising trade tensions, combined with the policy of granting shorter visas since June 2018 for many Chinese students, are making US universities less popular among students and parents in China.
The loss to US universities is a gain for their counterparts in the UK, Canada and Australia. The Universities and Colleges Admissions Service, which handles applications to higher education courses in the UK, reported a 30 per cent rise in applications from Chinese students this year compared with 2018. During the same period, Canadian universities saw a 15 per cent jump in international students’ enrolment.
“Students are increasingly feeling deterred due to tighter visa restrictions and instead opting to study in the UK and other countries,” said Jon Santangelo, spokesperson of the Beijing Overseas Study Abroad Association. The UK overtook the US as the preferred study destination this year, according to the 2019 Chinese Student Overseas Study Survey Report.
China is the largest source of international students studying in the US, supplying one-third of the total. Education service exports ranked fifth among service exports in 2018 and were worth $44.7bn, according to official figures.
“Education is one of the few sectors where America has a balance of trade [surplus],” said Dick Stratz, professor of economics at the University of California in Santa Barbara.
Gaurav Khanna, an assistant professor of economics at the University of California in San Diego, warned that public universities would be the worst hit as foreign students stay away. “Most universities are facing budget cuts, and the extra tuition from international students is helping cross-subsidise state residents,” he said.
Some US universities that were popular with Chinese students are reporting declining interest. Michigan State University’s admissions office has seen more Chinese students declining admission offers this school year compared with last. Indiana University also suffered a decline.
“We have been getting questions about the safety and feeling of welcome-ness from Chinese students,” said John Wilkerson, director of international admissions at Indiana University.
To counter the overheated rhetoric over immigration in the US, NAFSA launched a “You are Welcome Here” campaign to convince foreign students that they are still welcome. But it does not seem to be working.
Many parents feel that harsh US attitudes towards China may compromise their child’s ability to complete courses or get work experience, said Bao Xianmin, who works as a counsellor at a coaching institute in Qingdao in China’s eastern Shandong province. Ms Bao’s institute helps prepare students to apply to foreign universities, and this year half of them chose Canadian universities in spite of receiving admission offers from US universities.
“Students as well as parents are worried about what will (Donald) Trump do next,” she said.