
Chinese Companies Are Buying Up Cash-Strapped U.S. Colleges - samspenc
https://www.bloomberg.com/news/articles/2018-03-20/cash-strapped-u-s-colleges-become-targets-for-chinese-companies
======
hangonhn
"The pending purchase rankles some Westminster faculty and alumni, who
question what a longtime maker of steel spans knows about running an elite
school whose choirs sang with maestros Leonard Bernstein, Arturo Toscanini and
Seiji Ozawa."

I think that sentence provides some insight into the deal. As China becomes
wealthier, their aspirations will be elevated as well. There's a lucrative
opportunity here where the prestige of an American institution can be used to
attract family who have the means and aspirations for their children to be
acquainted with cultures and arts other than the ones they are born into.

It's kind of funny to hear people complain about a former steel company taking
an interest in music education given the prestige that Carnegie Hall holds in
American culture.

~~~
smilekzs
> Xu Guangyu, chairman of Beijing Kaiwen and a choral singer in college...

> Westminster’s odd couple may not be such a mismatch, given Xu’s background
> as a choral singer at Peking University. In the early 1980s, his high-school
> music teacher in Beijing took students to performances of operas “Carmen”
> and “Madama Butterfly,” and the ballet “Swan Lake,” he said.

At the very least the buyer does appreciate the art involved.

~~~
Johnny555
Or, at least he claims to have that appreciation to get the sale done.

~~~
mazerackham
seems like we could give him the benefit of the doubt in this case, no?

~~~
gilrain
The rich never deserve the benefit of the doubt; if they need their side of
the story told, they can, and do, pay for it to be told as sympathetically and
skillfully as possible. We are only to look on with as much discernment as
possible.

------
OliverJones
Hear that "pop"? It's the student-debt-driven education bubble springing a
leak and starting to deflate.

Thanks, Bush 43, for your legacy in this when you "reformed" the bankruptcy
laws to make it impossible to discharge student loans in bankruptcy. That set
educational institutions free to raise their rates to ludicrous levels: it
took away the incentive for student lenders to push back.

It took away lenders' incentive to say such things as "$126,000 is too much
debt for a special education teacher. She'll never be able to pay it back. We
won't lend it to her to give it to you. Reduce your tuition, and cut your
administrative overhead."

Institutions with some cachet, like Westminster, will get rescued. Others will
just collapse.

This bursting bubble is going to hurt.

~~~
matt_wulfeck
I don’t really understand how there can exist any debt that can’t be
bankrupted, apart from federal treasuries.

It may produce some desired affect in the short term, but in time creates a
massive liability for everyone, not just those who took out the debt.

~~~
cbr
The standard argument for why student loan debt survives bankruptcy is that
otherwise students would declare bankruptcy on graduation. At least with our
current system, where bankruptcy is wiped from your record after 7 (or 10)
years this would be a good move for most students.

~~~
tw04
There are better ways to counteract that. Off the top of my head - if you
declare bankruptcy to evict student loans, you are ineligible for retirement
account contributions like IRA and 401ks for the 7-10 year window.
Additionally you take a 5% tax increase for the duration of that window.

~~~
woolvalley
Not allowing people to put money in retirement accounts just means the govt
has to support those people that much more when they get to old age, instead
of them supporting themselves and getting tax revenue from the withdrawal.

And a %5 tax increase sounds like a pretty good deal. For most people it's
going to be $25-$50k total, and you have no bill due when your unemployed.

~~~
lovich
I don't know if it wouldn't work out better for everyone but the lender.
People paying student onerous student loans, like myself, already aren't
putting money into retirement accounts because the banks are taking it all.

If I could just cut out student loan payments the money would go towards
paying down any outstanding debt or towards buying a house/condo which would
help me not need support in retirement. The tax advantaged retirement funds
are nice but many people with student loan debt it's like telling them they
have won't have to pay taxes on any yachts they buy. Technically nice, but
practically useless

------
RobertRoberts
An idea, any foreign country that forbids buying land in their country [0] is
not allowed to buy land in our country. Sound equal?

[0] _" Foreign investors are not allowed to buy land in China. The land in
China belongs to the state and the collectives."_

[https://en.wikipedia.org/wiki/Chinese_property_law#Buying_la...](https://en.wikipedia.org/wiki/Chinese_property_law#Buying_land)

Edit: I think it's reasonable to leverage our freedom as an asset instead of a
liability to be abused.

Edit: Replaced "fair" with "equal"

~~~
rgbrenner
Chinese can't buy chinese land. They only get the right to use the land. Land-
use rights can be bought by foreign investors for some projects.

~~~
masonic
Perhaps Mexico is a better example; they restrict the ability of Americans to
buy Mexican land within X distance of the border or within Y distance of a
coast.

~~~
skookumchuck
Yes, and look at how well their economy does.

~~~
B1FF_PSUVM
Yeah, but it's been over a century since they lost any states.

~~~
skookumchuck
And millions and millions move to the US.

------
lgleason
Given how regressive/repressive many universities have become this is really
scary. With that being said it is not entirely surprising given the amount of
Chinese investment going into the us with things such as this
[https://www.politico.com/magazine/story/2018/01/16/how-
china...](https://www.politico.com/magazine/story/2018/01/16/how-china-
infiltrated-us-classrooms-216327) . It is getting more brazen by having them
buy our universities and is the perfect Trojan horse. As it is, our
universities, which used to be institutions that valued free speech, open
inquiry etc. are becoming places with strict speech codes, repression of
dissenting ideas and places where due process is thrown out the window. The US
education bubble needs to pop, but if it is bailed out and propped up by
foreign interests (who's interests are not direct profit from the venture)
there could be a lot of other negative consequences for the US beyond stealing
IP. To continue to be innovative we need generations of people to be able to
critically think about things, not a mass of indoctrinated people.

------
pure_ambition
> "Xu Guangyu, chairman of Beijing Kaiwen... runs K-12 schools in China and
> said Westminster could provide the knowledge to help upgrade arts education
> for his students."

There you have it. The Chinese company is buying the college specifically for
the purpose of using their intellectual property. Is this not the same thing
they have been doing buying US businesses? Purchasing the know-how that they
lack to gain a competitive edge, while preventing MNCs from competing fairly
in the Chinese domestic market?

It's a smart strategy and seems to be working. Not fair though, and shouldn't
be allowed.

~~~
analyst74
US does the same, no? Think of all the Chinese researchers, athletes and
business people who immigrated to US and brought their knowledge and resources
to America.

In the end, the more countries and firms compete on expert knowledge, the
better it is for knowledge workers.

~~~
adventured
> US does the same, no?

No, the US doesn't do the same. You're comparing two very different things.
Property is/can be owned, people are not and should not be. China & the US do
not own their people or their brains, even if they'd like to.

Both countries technically allow people to move to and work in them, from
other nations. It's practically impossible to become a citizen of China as a
foreigner. The US grants a million green cards per year.

China almost entirely disallows outbound technology/IP/property/asset
tranfers. That's the overwhelming point of contention.

~~~
analyst74
If it's knowledge that's important, does it matter whether it's transferred
through asset purchase or by hiring foreign talent?

Also, this is musical and educational colleges they are buying, how did
tech/IP transfer sneaked into the discussion?

------
mark-r
How is it possible that any colleges are cash-strapped with the tuition they
are charging these days? It boggles my mind - they must be incredibly
mismanaged.

~~~
dv_dt
I haven't seen any reports, but my impression is that many universities have
cut loose many permanent professors, hiring masses of part time, super low
wage adjuncts. At the same time gold-plated administration and facilities
costs have increased much faster than inflation along with textbooks and
tuitions. It's a massive devaluing of the actual education with super-
inflation on the trappings of education.

~~~
JustAnotherPat
permanent professors are tenured or tenure track and are very hard to 'cut
loose'

~~~
romwell
>permanent professors are tenured or tenure track and are very hard to 'cut
loose'

Hahahaa. Hahahaaa. Ha.

Tenure-track professors are simply denied tenure in the end of their glorious
$50K/year 6-year stay.

Hard to fire a tenured professor? You aren't thinking big, my friend. Shut
down the entire department. Who[1] needs[2] physics[3], after all[4]?

That's not to mention the obvious solution - eliminate tenure altogether[5].

Think that's hard to implement? Time is on your side then (if your side is the
side that wants to ruin academia for good). Simply let the academics retire
(or die out), and never open tenure-track positions[6]. When someone leaves
the department, replace them with an adjunct.

For every linked reference, I could also provide personal anecdata. And as far
as problems in academia go, I didn't even scratch the tip of the iceberg.

[1]
[https://www.aps.org/publications/apsnews/201110/physicsprogr...](https://www.aps.org/publications/apsnews/201110/physicsprograms.cfm)

[2]
[https://www.theguardian.com/science/2006/sep/29/highereducat...](https://www.theguardian.com/science/2006/sep/29/highereducation.education)

[3]
[https://physicstoday.scitation.org/do/10.1063/PT.6.2.2018021...](https://physicstoday.scitation.org/do/10.1063/PT.6.2.20180216b/full/)

[4] [https://www.aaup.org/media-release/crisis-university-
norther...](https://www.aaup.org/media-release/crisis-university-northern-
iowa#.WrGULudJlpg)

[5]
[https://www.insidehighered.com/news/2017/01/13/legislation-t...](https://www.insidehighered.com/news/2017/01/13/legislation-
two-states-seeks-eliminate-tenure-public-higher-education)

[6] [https://www.nytimes.com/2016/07/14/upshot/so-many-
research-s...](https://www.nytimes.com/2016/07/14/upshot/so-many-research-
scientists-so-few-openings-as-professors.html)

------
SubiculumCode
Letting China control American universities may give China an opportunity to
influence intellectual thought about the role of China in the world, and the
abuses it has committed at home. There are multiple reports about China using
money and influence to limit the free speech of students [1,2], and is
consistent with reports that China is heavily investing in international
propaganda[3].

1\. [https://www.nytimes.com/2017/11/26/opinion/beijing-free-
spee...](https://www.nytimes.com/2017/11/26/opinion/beijing-free-speech-
america.html) 2\.
[https://www.washingtonpost.com/news/worldviews/wp/2017/05/23...](https://www.washingtonpost.com/news/worldviews/wp/2017/05/23/a-chinese-
student-praised-the-fresh-air-of-free-speech-at-a-u-s-college-then-came-the-
backlash/?utm_term=.e5ce8fb234cf) 3\.
[https://www.bloomberg.com/news/articles/2018-03-20/xi-
create...](https://www.bloomberg.com/news/articles/2018-03-20/xi-creates-
voice-of-china-broadcaster-to-improve-global-image)

~~~
macintux
I’m not sure it scares me as much as, say, the Koch brothers doing the same.

[http://time.com/4148838/koch-brothers-colleges-
universities/](http://time.com/4148838/koch-brothers-colleges-universities/)

------
watertom
Since all Chinese companies are partially owned by the Chinese Government, and
ultimately controlled by the Chinese Govrrment they __all __should be blocked
from purchasing __anything __in the U.S. we would never sell anything to the
Russian government, or the German govt. etc.

It’s foolish to test their companies as independent from the government.

------
malloreon
This might be my favorite paragraph in a news article ever:

"Beijing Kaiwen Education Technology Co. agreed in February to pay $40 million
for Westminster Choir College, an affiliate of Rider University that trains
students for careers as singers, conductors and music teachers. The
announcement came just weeks after the government-controlled Chinese company
changed its name from Jiangsu Zhongtai Bridge Steel Structure Co."

Bridge steel -> Music education. Now that's innovation!

~~~
leereeves
Carnegie did it 100 years ago.

~~~
adventured
No he didn't.

Carnegie gave away his wealth.

US Steel did not rename itself the US Library Corporation.

------
apo
Can't help but be reminded of this:

 _The Mitsubishi Estate Company of Japan plans to walk away from its almost $2
billion investment in Rockefeller Center, the Hope diamond of world real
estate._

[https://www.nytimes.com/1995/09/12/business/japanese-
scrap-2...](https://www.nytimes.com/1995/09/12/business/japanese-
scrap-2-billion-stake-in-rockefeller.html)

~~~
seanmcdirmid
We are already seeing that happen with HNA.

~~~
fspeech
HNA seems to have made money on disposed assets so far. Maybe they are hanging
onto the losers for now.

~~~
seanmcdirmid
They are about to take a huge loss on an old Park Avenue building in NYC. They
made out on HK plots they sold. Heaven knows what will happen when they start
unloading mainland properties.

~~~
fspeech
Interesting to see how much the NYC property will go for. I don't think the
regulators are that concerned about HNA's properties in China. Domestically it
is a zero sum game. Their loss would be someone else's gain, as long as
solvency of the banks is not threatened.

~~~
seanmcdirmid
They have to pay their loans...I think it is only a matter of time until
Hainan Airlines starts having problems paying for fuel.

------
jermaustin1
Are these colleges accredited? And if so, will they still be accredited and
reviewed just as they were when they were wholly owned by the University?

It smells weird that a foreign state-owned company wants to buys a US college.
Maybe they want the land, or maybe its all about that tuition money. The China
sees that we Americans are stupid enough to pay $30-40k per year to go to a
private music college, and they want a cut of that.

~~~
lainga
It is a safe haven for capital, too - see the comment below about the 1980s
Japanese property bubble.

------
hguhghuff
I wonder what it might mean if extrapolated into China eventually buying the
lions share of houses, farms, companies, infrastructure, educational
institutions..

What would be the outcome?

It’s sort of weird that such buyup isn’t seen as a national security issue.

~~~
kuschku
Americans bought the lions share of farms, companies, infrastructure in Europe
in the past 70 years.

Now it’s gonna be China.

It’s too profitable to worry about it, and just like we sold out to the
Americans, they’ll now sell out to China, as the circle continues.

~~~
adventured
The US acquired practically zero infrastructure in Europe over the last 70
years and practically zero of Europe's farming output. Europe as a whole is
notoriously protective of its farming, both in terms of ownership and tariff
protection.

Trains/rail, bus systems, power generation, power distribution, telecom - US
companies own an extroardinarily tiny share of those things in Europe overall.

Verizon + AT&T are worth ~$420 billion and are giant, wildly profitable
businesses. Why don't they own most of Europe's telecom industry, which is
mostly dominated by numerous far smaller companies? Because it doesn't work
that way. You can't just go into a dozen European nations and buy up all of
their telecom, the government roadblocks to doing that make it impossible.
Instead, it's Softbank (Japan) that owns Sprint (#4), and it's Deutsche
Telekom that owns T-Mobile that is the #3 telecom carrier in the US.

~~~
kuschku
I’ll mention the term "Amerikanische Heuschrecke" or "Heuschreckeninvestor"
here:
[https://de.wikipedia.org/wiki/Heuschreckendebatte](https://de.wikipedia.org/wiki/Heuschreckendebatte)

It refers to an American Investor buying up a European company, destroying it
in some way (e.g. by using its voting power to force the company to sell all
its assets and take on lots of debt, then pay out all that to the investor),
and then letting the company go bankrupt.

It’s been a common scheme of American investors in Europe in the 2000s, and
has destroyed many local companies, which in turn meant that their marketshare
was afterwards taken over by American multinationals.

It was such a common incidence that it became main topic of political debates
for a while.

Here’s another article from 2016, discussing all kinds of US investors buying
European companies, because never before have US companies taken over more
European companies than now:
[http://www.spiegel.de/wirtschaft/unternehmen/auslaendische-i...](http://www.spiegel.de/wirtschaft/unternehmen/auslaendische-
investoren-kaufen-rekordzahl-deutscher-firmen-a-1127959.html)

~~~
notfromhere
That doesn't prove your point of "70 years of rapaciously buying EU resources"

------
jedberg
In the 1980s, people assumed that Japanese companies would eventually own
everything in the US. You can see this in the pop culture of the time, namely
in Back to the Future 2, where they go to 2015 and Marty works for a Japanese
company.

I have no idea if China is in a fundamentally different position than Japan
was in the 80s, but just something to keep in mind when prognosticating doom
and gloom about a "Chinese takeover".

~~~
xeeeeeeeeeeenu
>I have no idea if China is in a fundamentally different position than Japan
was in the 80s,

It is. Its economy is _much_ bigger, it is not a democracy and, most
importantly, today's China is much more expansionistic than post-1945 Japan
ever was.

------
FLUX-YOU
/slight-tinfoil-hat

A lot of espionage recruiting goes on through academics, so I'm wondering if
this isn't just a good opportunity to open avenues for spies to be sent over.

That name change alone makes me immediately suspicious of this company:

\- From: Jiangsu Zhongtai Bridge Steel Structure Co

\- To: Beijing Kaiwen Education Technology Co.

~~~
tozeur
I think that would really depend on the university. I doubt the Chinese
government would care to plant spies in US choir societies versus let’s say
sending students to Georgetown with direct recruitment feeds to Capitol Hill.

~~~
FLUX-YOU
Sure, although if you own the university (also, this is near Princeton), it
probably makes the job easier. Unless Georgetown is run by the Chinese
already.

------
nwatson
Japanese companies bought into US real estate, infrastructure, corporations
etc. in the 90s then had to relinquish much of it at cut rate prices. Same
will happen here I imagine.

~~~
HumanDrivenDev
China faces even more serious problems that Japan did at the time. Much of the
country still lives in poverty and there's no social safety net.

~~~
qaq
Fortunately US has a very developed social safety net.

------
organsnyder
Westminster has a towering presence in the choral music world. At one point,
the plan was to shut down the college entirely, so this purchase is definitely
an improvement. It will be interesting to see how the college evolves after
the acquisition.

------
JustAnotherPat
American colleges have an anti-asian bias. I, for one, don't blame the Chinese
for buying up the system so that they get decide who comes through the door
now.

~~~
tabtab
Re: _American colleges have an anti-asian bias_

I don't think it's an anti-Asian bias but more of a pro-diversity bias.
Colleges often want a good mix of ethnic groups such that having 60% Asians
when the US population is about 8% Asian won't get them the mix they want.
Whether the goal of "diversity" is more important than the "fairness" of raw
merit is a complex moral and philosophical debate.

~~~
Consultant32452
After years of looking at this phenomenon your post finally made something
click in my head. We've decided that birth rate is the primary measure of your
merit. The more babies you have the more people that look like you we're going
to allow into universities and good jobs. So weird...

~~~
tabtab
Perhaps it may end up that way in _some_ cases, but that's not the intention.
Art & Music universities often feel that diversity increases creativity, and
they are in the creativity biz: the more (perceived) creativity that flows out
of the U, the more they can hike tuition.

Having one group heavily- or over-represented may be seen as going against
that goal. It's not necessarily personal against Asians. They may not want too
many whites either.

~~~
Consultant32452
But proportional to birth rate is arbitrary. If we decide there's 10 "races"
why not try to force representation to be at 10% each? Wouldn't that be even
better for diversity? If your race has a lower birth rate maybe we should give
you a little boost by making sure you get a college education and a good job.

------
naveen99
I thought most universities are non profit and essentially own themselves. I
don't think they can be sold as no one owns them.

------
forkLding
I do think that for the Chinese owner, they're either very interested in
music, see something we don't see, has children attending that college or is
involved in a very clever money capital outflow plan as Chinese overseas
investment and major currency outflow is heavily monitored and restricted by
the Chinese govt:

[https://www.bloomberg.com/view/articles/2017-04-10/china-
fin...](https://www.bloomberg.com/view/articles/2017-04-10/china-finally-
stems-capital-outflows-now-what)

------
bawana
I guess they see tuition inflation as a guaranteed revenue stream. Certainly
they have experienced this firsthand as much of Asia sends their offspring for
a US ‘education’.

------
buchanaf
Well there's one way to slow down China's economy. Nothing says first-world
country like crippling student-loan debt.

------
thathappened
I wonder if this is their answer to their absurd requirements to get into
American Universities

------
RobertRoberts
It is apparent that there is Chinese influence on this board.

Look at the commenter's history for some of the comments on China related
news. This is interesting. China is known for manipulating information and
spreading propaganda.

I hope HN cracks down on comment manipulation related to Chinese government
news stories.

~~~
KaoruAoiShiho
Silicon Valley is like 30% Chinese dude. If there isn't Chinese influence that
would be even more problematic.

~~~
dang
Less than 10% of the HN community is in Silicon Valley.

~~~
siquick
This surprises me. Would love to see a breakdown of where HN community are
based.

~~~
dang
I looked at this a couple weeks ago. The numbers depend on how you measure
'user' and 'location'.

Silicon Valley: 5% - 14%; US: 32% - 56% (including SV); Europe: 28% - 35%;
Canada/Australia/New Zealand: 7% - 8%; India: 2% - 7%; China: 0.5% - 3%
(including Hong Kong). From European countries, the UK is 5-8% (of the HN
total), Germany is 4-7%, France is 1-3%. The Dutch and Swiss are
stereotypically stable at 2% and 1% respectively.

These ranges include measures like logged-in-ness. If you only look at total
users then SV is less than 10%, and the US comes out less than 45%—or even as
low as a third, depending on what's specifically measured.

~~~
nkurz
_Canada /Australia/New Zealand: 7% - 8%_

Is this combined for all three, or each individually? If combined, could you
break it down? If individually, wow for New Zealand!

~~~
dang
Combined. I don't seem to have kept that breakdown, but it was about what
you'd expect from population.

------
quickConclusion
"Westminster is at least the fourth college site bought by Chinese interests
since 2015."

Pretty much one per year. Let's keep looking at it, but probably nowhere as
near as foreign companies investing in China's education system.

