Australia’s education exports at risk from fragilities in China

04.09.2018 Export Finance Australia

In the latest edition of World Risk Developments, Efic highlights the fragilities in the Chinese economy and how this could affect Australia’s education exports.

Australia’s education sector is benefitting from China’s growing middle class—with Chinese student enrolments up 12% every year since 2002. Higher education has accounted for the lion’s share of this growth, with enrolments up 10-fold over the last 16 years. Not surprisingly, earnings in Australia’s private education sector have risen 7% p.a. over the last decade.

China accounts for 30% of foreign student enrolments in Australia, up from 16% in 2002. But there is significant variation by state. New South Wales and Victoria have the largest absolute Chinese student population. But the reliance on Chinese students is significantly higher in South Australia, Tasmania and ACT (Chart).

The large dependence on China leaves education exports—particularly in South Australia, Tasmania and the ACT—exposed to fragilities in the Chinese economy. China’s large debt burden and ongoing efforts to pump-prime the economy following unexpectedly weak recent economic data are cause for concern. In a worst-case scenario, a severe downturn in the Chinese economy could lead to a sharp decline in household incomes and stringent capital controls to curb outflows. This could deter Chinese students from studying abroad as they opt for domestic alternatives, while capital controls could cause payment delays of education fees.

Other stories in the latest edition of World Risk Developments:

  • Emerging Markets—Australia’s key trade partners insulated from financial volatility
  • Coal—US looks to grow market share in Asia
  • Philippines—inflation dents growth and reform prospects
  • Pakistan—new Prime Minister’s bailout conundrum risks economic crisis
  • Turkey—policy missteps risks a balance of payments crisis
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