“Education is Not a Business”, or Is It?

U.S. college tuition is one of the world’s most expensive; yet, Chinese parents are willing to pay the bills for American higher education anyways. In 2014, Chinese students in American colleges and universities alone contributed $9.8 billion to the U.S. economy, according to U.S. Department of Commerce.

As China joins the World Trade Organization (WTO) in 2001, free trade with other countries of all kinds, including the trade of culture and education began to happen. As a result, University campuses in the United States have since accommodated triple times of total international students from China throughout the past ten yeas. Currently, students from China make up about 29 percent of total international students studying in the United States (WSJ). In the academic year of 2014/15, total number of students from China studying in the U.S. is 304,040, which is a 10.8% increase from previous year. Compared to ten years ago, when total Chinese students studying in the U.S. was around 62,582, the number today has more than tripled. Among all Chinese students currently studying in the US, or one year post-graduating from colleges, a majority of 41 percent are pursuing undergraduate degrees, 39.6 percent are graduate students, 5.3 percent are enrolled in other institutions such as private boarding high schools, and 14.2 percent are in the process of Optional Practical Training (OPT).

The growth in number of international students coming to the U.S. has created “significant positive economic impact” on the United States, commented the Open Doors Data. According to the U.S. Department of Commerce, “international students contributed more than $30.5 billion to the U.S. economy” (Open Doors Data).Most international students receive their funding for tuition and general daily expenses from their families overseas. Other than tuition, international students spend money on rent, cars, and daily expenses. For wealthy Chinese kids, expenses also include shopping for luxury goods, paying for vacations and other leisure expenses.

College tuition in the U.S. is not cheap. In fact, the US has one of the world’s most expensive higher education system in the world. On average, a private four-year institute costs from $45,000 to $50,210 per academic year. A public four-year institute, such as University of California—Los Angeles (UCLA) costs $12,753 for in-state students and $35, 631 for out-of-state students. Unlike most domestic students in the United States, for most international students, college tuition fee comes entirely out-of-pocket. American students have the option of applying for Federal student loans and pay back their tuition gradually after graduation; however, most international students are ineligible for financial aid or student loans, they have no other option than paying their bills all at once. About 64 percent of Chinese students cover 100 percent of their college education cost (Open Doors Data).

There is no surprise that Chinese families are willing to pay for these expensive tuition bills. As part of the Chinese cultural norm, Chinese parents have high expectations for their children. They expect their kids to succeed, which is usually judged by which schools their kids go to, which degrees their kids acquired, what type of jobs their kids do and how much money their kids are capable of making. Therefore, college education is viewed as the first stepping stone for success. Many Chinese families would rather save money to send their children abroad than making investments with their money. As China’s GDP soars after opening the gate for free trade, overall improving economic conditions in China allow more Chinese families to send their children overseas to receive higher education with higher quality.Additionally, because of China’s one-child policy, most college-age students are “only children” of their families; thus their parents, their grandparents might spoil him/her by granting financial support for luxurious lifestyle while studying abroad. The United States, known for its high quality in education, became one of the most popular destinations for studying abroad. 

Based on recent trends in leap of students coming from China, many people cannot help but wonder: are numbers of Chinese students in the U.S. booming since the 2000s because of their excellent academic performance or simply because they are profitable?

Chinese students applying to US colleges and universities with fake high school transcripts, fake recommendation letters is almost old news. Service agencies in China that assist students with their college applications charge students various amount of service fees, based on the number and rank of schools that students intend to apply to. The wave of a growing study-abroad population has created a rising new market for service agencies in China, where fraud is a norm.

The real problem is, once these students step into their admitted colleges and universities, their academic performance do not match with their application resume. In order that these students become capable of joining mainstream programs, some schools provide language courses for international students whose language fluency level has not met the mainstream class standards yet. Of course, these intense language courses are not free, a 15 week intensive english program usually cost $5395.

However, some Chinese students facing academic struggles opted for other tacks. Since the 2012/13 academic year, universities in the U.S. have expelled as many as 8,000 Chinese students in three years (Kutner, Newsweek). The most common reasons for suspension and expulsion is cheating, plagiarism, and low academic performance. “I became aware of some services that Chinese students pay for getting their essays written, getting their exams taken and so on”, says Nansong Huang, a professor teaching Chinese literature courses at USC, “I think these students are wasting their parents’ money.”

Throwing back to ten years ago, when few Chinese students came to study in the United States, much fewer suspension and expulsion cases have been reported. One reason might have been the lack of social exposure back then, another reason is that compared to Chinese students now, most students came to study with full scholarship or financial aids provided by universities ten years ago. The group of students from China on US university campuses today are no longer the 1 percent most talented, intelligent and hardworking students; instead, they are more likely to have wide ranges of interests, passion for American culture and more willing to join fraternities and sororities. Therefore the images of Chinese students studying in the U.S. today is entirely different from the “nerdy” Asian image before.

This is a result of American colleges and universities’ expansion on their international enrollment since 2000. Since the 2000s, American higher educational institutions have been raising tuition fees at the rate of 2.8 percent approximately. For example, USC’s tuition fee in 2005 was $44, 582 per year; today, USC’s tuition has reached $66,754 per year, an increase of almost 50 percent.

In American higher educational institutions, about 40 percent of institutional revenues for colleges and universities come from tuition, the rest consists of endowment and other income, state/local appropriations and federal appropriations. For domestic students, tuition is paid by Federal aid, non-federal aid and students themselves, among which Federal aid including loans, grants, tax benefits and work-study make up 55 percent (Department of the Treasury). For international students, tuition is mostly paid by themselves. This explains why US universities cannot resist the attraction of international students. 

a-1-ratio-average-tuition-and-required-fees-for-all-four-year-degree-granting-institutions-to-median-household-income-1969-2012

However, complains have been voiced by domestic students in the US, arguing that international students have “crowded local students out of their own state schools” (Stephens, Washington Monthly). “The university (USC) has admitted too many international students, in my opinion,” comments Professor Huang, “Resources at the university compared to the size of the student body is immensely inadequate. Sometimes professors have to argue with the university when assigned class schedules and classrooms, because no one wants to teach a Friday class.”

Some institutions such as UCLA are making new policies to restrict the number of out-of-state and international undergraduate students admitted each year, in order to create more opportunities for in-state students while preserving high student academic quality. “But the reality is”, says Professor Huang, “the university needs the money from international students, thus it is a difficult bargain.” “For many institutions who are looking to balance their budgets, increasing the number of students from countries where they’re willing to pay full tuition is a strategy”, says Michael Bastedo, director of the Center for the Study of Higher and Postsecondary Education at the University of Michigan (Kutner, Newsweek).

Professor Huang predicted that “as anti-corruption policies tighten up in China, there might be a decrease in the number of Chinese students overseas in the future.” Meanwhile, as Chinese college-age population shrinks, the sudden boom in study-abroad is likely to slow down in the future. China’s economic slowdown might also lead to some changes in Chinese’s saving and spending choices. In addition, Chinese education department is working on retaining high school students in the country’s local universities while attracting students from overseas to come to China. On the other hand, US universities would still remain an attractive destination for Chinese students pursuing higher education. In the meantime, US universities’ interest in Chinese students will not fade away anytime soon. Chinese students, together with international students from other parts of the world, not only bring economic benefit to the United States, but also contribute intellectually in areas such as the STEM fields. Therefore, the relationship between Chinese students and US universities might still remain positive in the future.

 

http://www.iie.org/Research-and-Publications/Open-Doors/Data/Fact-Sheets-by-Country/2015

http://www.wsj.com/articles/international-students-stream-into-u-s-colleges-1427248801

http://www.washingtonmonthly.com/magazine/september_october_2013/features/international_students_separat046454.php?page=all

https://www.treasury.gov/connect/blog/Documents/20121212_Economics%20of%20Higher%20Ed_vFINAL.pdf

http://blog.collegetuitioncompare.com/2012/12/usc-tuition-cost-10-years.html

http://www.newsweek.com/us-colleges-expelled-many-8000-chinese-students-3-years-337445

China: Loss of GDP on Smog

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Right when the world leaders gather in Paris for the discussion of environmental issues at the Paris Environmental Conference, China is suffering from heavy smog pollution in multiple areas. This extremely painful weather once again calls upon people’s concentration and concern for air pollution problems.

Air pollution problems are more severe than we think. The UNEP (United Nations Environment Programme) has listed air pollution as “world’s worst environmental health risk” in its Year Book 2014 emerging issues update. UNEP analyzed environmental, social and economic costs of air pollution:

“The cost of air pollution to the world’s most advanced economies plus India and China is estimated to be US$3.5 trillion per year in lives lost and ill health. In OECD countries the monetary impact of death and illness due to outdoor air pollution in 2010 is estimated to have been US$1.7 trillion.”

Deaths caused by outdoor air pollution reach a level of 3.5 million each year from. Between 2005 and 2010, the death rate rose by 4% worldwide, by 5% in China and by 12% in India (UNEP Yearbook 2014).

Air pollution not only threatens people’s life and death, it hinders economic growth as well.

In 2010 alone, air pollution caused lost of USD 1.4 trillion in China (OECD). The total cost of health impact of outdoor air pollution in OECD countries is about USD 1.7 trillion in 2010 (OECD). The World Bank estimated there is at least loss of USD 100 billion spent on illness, premature death and loss of productivity, due to smog in China (The Financialist).

Just because air pollution is a critical issue worldwide, leaders are trying to search for solutions. In addition, solving air pollution problems will likely reduce economic losses and stimulate tremendous economic potential.

China could learn from some previous successful examples. In the U.S., the Clean Air Act (CAA) of 1990 aimed at reducing and preventing air pollution. Combating air quality and enforcing emission limitations were major goals of the CAA. The U.S. has seen many pollutant levels and associated cases of health complications drop, after the act took effect. The direct economic benefit generated from the CAA is 90 times the initial fund put into the regulations.

Wealthy Chinese are investing in real estate in foreign countries and immigrating away from Mainland China, due to the deteriorating air conditions in China. Beijing has announced some policies including China’s Action Plan of Prevention and Control of Air Pollution; however, the people of China have seen little improvement, as Chinese economy remains unstable.

The air pollution in China has caused trillions of USD in loss for its GDP, but the problem is far from being solved. On the other hand, when China eventually becomes capable of finding a solution to its smog problem, there might be growth in its economic outlook as well.

 

Sources:

http://www.oecd-ilibrary.org/docserver/download/9789264210448-sum-en.pdf?expires=1449128721&id=id&accname=guest&checksum=1E9A27001F2B3684A8CD4AB8D5284351

http://www.unep.org/yearbook/2014/PDF/chapt7.pdf

http://www2.epa.gov/clean-air-act-overview/1990-clean-air-act-amendment-summary

https://www.thefinancialist.com/chinese-smog-at-what-cost/

 

Airbnb Faces Safety and Insurance Challenges

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Airbnb is facing steep challenges surrounding insurance and safety issues as fatal incidents occur.

Zac Stone’s father, a user of Airbnb, attracted by the rope swing on the pictures, rented a cottage in Texas on Airbnb. Rather than having a good time with the swing on Thanksgiving morning, the trunk the swing was tied to broke and directly fell onto Mr. Stone’s head, “immediately ending most of his brain activity.” Accounted Zac Stone.

Accidents like this are inevitable. The rise of Airbnb offers travelers from all over the world a new approach to traveling and discovering different places; however, despite appealing pictures online, users’ experience with Airbnb can often be disappointing, even threatening. Stories that tell horrible guest experiences with Airbnb can be found easily online. Now that Airbnb faces the challenges with safety and insurance problems, it is important that the app start to think of doing something for its users, not only its hosts but also guests.

Currently, Airbnb offers “free, automatic secondary coverage for liability, in case a host’s insurance company denied a claim.” (New York Times) Airbnb states on its website that its Host Protection Insurance program now “provides primary coverage for Airbnb hosts and landlords…against liability claims up to $1 million USD that occur in a listing, or on an Airbnb property, during a stay.” (airbnb.com) The Host Protection Insurance program is provided through Lloyd’s of London, one of the providers of direct and indirect insurance policies covering many types of risks.

Ever since the enforcement of its Host Protection Insurance, Airbnb announces receiving less than 50 claims filed in the US. Compared to number of fatal accidents that occur in traditional hotel industry annually, the public has yet developed severe concerns for the safety aspect of Airbnb . The downside of Airbnb, compared to hotels, is that when unfortunate accidents happen, there is no one around responsible for immediate rescue.

In addition, under the “Help Center” section, guests will find some “Safety Tips” on airbnb.com that specifically provide safety advice for travelers during their stays. Although guests are encouraged to look for listings that emphasizes safety features including he insurance provided to hosts are not likewise applicable to guest/travelers. Unfortunately, the protection for those who pay for their stays on the website remains missing from the company’s insurance policies.

Airbnb may advise that travelers be responsible for their own safety, but what measure it will take to prevent future incidents from happening remains questioning.

 

https://www.airbnb.com/help/article/241/i-m-a-guest–what-are-some-safety-tips-i-can-follow

http://www.nytimes.com/2015/11/14/your-money/death-in-airbnb-rental-raises-liability-questions.html?ref=your-money

http://www.huffingtonpost.com/entry/a-death-at-an-airbnb-rental-puts-the-tech-company-in-the-hot-seat_5640db66e4b0b24aee4b18f7

Will Chinese Like Fish N Chips?

The British economic authorities aim to push for closer trade relationship with China, as Chinese President Xi Jinping arrives in London for a four-day visit. London is seeking stronger economic ties between the U.K. and China, despite the recent economic slowdown in China. This effort to enhance trading cooperation with China signifies that the U.K. has more options outside of the EU.

Currently, China is the 7th largest export market that the U.K. trades with, total export to China worth approximately 30 billion dollars last year. The major products that the UK exports to China are automobiles, telecommunications equipment and electronic components. Although the EU and US still take up most of the UK’s exports, the number of UK’s export goods and services to China will be riding on a rising trend, especially after Xi’s recent visit.

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Chinese President Xi also states his intention to strengthen trade relationship between the two countries during his visit. China is the UK’s second largest source of imports, right after Germany but ahead of United States, according to Quartz (Quartz). Investments on British real estate coming from China has been increasing over the past five years; in the meantime, the increase of Chinese tourists’ purchasing power boosts local economy in the U.K.. According to the Reuters, “the People’s Republic has picked London as the host city for its first foreign-issued, yuan-denominated bond” (Reuters). Additionally, wealthy Chinese individuals are sending their children to the UK for schools. Reportedly, every one out of seven students on a British University campus is Chinese.

On the other hand, many remain suspicious of this newly established close relationship between the UK and China. One of the arguments against this relationship maintains that China’s economy is at an unstable place right now and that its growth will not skyrocket like it used to in the past ten years. Chinese stock market’s recent crash has hit not only the U.K., but also the world’s confidence in Chinese economy. As a result, critics comment that the timing might not be a perfect one for the two countries to strengthen trading partnerships.

Secondly, the U.K. has been known to the rest of the world for its criticism on Chinese refrain of human rights, represented by Prime Minister David Cameron’s meeting with the Dalai Lama in 2012, which resulted in great diplomatic tension between the two countries. In September 2015, however, British Chancellor of the Exchequer, George Osborne indicated that the U.K. would no longer engage in “megaphone diplomacy” and will avoid its criticism on Chinese human right issues during his visit to China (Bloomberg). Unfortunately, the two countries’ difference in cultural values might still pose as a barrier before the two countries manage to pull each other closer.

http://www.bloomberg.com/news/articles/2015-10-18/u-k-in-economic-kowtow-to-xi-seeks-golden-era-of-china-trade

http://exportbritain.org.uk/market-snapshots/china.html

http://www.ibtimes.com/china-uk-trade-relations-despite-chinese-economic-slowdown-british-authorities-push-2146891

http://qz.com/526977/what-china-really-wants-from-the-uk-charted-private-education-bank-loans-and-real-estate/

http://blogs.reuters.com/breakingviews/2015/10/19/china-is-unreliable-new-best-friend-for-britain/

Want to Start a Business? Try an Alternate Path

Entrepreneurship is such a trending word it seems anyone can start his own business. But not everyone is lucky enough to obtain an entrepreneurial opportunity. The owner of Home Brite Cleaning Services, Siraj Mirza, is part of an alternate trend which people buys an existing business and makes smart modifications to help the business prosper.

Home Brite Cleaning Services is a professional cleaning services company started in 2009 that provides private home cleaning, pre move-in and pro move-out cleaning, office cleaning and post construction cleanup services. The owner of Home Brite, Siraj Mirza, currently in his mid-40s, used to be a banker working with foreign banks; he was laid off during the recession in 2008, leaving his wife, Tess Zaidi, under heavy financial pressure. After changing jobs for a few times, Mirza decided that he didn’t want the stress of managing credit portfolios anymore, so he purchased the national franchise and canceled original contract deals restricted to cleaning services in Beverly Hills and Studio City areas. Instead, Mirza and his wife created their own brand, Home Brite, and started serving personalized home cleaning services to multiple areas within LA County.

Mirza recalled that when the business first started out in 2009, sales kept going down for a year because of the downturn that entire U.S. economy was undergoing back then. “Life was very stressful in 2009, we had lost one of the properties we owned to foreclosure”, said Tess. Thanks to the recovery of overall U.S. economic conditions and Mirza’s hard work, Home Brite has been able to double its business sales every year since 2011. In addition, Home Brite improved its service quality, and it started its marketing campaign, as well. As a result, Home Brite is able to reach steadily growing annual sales of 200,000 dollars in 2014.

The most dominant change that Home Brite made to its business is personalizing its services. Mirza knows his customers very well in person and remains accessible to his customers through text messages and phone calls daily. For private home cleaning service requests, Home Brite is able to respond very quickly and arrange timely services for its customers. By maintaining its high quality of service, Home Brite is able to maintain its loyal customers while increasing the number of new customers. Another factor that helps Mirza with increasing sales is diversifying the projects his team works on. For example, he himself would work on smaller apartment cleaning, and his other team of 6 people would work on larger projects such as post construction cleaning for an entire house.

According to Home Brite owner Mirza, he refers the housing market and national unemployment rate as two broader economic data that impact his business. Since the service Home Brite provides is essentially a discretionary service, the demand for home cleaning services depend largely on people’s economic conditions. When unemployment rate is low, people can afford discretionary services; however, when unemployment rate rises, people are losing jobs and thus are less likely to afford discretionary expenses. Another factor Mirza concludes that affects his business is the housing market. A robust housing market creates more demand for house cleaning services, yet a weak economy reflects a low level of investment that results in less demand for services.

The biggest challenge Home Brite faces with currently is to find reliable employees due to the nature of service it provides. “It makes me nervous”, said Tess, “we have not experienced anything bad, but I always want them [the cleaning team] to be extremely careful with expensive items”. Indeed, many people who use cleaning services worry about the same trust issue. In order to maintain the loyalty of both its employees and customers, Home Brite owner Mirza says he would choose to grow the business at a controlled manner. He notes that he does not want employees who are “constantly not available or constantly changing jobs”; it is not the size of a cleaning team that matters but really the quality of its service that matters.

In general, the lowering of interest rates has allowed investments pour into construction, which creates more jobs in post construction cleaning for cleaning services such as Home Brite. “When more buildings are being built, it increases our sales”, said Mirza. One may think that access to capital is a requirement for starting a business, but for a smaller business like Home Brite, Mirza used his savings to finance the initial stages of the business. Once the business is up and running, there is little capital they had to acquire from banks.

The major competition for Home Brite comes from independent workers who are not registered with residential apartment buildings. Another competition comes from national cleaning franchises such as Merry Maids and Molly Maids, because these companies are capable of much stronger marketing campaigns, especially their powerful online presence. On the other hand, Home Brite holds its own advantages. Mirza and his team are flexible in time scheduling and they always respond quickly to customers. Besides, their services have no territory restrictions. “When I talk to people who used to use other larger maid service companies, customers have complained that they never answer the phone or response to text messages, and they keep changing the times”, says Tess. Although Home Brite has not been able to raise prices for the past 5 years, it has not yet had to offer discounts to attract customers either.

“We are currently bidding for a few larger projects over 100,000 dollars per job”, Mirza says. “We now show up as the No. 1 post construction cleaning team in LA County.”

Diversification of jobs has increased Home Brite’s competitiveness in the market. In the mean time, by maintaining good relationships with its current customers, Home Brite is taking the purchased franchise onto a fruitful path.

What Men’s Underwear Tells about Economy

Many know more or less about the lipstick index, or the hemline index that both indicate certain relationship between economics and female fashion trends. Has anyone ever wondered what men’s fashion have to do with the economics? The Men’s Underwear Index tells you everything about the hidden ties between the sales of men’s underwear and current economic conditions.

 

The revenue generated by men’s underwear usually stays stable because they are regarded as daily necessity instead of luxury items. However, when the economy faces a downturn, men’s underwear industry is likely to suffer from a “prolonged purchase”, according to Marshal Cohen, because male tend not to purchase new pairs of underwear until the economy gets better. As a result, men’s underwear industry is likely to witness a decrease in sales when economy is bad.

 

On the other hand, however, since men’s underwear companies have discovered the underlying connection between the Men’s Underwear Index (MUI) and the economics, they start to utilize predictions for men’s underwear sales as an indicator for economy conditions as a whole. In the early 2000s, men start to explore a world where their choices of underwear are no longer limited to basic black and white boxers, since companies started to make colorful and modern designs underwear with high-tech materials. These advancements signify a growing economy, which is reflected by increasing sales numbers during the time. Had the economy been growing at a stable rate, the estimated sales of men’s underwear would look like this:

MUI 1

 

However, as time approaches the year of 2008, the relatively stable men’s underwear industry has observed a phenomenon, which men are increasingly willing to purchase single pairs of underwear instead of multi-packs of underwear. During the recession, men’s underwear sales dropped by 2.3 percent; and it is not until in 2010 when sales began to slowly climb up again. This transition represents the change of men’s habits during times when smooth economic growth is challenged: they tend to purchase underwear only when they absolutely need to. Of course, there are men who still purchase underwear regular basis during times when economy is slowing down; but what the MUI indicates is a big picture from which people can tell the economic conditions according to increase/decrease in men’s underwear sales numbers.

MUI

Overall, the Men’s Underwear Index can be regarded as a reliable economic indicator, thanks to its stable sales behavior throughout the years. When an economic downturn arrives, men are less likely to shop for underwear on a frequent basis, therefore extending the purchasing cycle and lowering sales in the long run.

 

http://www.huffingtonpost.com/2012/10/09/underwear-sales-growth-economy_n_1952214.html

 

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/30/AR2009083002761.html?hpid=topnews

 

http://www.businessinsider.com/mens-underwear-index-economy-indicator-2014-9