The profit-making business operations of so-called “people-run non-enterprise units” (民办非营利企业, which in practice has long referred to private service providers) have long been questioned by the public. One of the main reasons is that private schools make up a large proportion of such people-run non-enterprise units. On the one hand, the state requires that private schools be registered as “non-profit people-run non-enterprise units”. On the other hand, in accordance with Article 51 of Law of the People’s Republic of China on the Promotion of Privately-Run Schools, the fund providers may obtain a reasonable amount of requital from the cash surplus of the school. This, in practice, enables private schools to make profits.
This contradiction has now been rectified however, and the new law will be put into practice on September 1st 2017. Article 51 has been deleted, meaning that China will start to conduct classified management of non-profit and profit-making training institutions. When it comes to existing private schools, those that still choose to be non-profit-making will continue to be registered with the administrative department for industry and commerce, and will be defined as social service organizations in line with the Charity Law of the People’s Republic of China. Schools that continue to be profit-making, on the other hand, shall re-register as profit-making non-public training institutions for companies and enterprises.
As for newly established private schools, the law also states that fund providers can choose whether to make the school non-profit-making or profit-making at will. However, and this is a crucial point, profit-making private schools are not allowed to provide China’s nine-years of compulsory education.
Zhu Zhiwen, Vice Minister of Education, has explained why profit-making private schools will be banned from providing compulsory education as follows: compulsory education reflects the national will. It is a basic public service provided by the state as well as a citizen’s obligation. The definition and properties of compulsory education determine that profit-making private schools should not be running it. Otherwise the implementation and balanced development of compulsory education may be affected, and may even put more pressure on the general public.