Establishing International Schools in China: Part 2 – A Deeper Dive

This is part two of my four part series on establishing an international school in China. As I mentioned in Thursday’s part one post about establishing a school in China, it is important for both the foreign and the local party to know the relevant current regulations before early in the process. The first step to determining what regulations are relevant is to determine the type of school each party is actually intending to establish. This is most easily accomplished by understanding each type of school the Ministry of Education allows and then reviewing the guidelines for that particular type of school.

Schools for Children of Foreign Workers. In 1995, the Ministry of Education (MoE) published Interim Measures for the Schools for the Children of Foreign Workers (中华人民共和国国家教育委员会关于开办外籍人员子女学校的暂行管理办法). There are currently over 120 schools of this type in China, with the majority of them in Beijing and Shanghai. Though some foreigners send their children to Chinese local public schools (one of our Beijing lawyers does that), most do not. The Chinese government long ago recognized that good schools for foreigners is good for foreign investment into China (FDI). In Schools for the Children of Foreign Workers, foreign students typically receive an education very similar to what they would receive in their home country. Most of these schools contain “International School” in their name,

The MoE made an allowance for this type of school to be completely under foreign control. MoE review of the curriculum at these schools is not required, and both its governing board and legal representative can be foreigners. These schools, however, cannot be religious in nature and no Chinese students are allowed to attend them. Once property developers understand the “no Chinese student” restriction, they often are not as interested in establishing this type of school. Why would their wealthy Chinese customers want to buy a high-end apartment only to have to watch foreign children go every day to a top school that their own children are forbidden to attend?

The following is a brief overview of issues to consider when establishing a School for the Children of Foreign Workers:

• The school must be only for early childhood, primary and secondary education. Post-secondary (university level, technical training school, etc.) education is not permitted.

• The school must have a China legal entity sponsor its establishment. This entity can be a  Wholly Foreign Owned Entity (WFOE) or a Joint Venture (JV) whose purpose is to start and operate a school. Our China lawyers have established numerous WFOEs for this purpose, and it should be noted that the requirements on WFOE type, business scope and name substantially differ from standard WFOEs. More than once, lengthy negotiation was required between the local SAIC and Education Bureau to secure approval for a WFOE with the Chinese characters for education (教育) in its WFOE name.

• Local Education Bureaus differ in the amount of registered capital required, but it is often a minimum of USD$1,000,000.

• The sponsoring company appoints the first school director and governing board. This fact is often critical in determining whether to go into this sort of venture as a WFOE or a JV.

• Once established, a School for the Children of Foreign Workers is an independent legal entity, owned by itself (as non-profits are) and governed by its board. All money received by the school must be used by the school, and therefore cannot be remitted as profit to investors, of which there are none. It follows, then, that there are no investment shares possible in this type of school, a fact that often also scares off would be powerful Chinese investors or government officials looking to cash in on their influence and connections.

• As mentioned earlier, only non-PRC students are allowed to attend these schools. Note that the regulation carefully uses the term commonly used for non-PRC citizens,外籍人, rather than the term for “foreigner,” 外国人. The effect of this is that students from Taiwan, Macau and Hong Kong families can also attend a School for the Children of Foreign Workers.

• From 1995 – 2012, all School for the Children of Foreign Workers applications had to be approved by the National Ministry of Education in Beijing. From 2013 onward, each provincial Education Bureau has had approval authority for these types of schools, which, due to a lack of clear procedures existing at the provincial level, has only further complicated application efforts.

In my next post, I will look at the remaining two options for establishing an international school in China.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.