The government is likely to set a capped "rational return" rate of 10 percent for private investors injecting funds into education, which has been officially proclaimed a non-profit sector, according to educational policy makers.

Sun Xiaobing, a senior official with the Ministry of Education, said other detailed financing and accounting requirements are still under discussion in a bid to ensure the healthy development of private investment in education.

"All of the detailed requirements are designed to make enforcement of the Private Education Promotion Law more functional," said Sun at a workshop on education sponsored by the Ford Foundation on Friday.

The law, passed by the National People's Congress (NPC) last November, will take effect on September 1. But the enforcement measures, said Sun, will not take shape by that time.

Many private investors and economists are firmly against the capped return rate.

Mao Yushi, a renowned economist with the Beijing-based Union rule Economic Research Institute, said market forces can play an efficient role in the endeavor.

"I firmly believe massive profit cannot be gained in China's education sector so far and therefore capping rates is unnecessary," said Mao, adding the government's role in the market economy is to ensure that poor children can obtain basic education.

Chinese Academy of Social Sciences researcher Lin Yueqin urged that the enforcement measures would ensure equality between non-State schools and those funded by the government, in order to attract more private investment to education, where demand still exceeds supply.

China, with its 1.3 billion populations, urgently needs non-governmental funding to help develop its voluntary education sector, said Lin.

NPC education legislator Hou Xiaojuan said the rate setting was in line with China's Education Law, which stipulates that the education sector is based on the welfare of the public and cannot be allowed to seek profits.

"But as far as attracting private investment, we allow investors to gain some rational return," said Hou.

According to Chinese law and regulations, the characteristics of schools organized by private investors are between non-profit public welfare organizations and profit companies, said Hou.

"'We allow them a capped rational return rate of 10 per cent, which is the average minimum profit rate of common companies," said Hou.

Lin Haibiao, owner of two primary schools in Shanghai, said the government should focus its energy on how to help improve and supervise qualifications for the private schools, and not worry about their financial and accounting systems.

"In my personal view, the government is interfering and not helping," said Lin. He added that during his four years of experience in investing in education, no local education officials have discussed any measures with him to improve education quality, but are more eager to discuss the financial situation of his schools.

(China Daily August 25, 2003)