Chinese Higher Education Research Funding Regulatory Mechanism

Benefiting from the reform of the economic system and the education system,China universities and colleges have been expanding continuously, offering higherlevels of education and innovating new ways of learning and teaching, China’s highereducation has being experienced a considerable growth. This growth is inseparablefrom the strong financial support. Particularly since1999, China universities havestarted a new round of expansions nation-wide, so the demand for more funds hasbeen presented a blowout increasing. Currently amount of funding for highereducation is huge and from a wide range of sources, which determines the necessityand complexity of its management, this has been calling for an effective supervisionmechanism of higher education funding in order to ensure the rational use of funds.However, there are many problems in managing higher education funds. On theone hand, problem in using the funds keeps happening. A lot of universities andcolleges had a blind expansion, a bloated management, serious waste etc. On theother hand, the education system should be in the top of the "altar", but the trend ofincreasing corruption in the higher education system is alarming. Therefore, we muststrengthen supervision of higher education funding and regulation of higher educationfunding for rational use."Long-term Education Reform and Development Plan (2010-2020)" emphasesthe importance of strengthening education fund management and points the rightdirection for fund regulation, but the existing regulatory mechanisms highereducation funding is not perfect. External supervision of the fund is based on randomand occasional audit; internal controls on the fund is weak lacking strong internalcontrol mechanisms; public supervision of the fund goes nowhere because of thepresence of asymmetric information. Therefore, building a sound financial regulatorymechanisms can help to achieve rational use of education funding.Based on this background, this article examined higher education fundingregulatory mechanisms from prospects of financial theory and practice. First, higher education funding is qualitative based on theory of public goods, then governmentfunding for higher education is justified using external theory. Next, the reasons forsupervision of higher education funding are explained according to "principal-agent"theory. Finally, the clear goals of regulating higher education funding are establishedvia principles for fair and efficiency theory.From practical perspective, this paper mainly analyzes three areas related tohigher education funding supervision-funds operation, regulators and theinternational practice. First, it reveals many problems in fund operation, fundingsources and expenditures and operating performance based on empirical data.Secondly, It systematically examines and snapshots current situation of China highereducation funding supervision in areas of policy, system and result. Following this, itintroduces the related regulatory experience the United States, Britain and Canada.After thorough study of funds operation, fund regulatory and international experience,this paper introduces the normative standard for Chinese higher education fundingregulatory mechanisms. Accordingly recommendations are given to improve theregulatory mechanism of Chinese higher education funding.