A new law which took effect in September is generating a wave of investor interest in China’s higher education sector. The law, enacted by China’s Standing Committee of the National People’s Congress last November, lets universities and high-schools establish themselves as for-profits for the first time. All providers operating in the K-9 space must continue to remain non-profit. This is the last major sector of China’s economy to be commercialised, following close on the heels of the health sector overhaul.

Like every other country in the world, China is struggling to close skills gaps in the labor market and to equip youth with the knowledge they need to thrive in a global economy. Demand for higher education outstrips supply. China’s public universities are already heavily-subsidised and the government has limited room to grow public spending. The new law is aimed at attracting private investment neededto expand access to relevant skills and training. With their close links to industry, many private universities are more responsive to labor market evolutions and have skills-based curriculums.

The opportunity for growth is vast. Today, China’s private tertiary education industry is small, underinvested, and fragmented. Overall higher education spending is about $149bn, about $135bn of which is financed by the public purse, and the remainder from the private sector. Some 29m Chinese are enrolled in some form of higher education, of which only about 6.3m are enrolled in private universities, a number expected to hit 8m by 2021, according to a Frost and Sullivan report.