Retailers Fret As Chinese Students Cool on U.S. Schools

    The recent drop in Chinese international tourists and students is causing many U.S. universities and retailers to get creative in how to manage this loss.
    The number of Chinese students who see the U.S. as their top choice to study abroad has dropped to 43 percent — down from 49 percent two years ago. Photo: Shutterstock
      Published   in Retail

    The ongoing U.S.-China trade dispute is claiming more victims in the form of U.S. universities and retailers who have, in recent years, come to depend on big-spending Chinese international tourists and students. As of the 2017-2018 academic year, U.S. universities had more than 360,000 Chinese international students, a demographic that contributed an estimated $13.9 billion to the U.S. economy.

    The buying power of Chinese students has been very keenly noticed for years in places like Los Angeles — where Chinese students are actively courted on- and offline. But it’s perhaps even more crucial elsewhere. According to Quartz, “certain states rely on China for students much more than others. In July 2018, forty-two percent of international students in Vermont were from China, followed by 40% for both Wisconsin and Oregon.”

    As Sixth Tone recently noted, it’s likely that universities in these states will see these numbers dwindle in semesters to come if the dispute continues. This June, China’s Ministry of Education “warned its students and scholars planning to study in the U.S. about unexplained delays or outright rejections during the visa application process,” and recent rejections and deportations of Chinese students in the U.S. have been highly publicized in the Chinese press.

    There are signs that these stories, along with regular coverage of mass shootings and violence, are causing America as an aspirational destination for university study to take a hit in China. A survey earlier this year indicated that the number of Chinese students who see the U.S. as their top choice to study abroad has dropped to 43 percent — down from 49 percent two years ago.

    This is bad news for universities, which spend heavily on international recruitment efforts to increase tuition revenue and make up for fewer domestic applicants. To combat any decrease in Chinese student enrollments, one university took a creative approach. Two years ago, according to NBC, the University of Illinois’s Gies College of Business and its Grainger College of Engineering “took out an insurance policy... to protect the schools from a possible drop in revenue from Chinese students.”

    The three-year policy — believed to be the first of its kind — is creatively structured, NBC notes: “The colleges together pay $424,000 a year in premiums. It’s triggered if the two schools have a combined revenue decline of at least 18.5% from a loss in Chinese students. The payout is proportional to the decline — so if there is a 20% decline in Chinese-student revenue, the insurance payout would be about $12 million. If the numbers fall by half, the payout is about $30 million.”

    As Jeffrey Brown, the dean of the Gies College of Business, said, “It’s given every school a bit of a wake-up call that the flow of students from China is not something we should take for granted or should count on.”

    It remains to be seen whether other schools will follow suit — particularly those that depend the most on Chinese students. For those outside of academia, the unfortunate reality is that they’ll be unable to have similar policies for a drop in customers. This means it’ll be even more important for brands to beef up their digital marketing efforts both to existing and prospective Chinese international students in the U.S.

    This means the timing couldn’t be more perfect for recent shows like “Over the Sea I Come to You,” which follows the lives of several parents who accompany their teenage children to attend college in the U.S. The show has already racked up numerous brand integrations from the likes of Coca-Cola and GE, but it’s feasible that we may see more U.S.-centric brands and retailers look to infuse themselves in this type of show and keep themselves top-of-mind for Chinese consumer if the U.S.-China trade dispute lingers on and impacts student and tourist arrivals for another quarter.

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