Push and Pull:

Why Do Chinese Students Return to China After Earning an Undergraduate Degree in the United States?

By Shayleen Reynolds

 

Do international Chinese students in U.S. colleges return home after they graduate by force or by choice? According to The Educational Exchange Data Open Doors 2015 Report, Chinese student enrollment in U.S. universities has increased by 95% over the past 35 years, and has more recently experienced a percent change increase of 21.4% from 2014-2015. The U.S. remains the leading destination for Chinese students studying abroad, however data from the National Bureau of Labor Statistics of China indicates that Chinese students are returning to China to pursue their careers in greater numbers than before. The return rate of Chinese students has increased an average of 22% per year since China entered the World Trade Organization in 2001. China’s economic growth and political changes were followed by an increase in returning international students, also known as returnees.In 2013, 505,563 international Chinese students enrolled in U.S. universities.  That same year 353,500 Chinese students left the U.S. and returned to China after earning their undergraduate degree. This study employs a “push-pull” analysis, determining what factors motivate Chinese students to return to their home country, while taking into account both factors that “push” Chinese students out of the U.S. and the factors that “pull” them back to China after earning their degree.

International students represent a potentially valuable source of educated labor. According to the 2015 Open Doors Report, Chinese students in U.S. colleges contributed a total of $9.8 billion to the U.S. economy (with international students contributing a total of $24 billion), and 42% of those students were studying within STEM fields. According to the Observatory on Borderless Higher Education, foreign STEM students are recognized as job-creators. Investment in STEM disciplines is increasingly seen in the U.S. as means to boost innovation. According to The U.S. National Bureau of Labor, the last decade has seen considerable concern regarding a shortage of STEM workers to meet the demands of the U.S. labor market. A 2011 report by the American Enterprise Institute and the Partnership for a New American Economy indicated that every foreign-born worker in the U.S. with a STEM degree creates an average 2.6 extra jobs for native-born workers. The U.S. Department of Commerce 2014 Report finds that as more foreign students in the U.S. return to their country of origin after earning a U.S. college degree, the U.S. economy suffers from a loss of potential human capital, also known as “ reverse brain drain”, or the reverse migration of human capital.

Zweig et al. (2006) supports the hypothesis that the return rate of Chinese students is sensitive to expected future wages, government incentives, employment rates, returns on education, U.S. visa policies and political stability. There is evidence that government rewards and economic opportunities incentivize Chinese students to return. A survey conducted in 2008 by Harvard Law School, Duke University’s School of Engineering, and U.C. Berkeley’s School of Information showed that 54% of Chinese students “would stay in the U.S. a few years after graduation if given a choice, but intend to return to China eventually.” The study concluded that the majority of these students would prefer to remain in the U.S. temporarily after graduating rather than permanently.

As Chinese students continued to migrate and establish careers overseas, China began to suffer from economic strain induced by a decrease in the stock of human capital, also referred as “brain drain”. To reverse the effects of this phenomena, the Chinese government established policies to alter  the state of their political, social, and work environments. Kuptsch and Fong (2006) conducted a survey and found that the majority of Chinese students who earned a bachelor’s degree in the U.S. believed there were greater opportunities to pursue their careers China. When asked specifically why they would return to China, 58% chose China’s rapid economic development and 42% believed they had “a good opportunity to develop new technologies in China.” Furthermore, 32% of the respondents said that it was “hard to find good opportunities overseas.” 31% believe they are subject to a glass ceiling overseas, and 19% chose an increase in political stability in China as the rationale for their return.

Docquier and Rapoport (2012) found that China’s openness to trade and investment in the early 2000’s led to rapid transformation and development. Globalization played a significant role in Chinese students’ international mobility. Research shows the significant influence of multinational enterprises and foreign direct investment within China’s labor market. Loosened policies within the labor market and increased political stability made China a much more inviting location for students who had gone overseas. With the opening of China’s markets came an increase in economic freedom and an abundance of new jobs.  According to the Heritage Foundation 2016 Economic Freedom Index Report, once all trading nations were given equal access to Chinese markets in 1978, labor, capital, and goods moved more freely throughout China’s economy than in previous years. The Economic Freedom Index is based on  10 quantitative and qualitative factors, grouped into four broad categories of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); Open Markets (trade freedom, investment freedom, financial freedom). The categories are graded on a scale of 1-100, and the overall score is derived by averaging all ten categories with equal weight being given to each.

China’s global economic prominence fueled demand for foreign technology. The opportunities that China has to offer returnees influences their decisions to repatriate. China’s marketplace now offers incentives to encourage returnee entrepreneurs to transfer technology, and especially technologies that can be commercialized. Zweig and Rosenberg (2006) proposed two models to explain the mobility of international Chinese students and found that the majority of these students go abroad to accumulate human capital.  In evaluating whether returnees possess transnational capital (an increase in value after acquiring knowledge overseas), Zweig and Rosenberg sought to determine if these returnees actually have greater capabilities than domestic citizens, if they are making greater contributions to China’s economic development, and if they are being rewarded more than people who did not go overseas. Their research depicts all of the above to be true. Overseas students have somehow accumulated important knowledge “that is critical for building a rich and powerful China.” Kuptsch and Fong (2006) surveyed business owners in China to compare employees’ productivity rates according to whether they received higher education or training at an international institution or a domestic institution. Their research concluded that Chinese employees who went abroad and returned had a higher productivity rate than locally educated citizens. Therefore, returning international students have a comparative advantage over locally educated Chinese citizens in the domestic labor market, because they can provide highly demanded international technology and skills.

In this study, a time-series double log OLS model was regressed using twenty-five observations to study the effect of both push and pull factors on international students returning to China after earning a U.S. college degree. Annual data was obtained for the years 1978-2013 (n=25). The dependent variable is the annual number of returning Chinese students with a bachelor's degree from a U.S university. Within the model, the U.S. unemployment acts as a push variable; increases in unemployment in the U.S. “push” Chinese students out of the U.S. and encourages them to return to China.  China’s investment in R&D, high-technology exports, and the Index of Economic Freedom are considered “pull” factors within the model, since increases in each “pull” Chinese students back to China after earning their degree in a U.S. university.

To measure these hypothesized effects, this study utilizes four economic indicators as independent variables. The first variable is the U.S. unemployment rate of people ages 20-24 with a bachelor’s degree from a U.S. college. An increase in unemployment was found to motivate Chinese students to return to China after graduating from a U.S. university. According to a study conducted by the Federal Reserve Bank of St. Louis, unemployment for college graduates between the ages of 20 and 24 with a bachelor's degree reached its lowest point at 4.3% in the year 2000 and spiked from 2001-2003. From 2004-2008 unemployment decreased and levels remained relatively low. However, from 2008 to 2012 unemployment skyrocketed and remained high for the next few years. It is during this time period that Chinese students began to return to China at exponential rates after earning their bachelor's degree in the U.S. The effects of the unemployment levels are reflected in both Chinese student enrolment in U.S. universities and the return rate. As the pool of available professional opportunities expanded, and working conditions significantly improved in China, the U.S. was simultaneously experiencing economic decline due to the recession in the early 2000’s.

The second independent variable is China’s government expenditures on research and development as measured as a percent of GDP, obtained from the World Bank Database. Since there is a time lag between spending on R&D and its returns, China’s government expenditure on R&D was lagged in the model. Acting as a “pull” variable, increases in government funding for scientific research and development lead to greater return rates among Chinese graduates. An increase in China’s R&D expenditures generates employment, signifies technological advancement, and spurs innovation.

The third variable, obtained from the Federal Reserve Bank of St. Louis, is the amount of China’s high-technology exports, as measured in millions of U.S. dollars. This variable represents a “pull” factor, since an increase in technological exports would “pull” these students’ back to China. Increases in China’s high-technology exports represent job creation in the domestic market, economic growth, and strengthened international relations.

The fourth variable is China’s index of economic freedom. Prior to the 2000’s, China severely lagged behind the world’s average Index of Economic freedom. Specifically, in the early 2000’s China’s official weighted Index of Economic Freedom spiked alongside the exponential growth of Chinese returnees and continued to level out with the world's average Index in 2006/2007 and remained steady the years following. Therefore, an increase in China’s Index of Economic Freedom is indicative of a greater number of Chinese students returning after earning a U.S. bachelor's degree.

All four independent variables were significant at the 1% level.  This results of the analysis presented in this paper support the initial hypothesis that, on average, U.S. unemployment for those with a BA degree or higher, increases in China’s high technology exports, economic freedom, and government expenditures on research and development impact Chinese students’ decisions to return to China after earning a degree in a U.S. university. The adjusted r-squared was .9701, indicating that the model explains 97% of the variation in students’ decisions to return to China after graduating from American colleges.

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The results indicate that, on average, for every 1% increase in the college graduate unemployment rate in the U.S., there is a .8% increase in returning Chinese international students. This finding suggests that the return rate is highly dependent on job availability.  If Chinese students were faced greater difficulties finding jobs in the U.S., they were more likely to return to China. In other words, increases in U.S. unemployment “push” Chinese students out of the U.S. The model also indicates that on average, with every 1% increase in China’s expenditures on R&D, there is a 3% increase in the number of Chinese students returning to China. The government's allocation of additional funds for technological and scientific research encourages Chinese students to return home. Improving technology in China creates higher incomes for college graduates and increases their returns to education relative to the United States. Increases in expenditure on research and development create opportunities for employment and career growth, specifically within the STEM industries. With every 1% change in China’s high technology exports, there is a 1.12% increase in returning Chinese students. Overall, an increase in high tech exports positively affects job growth in China’s labor market. Finally, the model shows that with every 1% increase in China’s Index of Economic Freedom, an additional 7% of Chinese students return to China after earning their degree in the U.S.

An extension of this research could measure the impact of U.S. immigration and visa policies on the return rates of Chinese students. Immigration policies in the U.S have made it difficult for international Chinese students to pursue a career after graduation given the minimal amount of H-1B visas issued, as compared to the amount of F1 visas issued. The H-1B visa allows U.S. companies to employ foreign workers (recent graduates) in speciality occupations that require expertise in specialized fields, and the F1 visa allows international students to pursue academic studies at a U.S. university. According to the U.S. Census Bureau of International Migration, the U.S. issues an average of 8 times more F1 visas to Chinese internationals than H-1B.

What impacted these students’ decisions more? Economic growth and labor market indicators in both the U.S. and China influence Chinese international students’ decisions to return to China. Upon the availability of data to measure the return rate of all U.S. international students, a “push-pull” analysis similar to this study could be employed to do so. According to the U.S Census Bureau of International Migration, in 2014, 65,000 H-1B visas were issued to U.S. college graduates. However, U.S. Citizen and Immigration services stopped accepting applications on April 7th , 2014, after receiving 172,500 applications within the first week; therefore more than 107,500 internationals who earned degrees in the U.S. and applied for their work visa were denied of their request to stay and were forced to return to their country of origin.

The data shows that the demand for the H-1B visa is higher than the supply. A 2009 study by Harvard University Law School states that greater job expectations, more lenient visa policy, and increases in job availability in the U.S. could all prove to be attractive to recent Chinese graduates from U.S. universities. Creating incentives, such as adding  programs to encourage foreign immigrant career growth, especially in the areas of science and technology, could go a long way toward securing international Chinese undergrads who want to stay in the U.S. to pursue a career. On the contrary, if international students in the U.S. are incentivized to return to their home countries after graduation, gains from their increased productivity and innovations will accrue to their country of origin rather than to the U.S., where their advanced skills and knowledge were further developed. If U.S. immigration policies are driving valuable human capital back to China, cooperation between the U.S. government and the U.S. private sector could help to avoid this loss. Therefore, policy makers are faced with a dilemma: should they loosen visa policy to improve the U.S. economy, or maintain a stricter policy to provide higher employment for our native-born citizens?


CONTACT SHAYLEEN REYNOLDS

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Shayleen Reynolds is an economics major and a statistics minor here at Pace University. Shayleen has been interning and enhancing her professional work experience throughout all four years at Pace University. While she is not working, has been actively participating in multiple independent and academic research projects. As a former intern at the Smithsonian Institute, she has been awarded a $5,000 scholarship to conduct an internal case study of the Institute with a Pace University Economics Professor which she is actively working on. Shayleen also presented her undergraduate economic research at the 11th Annual Economic Scholars’ Program at the Federal Reserve Bank of Dallas and the Dyson College of Arts and Sciences at Pace University Society of Fellows. She is glad to share her experience with fellow researchers and readers and strives to continue to grow and excel in future career endeavors.

 

Email: shayleendeannereynolds@gmail.com


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