Universities ‘sharing burden’ after Hong Kong claws back reserves

Hong Kong’s universities will need to be flexible with their “substantial reserves” after being asked to return some to the government, experts have said. 

In the city’s latest budget, the Hong Kong government cut higher education spending by two per cent over the next three years.

Additionally, Hong Kong’s eight public universities are expected to return HKD$4 billion (£407 million) from their General and Development Reserve Fund (GDRF) to the government on a one-off basis in the 2025-26 financial year.

The GDRF is the unspent money remaining from the cash given to universities by the University Grants Commission (UGC) each year. 

According to the UGC, Hong Kong’s universities had a collective total of HKD$11.1 billion in this pot as of 30 June 2024.

Universities are allowed to retain unspent grants as a “buffer against variations in cash flow requirements,” the funding body said. The University of Hong Kong’s (HKU) financial statements show it had HKD$2.3 billion in this fund last year. 

At the end of the funding triennium – Hong Kong is currently in the first year of the 2025-28 period – universities are only allowed to hold on to a maximum of 20 per cent of their grants from the UGC. Anything unspent beyond this would have to be returned to the UGC. 

While unexpected, the government’s decision to ask for this money back sooner does not appear to be a huge cause for concern for the city’s universities. 

In public statements released shortly after the budget speech, most university leaders were accepting of the budget cuts.

Dennis Lo, president of the Chinese University of Hong Kong (CUHK), said the institution “understands the pressures currently facing public finances and we recognise the need for all sectors to work together while navigating these challenging times”.

“The university will carefully study the potential impacts of the budget measures on its operations and hopes to minimise any effects on teaching, research and other areas.”

Their positive attitude may be down to the healthy reserves most universities hold on top of the GDRF. According to analysis by the South China Morning Post, the total financial reserves of Hong Kong’s eight public universities amounted to nearly HK$140 billion last year. The University of Hong Kong topped the list with about HK$41.5 billion in reserves, the publication found. 

“Any budget cuts will inevitably have some impact on us,” said Alan Cheung, professor in the department of educational administration and policy at CUHK. “Fortunately, all eight publicly funded universities have substantial reserves.

“I believe that we, as higher education institutions, have a responsibility to stand in solidarity with society and share the burden of navigating these challenging times,” he continued. 

“While it is true that universities have already earmarked their reserves for other purposes, I hope there is some flexibility in reallocating these reserves to address immediate needs during these tough times.”

In general, Hong Kong’s universities are perceived to have been very generously funded in recent years and have mostly been immune from the negative financial impact of the Covid-19 pandemic. 

“Since the pandemic, the universities have been the only bright spot in Hong Kong,” said Gerard Postiglione, professor emeritus in HKU’s faculty of education. “It is not a punishment for being the most outstanding sector in Hong Kong; rather it is a responsibility to take the lead in Hong Kong’s economic renovation by making such a sacrifice.”

Universities can manage their finances by gradually increasing other income streams, such as tuition fees and research funding from businesses, said Joshua Ka-ho Mok, provost and vice president of the Hang Seng University of Hong Kong.

However, Cheung warned, “If funding continues to be reduced, it could have a significant impact on our competitiveness in the long run.”

helen.packer@timeshighereducation.com