This study reflects a theoretical innovation in China’s higher education investment and school operation systems. It explores system transformation in Sino-foreign joint education endeavors, including how China should introduce international education capital into Chinese higher education. According to a theory of institutional transformation that recognizes supply and demand in both domestic and international education markets, this paper reviews the history of joint educational ventures in China and their influence on China’s higher education systems. Furthermore, from the perspective of institutional arrangement and through the cross-application of modes of institutional transformation, the paper identifies government responsibilities in pursuing mandatory change and offers suggestions for the demand side in induced change.

Keywords: Education investment in China, new institutional economics, system innovation, Sino-foreign cooperation in education.