The proposal bans foreign institutions and individuals, representative offices of foreign institutions in China, foreign investment enterprises and cooperative schools of China and another country from engaging in any form of intermediary agency activity which provide educational exchange services in China.

The new regulation would require agencies to set up an emergency fund of at least US$80,100

The draft will also require agencies to set up an emergency fund of at least US$80,100 so that fees can be refunded if things go wrong.

The government says the new rules aim to crackdown on bogus operations that forge application materials or cheat clients out of money. Just this summer authorities in New Zealand uncovered 279 cases of fraudulent student visa applications from Beijing.

But the government considers foreign-based agents the most difficult to regulate.

“If the companies are located on the Chinese mainland, students and parents can easily visit the companies to see the qualifications and environment, getting a feel for the company,” an unnamed staff member of an education agent based in Beijing told Xinhua.

“However, if the companies are located overseas, it is not easy to judge their qualifications by looking at their websites and other non-face-to-face means of communication.”

The reaction from agents has not be positive. “I think the ministry is simply cutting foreign agencies out without good reason,” Chen Naibo, who works for an intermediary agency based in the US, told China Daily.

“If foreign agencies can forge materials or cheat clients out of money, domestic agencies can do so too.”

Many agencies believe the contingency fund would be virtually useless considering they have thousands of customers a year and charge each client around US$8,000.

Shao Mingbo, whose son has been studying in the US, said the proposed ban surprised him.

“The regulation fails to take account of the fact that applying to a university in the US is extraordinarily complicated. It’s quite different to applying to one in China.”

“Foreign intermediary agencies offer many professional services to their customers, and banning them in China will heavily disadvantage students here.”

Chinese students studying abroad account for 14% of the international student population worldwide. Last year 339,700 students studied overseas and that number is expected to reach 400,000 this year.