IN July, Muddy Waters - a US-based short-seller - targeted New Oriental Education & Technology in an attack on New York-listed Chinese firms. New Oriental, China's largest private sector education and training company, saw its shares plummet from US$22 to US$9.50 in just one week.

Chairman and founder Yu Minhong fought back. In November, Muddy Waters backed off and New Oriental jumped to its highest price since July.

The provocation for the Muddy Waters raid was an investigation by the US Securities & Exchange Commission (SEC) into the company's change in accounting practices. New Oriental set up an internal investigative committee and was able to satisfy the SEC on all counts.

It is, in some ways, the story of Yu's life - always overcoming adversity. He failed in his first two attempts to get into college because of his poor English. Finally, in his third attempt, he was accepted by Peking University. Even there, he was put in a class for backward students, this time because his spoken Chinese was poor. With perseverance, Yu graduated and became a teacher at Peking University.

In his spare time, he used to teach students preparing for TOEFL (Test of English as a Foreign Language), mandatory for admission to US universities. That was considered to be against Peking University's norms, so he had to leave in disgrace. But his TOEFL training continued.

Today, New Oriental has grown into the biggest private sector firm in China's education sector. According to the company's recent annual report, the empire includes 55 schools, 609 learning centers and 32 bookstores. Yu has a personal net worth of US$1.05 billion, according to the Forbes Billionaires List 2012.

The 50-year-old Yu is not about to rest on his laurels. His new dream is to start a private college for the liberal arts. Liberal arts are very necessary to provide the balance in life for every person, he tells China Knowledge@Wharton in this interview.

An edited transcript follows.

Q: What is the vision for your new school?

A: Independent personality and free thinking. I prefer to adopt the European-American style of running a university to help students develop freely their interests and capabilities. This will not be a university for general subjects; it will be a small liberal arts college, which focuses on cultivating humanism and the scientific spirit in its students.

Q: What do you mean by humanism and how will you cultivate it?

A: To me humanism means understanding the perceptions of other people and the world.

I am an advocate of liberal education. The required courses during the first two years in my college will cover arts, philosophy, sociology, economics, math and all kinds of basic subjects.

Does an engineering student need to learn the history of art? Yes he does, not as something to make a career, but to cultivate his taste and perception of the arts and his aesthetic senses. Does a literature major need to learn logic and statistics? Very much so. A rigorous training in logical thinking is of vital importance for future development.

Q: What are the problems in China's higher education system today?

A: Chinese universities focus too much on examinations. They have done very little to develop research ability and independent learning.

Look at what our children are doing today in college. It takes only two weeks at the end of the semester for them to prepare for exams. They get a passing grade and the semester is over. But what have they really learned?

Q: Where will you get the faculty?

A: This should not be difficult. We will first decide the disciplines. Then, we will recruit the best faculty from all over the world. We will offer them the best salaries and kindle their interest in our educational concepts.

Q: Humanities are not mainstream in today's workplace. Are you concerned about the availability of jobs when your students graduate?

A: Not at all. Lawyers and economists are very popular and get high salaries. Mo Yan has just won the Nobel Prize for literature. Around half the graduates in the US are from the liberal arts. You don't hear that they are starving.

I always think that if a country does not have an excellent civil service system and outstanding humanist talent, there will be no hope for the country's future. There is high correspondence between the level of humanist studies and the cultural inheritance of the country.

Q: How will you address the financing issues of your school?

A: The first round will come from my own funding. I would like to donate money to build the school. But this money will not last for 100 years.

So there is need to build a donation mechanism for my entrepreneurial friends. The well-known private universities in the US all rely on a social donation mechanism. China has to create such a mechanism.

Q: I hear that your school will mainly recruit students from rural China?

A: Rural kids are the major targets of our school, but not the only targets. Some 50 percent may be from rich families and 50 percent from the poor families of rural China.

Q: The wealth gap between the rich and the poor is expanding rapidly in China. It is also becoming more difficult for college graduates to find a job. What role do you think higher education can play in this?

A: There is a fatal belief today that education is useless. Because some university graduates can't find jobs in cities and go back to rural areas, some short-sighted parents think higher education is useless. I believe that though some graduates are temporarily jobless, the future potential is much higher for those who have attended college.

Q: Many students with doctoral degrees can't find jobs either.

A: This is another issue.

If you have a clear goal, your doctoral degree will be of value. If your motive is to find a better job, you will be disappointed. Knowledge acquired has to match what you want to do. I am concerned that many people learn a lot but have no idea how to use the learning.

Adapted from China Knowledge@Wharton, http://www.knowledgeatwharton.com.cn. To read the original, please visit: http://www.knowledgeatwharton.com.cn/index.cfm?fa=article&articleid=2710