China’s education technology revolution
Country's private education market, especially English language training, is booming
China’s private education market is already large (US$260 billion) and growing at 9% annually. From live tuition in learning centres in the heart of urban shopping malls to personalized tutoring on mobile devices during their train commutes, Chinese consumers are becoming true lifestyle learners. Ubiquitous access to quality education and upskilling opportunities is a key consideration in where families and young professionals choose to work and live.
The numbers reflect this – the education technology investment bank, IBIS Capital, estimates that online tutoring will be utilized by over 30% of Chinese in education (versus 10% now) – rising 20 times to US$150 billion by 2030. The penetration of English language training currently only represents 2.5% of the Chinese population and is set to double in the next 10 years. Likewise, the Chinese vocational training market is set to triple in size to a US$300 billion market.
The most successful players capitalizing on these trends are reaching urban Chinese learners via a sophisticated omnichannel distribution strategy combining a dense retail presence of learning urban centres with cutting-edge digital delivery.
This is the case of TAL Education Group, a Chinese education and technology enterprise, that operates a dense network of more than 600 urban tutoring centres (versus less than 100 in 2010), including more than 130 in Beijing alone. It also operates Peiyou online, a digital platform that delivers online tuition and captures data about students’ level of understanding by using facial and voice recognition technologies.
The New Oriental Education and Technology Group has adopted a similar strategy with the same success, recently spinning off its digital tutoring platform Koolearn Technology on the Hong Hong stock exchange in 2019 with a market cap in excess of US$2 billion.
Both TAL and New Oriental are listed on the NYSE with market capitalization that have grown to US$25 billion and US$20 billion, respectively, representing a ten-fold and six-fold increase in just 5 years!
These stock market success stories and the insatiable appetite of the urban Chinese consumers for education are becoming increasingly attractive to international investment. TAL and New Oriental count hundreds of international institutional investors among their shareholder base and have paved the way for a flurry of Chinese education companies going public on the US stock exchange, the most recent being Youdao and GSX.
In fact, there are now more Chinese education companies listed on Nasdaq and NYSE than any other countries in the world, the US included. This signals China’s growing soft power and dominance over the West in the field of education.
A case in point is Meten English, headquartered in Shenzhen at the heart of the Chinese Silicon Valley, who has grown to a market leader position in English learning training for adults in China, beating at their own game renowned international brands such as Wall Street English, Rosetta Stone or EF. Like TAL, Meten combines a network of 130 urban learning centers with a hugely popular digital tutoring platform, Likeshuo, to provide premium English tuition to young adults aspiring for more cosmopolitan lifestyles and careers.
Beijing, Shanghai and Shenzhen have together become recognized as the largest hotbeds and ecosystems for education technology (edtech) start-ups, ahead of the Bay Area, New York, Boston and London. More than 4,000 edtech companies are headquartered in these three cities, representing the highest global concentration of edtech companies per capita and more edtech companies than Europe or US have ever produced.
The vision of China as an industrial power, the factory of the world, is an outdated Western view. The reality is that the China of tomorrow, with its extremely highly educated workforce, will dominate the global knowledge economy.
Benjamin Vedrenne-Cloquet is CEO of EdTechX Holdings, the first Nasdaq-listed SPAC to focus on education and education technology
20 Nov 2019