Your Roadmap to China’s Education Sector
Two overly sensitive areas -education and internet- are at the core of
the online education industry in China. The nature of this sector
attracts the attention of Chinese regulators and it is prone to greater
Recently, the Chinese government has demonstrated a commitment to providing a more collective response to new technologies, while acknowledging rapid growth within the industry. The nature of the COVID-19 health crisis has also heightened efforts to bring online education at the forefront of the central government’s policy-making agenda.
This will probably result in more regulatory tightening of the online education industry to ensure its growth is not at odds with government objectives.
Last year, the Ministry of Education (MOE), along with five other central authorities, led a campaign to check the operations, course content, and teacher qualification of online training providers.
By the end of the review, education authorities had scrutinized 3,463 courses and 115,622 teachers of the 718 online training course providers. The campaign could establish a provincial blacklist of the unqualified or poorly run online training providers and to suspend or shut down their services.
In the past few years, the Chinese government issued a series of new regulations overseeing two types of online education providers – mobile apps and live streaming providers.
There are three aspects of the education sector that these regulations focus on: short-term preemptive measures to control outstanding issues, intermediate measures to construct a standardized management system; and long-term measures to improve the quality of education in the country.
These rules seek to establish in a more pragmatic way a better management system to effectively screen independent education providers.
In 2018, the first regulation to officially address online education was issued – the Opinion on Regulating After-school Training Institutions (Opinion 80), which called for all relevant government agencies, such as telecommunications, culture, industry, information and broadcasting sectors to cooperate in taking action within the online education sector.
Since then, a series of different rules have dealt with specific issues of the operation of mobile online apps – for example, the Notice on the Prohibition of Apps from Entering Primary and Secondary School (Circular 102) and the Implementation Opinion Regarding Regulating After School Online Tutoring (Opinion 8), which restricted who could teach at off-campus online training facilities.
In 2019, the MOE and eight other ministries announced the Opinions on the Orderly and Healthy Development of Educational Mobile Internet Applications (Opinion 55). This new rule established a long-term approach to the monitoring of mobile education apps, for the better management and governance of these apps.
Opinion 55 instituted several specific measures to be implemented by educational administrative departments and education mobile application providers. These include, establishing and adhering to a filing system for education mobile application providers; a standardized data management system; a recommendation and selection mechanisms of applications used by the Education Administrative departments; as well as increased monitoring of content within the app, particularly where the app is aimed at minors.
A series of practical measures have been introduced to implement the above stated proposals.
In November 2019, the Chinese MOE, along with eight government departments jointly issued Administrative Measures for Record-filing Mobile Internet Applications for Education (Teaching and Technology (2019) No.3), which mandated that all such applications be registered on a national database before January 31, 2020.
The document requires the registration of all mobile education applications – the record of this information must be updated on the national public registry (also known as the National Digital Education Resources Public Service System by January 31, 2020.)
It further states that the accuracy of the information must be verified by the provincial government, which will be tasked with providing feedback on the information to the provider within 10 working days. The provider will then have a further 10 working days to correct the information in case of any errors or confusion.
Companies must complete their Internet Content Provider filing and protection by January 31, 2020. According to the notice, all education mobile applications that have not completed this two-step filing process by February 1, 2020 will have their license revoked.
China has a unique political situation, with a central government that decides every aspect of the private sector. Since January, officials have made many important decisions about when schools and education companies would open or close, and what resources were available to support learning.
Along with shutting down bricks and mortar schools, China also reinforced two existing virtual ones. One platform, Empower Learning, was built by the government, in collaboration with China’s seven largest EdTech companies, offering digital K-12 curriculum.
The platform offers live streaming courses that students can tap into from their phone or computer at home. The MOE also created its own site: Educloud. This site features videos, teaching plans and communities of the best teachers’ lessons recorded over the past eight years.
Although both platforms existed before the COVID-19 pandemic to provide free online learning resources to students, they added scheduling tools to help educators select and share materials with students and widely circulated them to the public once the schools closed.
After February 8, the MOE worked with provincial education departments to pick dates for reopening schools. Although not all schools resumed classes at the same time, the government sent clear signals about changes. In addition, in late March, the MOE announced it would delay the university entrance exam, the gaokao, for a month.
Worried about students who are unable to access digital content, the MOE prohibited educators to introduce new curriculum until the new semester started. It also encouraged educators to use online content concerning personal well-being, such as mental health and entertainment resources. In addition, in-home physical education courses were strongly promoted by schools and teachers.
Research says that spending hours in front of screens is not helpful for students of any age. As a result, the MOE suggested cutting back on screen time. The Department of Education of Guangdong province went even further, releasing detailed guidance limiting each online class to 20 minutes.
Though online education continues to be an appealing sector for foreign investors in China, businesses should be careful when entering this market.
While some segments of the market, such as K-12 compulsory education remain off limits to foreign investment, other segments such as foreign languages, vocational training and corporate training are promising areas of investment for foreigners.
Before COVID-19 became a worldwide pandemic, the education market in China was expected to grow from 1.6 trillion yuan in 2015 (US$231 billion) to 2.9 trillion yuan by 2020 (US$419 billion). The ecosystem of Chinese education, of which main sectors are private education, studying abroad, trainings and online education, had experienced until recently a booming trend.
Chinese private education institutions had witnessed a strong growth momentum and kindergartens account for a large share of private education institutions.
Outbound international students from China grew from 280,000 in 2010 to 520,000 in 2015. The number of Chinese students studying abroad had been steadily growing, with the United States, Australia, UK and Canada among the major destinations.
From the investment point of view, there is an increasing trend in the education industry of VC/PE investment value and volume, while M&A deal volume and value also reached record levels. M&A deals in the education industry indicate two major trends: first, M&A deals launched by industry peers to improve their business ecosystem; second, listed companies seek to diversify their businesses through cross-industry acquisitions.
For foreign investors, there are multiple models to enter the Chinese education market. The optimal entry model depends on how investors weigh the balance between extent of engagement and capital required.
Should you have questions about your road map to the Chinese online education sector, complete the below inquiry form with your questions and comments.
DISCLAIMER: All information in this article is verified to the best of our ability and is assumed to be correct at time of release; however, Woodburn Accountants & Advisors does not accept responsibility for any losses arising from reliance on the information provided within. The information provided is for general guidance and does not replace specialized advice.