Primarily helped by Technology Innovation, Education in China Is Set To Double To $450 Billion By 2020

Primarily helped by Technology Innovation, Education in China Is Set To Double To $450 Billion By 2020 ...

China’s education market is vast and poised to further expand in the coming years as parents prepare their kids for success in a different economy compared to the one they grew up in. As China transitions into a more digital and stronger economy – shifting their professional profiles from low cost workers to managers and other highly-skilled staff – education is becoming more important for modern Chinese families that want their children to be competitive and at ease with the digital innovations that have invested this changed work environment. Worth RMB 1.6 trillion (US $240 billion) in 2015, China’s education market is estimated to nearly double to RMB 3 trillion (US $450 billion) by 2020.

In line with this growth that sees China projected to surpass the US as the world’s largest economy by 2028, there is a high demand for foreign education services, particularly online; much discussion revolves around marketing e-learning platforms in China, and on the other side of the equation for Chinese people to find valid online foreign educators. According to Sean Go, Co-Founder of GoFurther Careers, “The Chinese market values foreign education and career experience abroad more than ever. Demand for foreign education is not likely to end soon and will increase as demand outpaces supply for elite schools and jobs. There is a need for mentors to help the Chinese become accustomed to western-style culture and education.”

In general, four factors contribute to the “golden age” of China’s education industry:

Technological innovation

Without a doubt, technological innovation is the most important factor contributing to the growth of China’s education industry. With a Chinese market counting in 2014 632 million Internet users and 700 million active smart devices, internet’s contribution to the total GDP increase is expected to grow from 7% to 22% through 2025. It doesn’t surprise then that the explosion of the internet (particularly on mobile) has brought increasing influence of online education. The growth of e-education in China has allowed people to study any topic they like, no matter how old they are, where they live, or what they do. Moreover, compared to the traditional education system, online education is generally cheaper, making education more affordable to those families that can’t pay the high fees associated with traditional education. In this way, online education has become a source of opportunity, not only for e-learners but also for e-learning companies. According to a study, “there are now around 2.6 new schools coming online every single day, which has made China’s online learning market grow from around 500 institutions in 2012 to well over 4200 – and counting – in 2016.”

A changing society

China’s economy, before primarily based on masses of low-cost workers, is now expanding into a more mature economy that is seeing a growth of the middle class, higher incomes and higher standards of living. Skilled workers are now highly valued and needed for the general growth of the modern Chinese economy.

This tendency is well reflected in the increase of investment by the government in the education industry, as well as the introduction of favorable policies, particularly with regards to preschool education. A big effort has been made to create favorable conditions for fair distribution of high-quality resources, at the same time focusing on “boosting employment” and “standardizing independent colleges”.

Capital in-flow

There has been a rapid increase of capital in the Chinese economy and, with it, a direct flow of capital into the education industry, both in terms of total amount and frequency. Despite many limitations that seem still to prevent foreigners from investing their capital in China, there is still a significant demand for foreign education.

“In 2015 the total amount of investment into the education industry was over twice of that in 2014; the total amount of mergers and acquisitions (M&As) increased by 165 percent year on year; IPOs increased by 76 percent from a year earlier. More capital is expected to flow into the industry under easy policies” (Source).

 Families’ changing attitude towards education

For Chinese families, making sure their kids receive the best possible education has become a top priority. According to a survey conducted by China National Statistic Bureau, in Beijing, a family’s spending on their children’s education is second only to their spending on food. According to the same survey, more than 60 percent of Chinese families spend at least one-third of their income on their children’s education. The survey covered 502 urban residents living in Beijing, Shanghai, and Guangzhou. This shows that Chinese families prioritize spending on education ahead of any other area, even above real estate and retirement savings. And according to a research conducted by McKinsey Global Institute (MGI), “China is expected to spend 12.5 percent of all consumption growth on education for those under 30—higher than any other country apart from Sweden (12.6 percent)” (Source).

 

This post is part of our contributor series. It is written and published independently of TNW.

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