China Education Sector

By pjain      Published Oct. 23, 2019, 3:50 a.m. in blog Invest   

China Education Sector Keys and Trends

Only 5% are profitable

Only 5 per cent of China’s online education businesses for pre-college students are profitable, according to one estimate

Huge Online Education market growing fast

Online education has become one of the hottest sectors in China’s technology industry delivering lessons via the internet or smartphone.

  • 2019
  • Globally, the online education market is predicted to reach US$190 b
  • Online education in China is expected to be worth 300 billion yuan (US$42.4 billion)

  • 2022 to reach 540 billion yuan

Fierce Competition - Crowded Market

The industry is becoming more crowded

VCs investing esp. Education units of Big Tech

  • Tons of new capital are pouring in.

  • E-commerce leader Alibaba Group => joined at least two funding rounds of VIPKID

  • Social media and games giant Tencent joined at least two funding rounds of VIPKID

  • TikTok owner ByteDance launched an online education platform earlier this year. It is reportedly developing an educational gadget to be unveiled in 2020.

  • Investors pour funds into China online education start-ups

GaoKao Univ Entrance Exam is Do-or-Die

Pressure is immense for students to do well in the national university entrance examinations known as gaokao. Only about a third of those taking part in the exams will earn a place in a mainland Chinese university, however to get into a prestigious major or college is far more selective.

Parents in China are willing to shell out top dollar for tutoring to prepare their children for the country’s gruelling national university entrance exam, called gaokao in Mandarin. The standardised examination score determines which university the high-school students can gain entry to.

China's Huge Emphasis on Prep and Scores

China’s fierce competition in education and emphasis on test scores has been widely criticized

China’s competitive exam-based school system has driven demand for tutoring

Edu Market Analysis, USP, Key Factors

Online prep, tutoring saves time and money for Parents

A mother of a 7-year-old girl, said the online courses cost less and save time because she does not have to drive her daughter to tutoring centres. Living in more remote Sichuan province, Wang said online education also gives her daughter access to the best teachers in bigger cities like Beijing and Shanghai.

Smaller Towns, Rural want to Level the Playing field with Online EduTech

Demand is highest in remote areas in China where the local system may not have the best teachers. In many places, the teachers have to teach three to four subjects.

Like many other large countries, the nation’s top teachers and doctors are concentrated in big cities like Beijing and Shanghai, in schools and hospitals that also have the best equipment. Meanwhile, education and medical facilities in the more rural parts of China often suffer from a lack of qualified teachers and doctors.

Demand for online tutoring is high in smaller cities in China as parents seek to boost children’s chances with education

Tech start-ups are attempting to level the playing field in China’s education and health care sectors, two areas that suffer from an uneven distribution of resources and talent.

Distraction problem esp. online

There is still a need for physical learning centres because many parents, especially those in the smaller and lesser-developed cities, place value in having the children learn in a structured environment like a classroom, rather than on their own at home, where they might easily be distracted.

In big cities like Beijing and Shanghai, on the other hand, parents are too busy to send their children to tutoring classes and prefer to have them study on their own at home.

Too many kids per "Good" Online tutur

Moms see a big downside: communication between teacher and students is minimal when online, especially when a well known tutor has to deal with a large number of online participants.

Prep classes and tutors add to Assignments Burden on Kids

The extra assignments given in online classes that can keep her daughter up till 10 o’clock some nights. “We can’t do anything about it because this is how our society works,” she adds.

Edutech BPRs - What, Why, How

EduTech - easier to deliver Tangible Test Scores boost than Quality or Creativity

The explosion in online education may have exacerbated the situation. For example, several companies are developing AI technology to help forecast exam questions, scan for answers and recite from text books.

EduTech duplicates existing Classroom

Digital based education like live-streamed classes and pre-recorded lessons can only serve as a supplement to offline schooling, but never replace it.

AI Based EduTech is famous

There are at least 60 companies in China that market AI technology for education.


Personalized Learning Paths

The firm’s adaptive learning systems claim to be able to recognise knowledge gaps in real time during the learning process, then immediately fills them with instructional content to close those gaps. The algorithms give each student a personalised learning plan and clearly identify which areas the student is weak at, allowing human teachers to hone in on the weaknesses.

Don't duplicate

Conceptual - not Rote

China Education Companies


  • Trades as Laix reported net losses of US$12.8 million in the second quarter.


  • Trades as China Online Education Group in New York reported net losses of US$4.7 million in the second quarter.

51 Talk spent more than US$100 million on marketing in 2018

New Oriental - Offline tutoring

Offline tutoring giants New Oriental expanded online in recent years to the detriment of their balance sheets. New Oriental's profit slumped 33.5 per cent to US$43.2 million in the fiscal quarter ended May

TAL Education - Offline tutoring

TAL has expanded online in recent years, to the detriment of their balance sheets.

TAL turned from a profit to loss of US$7.3 million in the same period.

Language Hujiang

Language teacher specialist Hujiang Education & Technology, which filed for a Hong Kong IPO last year, has indefinitely postponed its flotation. Net losses spiralled from 280 million yuan in 2015 to 537 million yuan in 2017.

Language platform VIPKID

Privately-owned VIPKID, which connects Chinese students with language teachers in the US, finished its latest funding round of US$150 million in September but has not expressed any intention to go public.

Youdao - eLearning unit of NetEase

Youdao Inc, of which NetEase owns more than 60 per cent,

Despite achieving 100 million monthly active users this year, Youdao recorded a net loss of US$24 million in the first half, more than double its loss a year earlier.

Youdao said in the filing that one of its main challenges was to “monetise the user bases”. Ahead of the listing, expected to take place as early as Friday, Youdao does not want to repeat the experience of New York-listed rivals that have been trading far below their debut prices and have struggled to turn profitable.

Youdao’s sales and marketing expenditure accounted for nearly 34 per cent of its total costs in the first half of 2019, 5 percentage points higher than the same period last year.

  • Forced to cut IPO fund raise by 50% It is set to price its shares at between US$15 and US$18 each, according to a recently updated filing with the US Securities and Exchange Commission. That adds up to about US$116 m
  • NetEase chief executive William Lei Ding told the World Internet Conference in China on Sunday that education is expected to be an important growth engine for the company. He has expressed interest in personally purchasing up to US$20 million worth of Youdao shares.

Squirrel AI-based Education Unicorn for FOREIGN customers

Squirrel, whose formal name is Shanghai Yixue Education Technology Co, provides personalised lessons for students from elementary to high school through both online courses and at bricks-and-mortar learning centres.

Squirrel AI provides personalised after-school tutoring for students from elementary to high school

Lockin-USP: Onboard Placement testing, Physical Location, Data-driven Curriculum

  1. Prospective students are first put through a diagnostic test to assess which areas in the subject they are weak at.

  2. AI analysis and placement The artificial intelligence algorithms will then cater the tutoring to focus on the areas of weakness, reducing the amount of time spent on unneeded tutoring by 80 per cent, according to Liang.

  3. It has about 2,000 physical locations across China, with the majority franchised to private owners.

  4. The curriculum is developed by its in-house team of 400 teachers, many of whom were public school teachers and tutors in after-school centers.


  • So far, Squirrel has taught 2 million students in the five years since its founding.
  • There are about 50,000 students currently taking Squirrel courses, with the majority from middle school.

Squirrel was founded in 2014 by Derek Li Haoyang, Jason Zhou Wei and Cui Wei. Li, who is chairman of the company, was a first-prize winner in the Chinese Mathematical Olympiad.

Squirrel charges lower fees for its services in less well-off parts of China. It has also donated one million learning accounts worth 10 million yuan (US$1.5 million) to underprivileged families in poor mountainous areas through the Qingxiyuanshan Educational Charity Foundation.

Targeting Foreign Customers in Future

AI education unicorn Squirrel plans to target foreign markets with plans for mathematics, Mandarin lessons

Squirrel AI Learning, a Shanghai-based online after-school tutoring company, plans to expand into foreign markets in two years by developing an English-language curriculum for mathematics as well as Mandarin lessons for non-native speakers.

“Why mathematics and Chinese-language lessons? Because there are so many foreigners who want to learn Chinese and they do not have good solutions,” Joleen Liang, partner at Squirrel AI Learning, said in an interview last week in Hong Kong. “So we’re going to expand our market in two years.”


Hexiaoxiang tutoring startup

It teaches Chinese to pupils aged between 5 and 12, Hexiaoxiang, which is headquartered in Hangzhou, the capital of China’s eastern Zhejiang province, features pre-recorded courses and one-on-one tutoring. Its third main feature is interactive learning among peers, guided by cartoon-based learning material. The company has more than 1,000 tutors and claims that it has made a monthly revenue exceeding 10 million yuan (US$1.45 million) in the past 15 months.

  • Closed its Series B financing round, collecting 200 billion yuan (US$28 million). The round was led by Sinnovation Ventures, the firm set up by former Google China head Kai-fu Lee, Bertelsmann Asia Investment, and an investment fund under US-listed education company Tomorrow Advancing Life. The new funds will be used on research, education, and AI technology upgrading.

Huowa - STEM critical thinking platform

Huowa targets those aged between three and 12, offering live-streamed courses aimed to build one’s mathematics and scientific reasoning capabilities. It now has nearly 60,000 learners and more than 1,800 teachers.

  • 2019 - Closed its Series D equity financing round, collecting US$85 million from investors led by GGV and KKR. Previous investors including Sequoia Capital China and IDG also took part in this round, which is the largest fundraising in China’s online education sector this year.



  • Major analysts
  • Xiong Bingqi, deputy director of the 21st Century Education Research Institute in Beijing.

Education Market


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