Trends in the Chinese Education Industry
In mid-April, Australia Week in China (AWIC) was held in multiple cities of China. Charlotte Lu, Deloitte China Education Industry Leader, was invited to address the International Education program and shared with the audience the latest insights of Deloitte on Chinese education industry; Deloitte Chinese Services Group facilitated the delivery of the program.
Size of Chinese education industry would double
The ecosystem of Chinese education, of which main sectors are private education, studying abroad, trainings and online education, generally boasts a booming trend. The size of Chinese education market is expected to grow from 1.6 trillion yuan in 2015 to 2.9 trillion yuan by 2020.
Chinese private education institutions have witnessed a strong growth momentum and kindergartens account for a large share of private education institutions. In terms of geographical location, over 40% of private K12 and higher education institutions are in East China.
Outbound international students from China have grown from 280,000 in 2010 to 520,000 in 2015. The number of Chinese students studying abroad has been steadily growing and there is further potential for the number to grow. US, Australia, UK and Canada are among the major destinations of Chinese outbound international students.
Training has become a new hot spot of Chinese education market. Traditional education institutions, as well as internet giants, are eager to make their presence in the training sector.
Major trends emerging in the sector of online education include 1) the integration of online and offline platforms, 2) the diversification of profit-making models, 3) the rising significance of mobile-end users, 4) penetrating into Tier 3 and 4 cities and the continued expansion of businesses, and 5) M&A deals boosting industry consolidation.
Capital driving the development of education industry would be the New Normal
From the investment point of view, the education industry sees an increasing trend 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.
Education industry accessing capital markets has multiple meanings:
- Further drive the development of private education
- Broaden the financing channels and boost the growth of businesses
- Realize brand extension and the identification of business values through financing and public offering
- Capital would further accelerate the consolidation and evolvement of education industry
Foreign capital continually flows into Chinese education market, while Chinese education businesses further explore their road of "going out"
For foreign investors, there are multiple models to enter Chinese education market. The optimal entry model depends on how investors weigh the balance between extent of engagement and capital required.
Meanwhile, Chinese education businesses are actively exploring "going out". Outbound models include setting up overseas offices or subsidiaries and the export of online education.
However, regardless of private education, studying abroad or vocational training, regulatory policies and reforms would be one key factor and safeguard to drive the growth of education industry and market.