China is a sleeping giant. Let her sleep, for when she wakes she will move the world.”                            ―  Napoleon Bonaparte”

 

2015, NetDragon Websoft Inc., a leading developer and operator of online games and mobile internet platforms in China, acquired Promethean, a London-listed world leader in the rapidly growing global interactive learning technologies market.

2016, China’s WeiDong acquired DEMOS international vocational education group, the 2nd largest vocational education player in Europe with 45 years of history, and Brest Business School.

2017, NetDragon acquired JumpStart, an educational game company behind iconic titles including Math Blaster.

2018, NetDragon bought Sokikom, an online game-based math program, and gobbled up Edmodo, one the largest online social communities of teachers and students in the world.

These are just a few examples of China’s interest in education industry.

The Capital Momentum

2018 will likely see China out-invest the US in education innovation and technology 3 to 1. Ten companies alone are responsible for 50%of the $4.5B of venture capital in 2018 fueling China’s unstoppable appetite for quality education at scale. US investment has been surpassed by China since 2 years ago and the gap is growing. The charts below demonstrate the growth momentum of China education capital market. (according to HolonIQ)

Source: HolonIQ

The Opportunity

Because of its population size, China education market could be the most attractive one in the world. Now the young generation of parents want and can afford a quality education beyond rote memorization, plus the government is revolutionizing its education system with several new policies published recently. And, for adult education, the country is transforming its workforce with remarkable ambition. The top-down system led by the government strategic policies is quite efficient. These create an opportunity that’s unimaginable before and elsewhere. But, what are the market needs?

For K12:

Quality contents are always desired in China, and localization is necessary to scale up although entering those flourishing international schools and local programs is a great start. Learning English is always in high demand, but the market is also very crowded. One well-known unicorn VIPKID grows on this need basis plus the live tutoring model – which is proven to be well-accepted in China. Its success has inspired other learning programs to follow suit.

Facing the 4th industry revolution with AI and robots shaping the future of work rapidly, individuals and nations all start to value higher order thinking skills and soft skills. For K12, pan-quality education (sports, music, dance, art, critical thinking, STEM, coding) is an emerging hot segment, differentiated products that are hard to be replaced will be appreciated. Combining online live teaching model or self-learning, China kids have started to learn coding, music or arts online.

Both school education market and the after-school program market are huge. But selling to schools is much harder than selling to parents. For the later, leveraging social media tools, current after-school programs and celebrity parents could be very helpful. But, for the former, collaborating with the right partners is crucial. Above all, no matter you are in to-C, to-B or to-S (School) model, the central government policies have significant impact on the overall market.

China’s government has started to push AI education into K12 schools. In the latest published education standard for high schools by MOE on Jan. 16, 2018, Computer Science education has been added as required and elective courses like in the US. While China’s government puts more emphasis on“data and information” in order to build up the awareness and knowledge toward understanding AI, which is mainly built on big data. (read more here) The enthusiasm about AI education in China K12 vertical is higher than any other countries.

For Vocational, Higher Education and Corporate Learning

These are different verticals facing different stakeholders, but they are all related with workforce needs. The job market is currently under reshaping and restructuring in China like in other countries. Technical skills building for IoT, AI, smart manufacturing, Blockchain and semiconductor are in high demand. Also the awareness education for non-technical roles (such as HR managers or L&D designers) are much needed, related online education resources are of high interest in China.

Apparently, China central government is urging to level up the skillsets of its workforce. Its policy encourages leveraging global quality education resources or programs. Collaborations across boundaries are happening more than ever. School systems work with enterprises to bridge the skill gap. International collaborations such as international learning pathways, both online and in-person, are very welcome. Technology solutions to support learning ecosystem will be appreciated.

As for leveraging AI in education systems or corporate learning, it’s just at the early stage. The interest is high, but there are too many marketing talks and too less evidence-based implementation results and learning science studies. That means the opportunity is huge. China has some advantages in this than other countries – one, the digitalization of education is better than most of other countries; second, there is less resistance for collecting data because of privacy concern; third, the user base is much bigger.

On China’s stock exchange market, the valuation is usually higher than listing inother markets. And, China is opening its stock market more to international investors, it will increase the funding entering the market. Moreover, Shanghai Exchange is setting up a new marketplace called Ke-Chuang-Ban for small companies developing innovations aligned to the central government’s strategic goals. It will greatly reduce the barrier of connecting with funding much needed in growing new businesses.

The Challenges

But, entering China market isn’t easy.

First, it’s the language barrier. What this meant is more than the language itself, it is the right terms you should use in order to let your target audience recognize and resonant with your value. For example, China uses “online education” or “Internet + education” for what we usually call digital learning. Furthermore, the usage of buzzwords such as AI is more aggressive, many are not true in reality-check, but it does draw attention.

The second challenge is the culture difference. The first frustration in this regard might be about building trust between people, the second is about value proposition. Many assumptions, conscious or unconscious, need to be re-examined. When marketing to decision makers, be it school administrators, HR managers or parents, you need to know what they value the most and how others are marketing their products – culture differences matter.

The third challenge is understanding and navigating the regulations, a lot of them are not friendly to foreigners. Having a local partner is particularly important in China, both for cultural reasons and strict regulations.

Finding the right partners is a critical decision, you should avoid giving exclusive right to one partner since the market is very big and possibilities are evolving. Developing dynamic, multi-faceted and deeper collaborations will increase your winning possibilities. Your business model might need to adjust in a big or small way. China market is highly competitive, the pace is fast, and competitors are a lot. Many winners need to integrate more resources in the vertical.

Education business is to serve humans, education systems and organizations, the localization for China market is necessary and should be like establishing a startup. Starting with collaborating with clients and testbeds for implementation testing (iterations) is very helpful. For example, Wise Ocean Accelerator connects with such testbeds and partners in major education verticals to help with market entry.

The other challenges include finding local technology support such as hosting cloud-based service for your product, finding investors and how to do local market competitor analysis correctly. Knowing how to protect your IP should be on your check-list as well.

Should You Join the Market?

China invests 4% of its GDP in education each year. There are around 260M K16 learners in China, plus all adult learners with learning needs driven by 4th industry revolution. As always, with opportunities come challenges, and Wise Ocean Accelerator aims to help you with these challenges. But the commitment of team efforts and resources is necessary, understanding what it takes to succeed in China is the first step.