In recent years, there have been suggestions circulated by the government to regulate subject training and to reduce the study load of school children. Since earlier this year, education companies and tutoring schools in China have been experiencing the most significant policy blow, known as double reduction. What is double reduction? Are there regulation changes to the other segments in education? What are the impacts and opportunities of this new policy? We have put together this helpful guide of the policy updates in the education market, with the aim of helping education companies and institutions to better navigate the Chinese education market.
On the 15th June, the Ministry of Education of China established a new department, to implement the new double reduction policy and regulate tutoring schools. This new regulation will be implemented from July for a twelve month trial period across nine regions and provinces in China, including Beijing, Shanghai, Jiangsu etc, before it is rolled out across the country. The terms of the policy are:
Since 2014, China's education companies have received tens of billions in investment each year. K12 afterschool education is a key investment area. As of August 2020, the average amount of a single investment event has increased to over 170 million yuan (according to iResearch). The current education policies may lead to reduced investment and a reduced number of IPOs in the short term.
On the other hand, over the past 2 to 3 year, in order to stand out from fierce competition, education companies have excessively invested in marketing to gain attention, through social media, KOLs, live streaming etc, thus putting comparatively less focus on the quality of their teaching.
According to the government, the new regulation aims to ease the pressure on school children and lower family living costs, whilst simultaneously calming down the hot investment in the sector. The Ministry of Education is also trying to correct a misconceived phenomenon, meaning schools start to be considered as the bodies responsible for student learning, not the tutoring companies.
With these anticipated changes happening very soon, schools in some regions of China have started to allow students to stay at school after teaching hours to complete their homework and wait for their parents to finish work. We are also seeing in Shanghai and other trial regions that local governments are organising summer schools and childcare centers to ease pressure on parents when after-school tutoring is no longer permitted. Education companies have already started to adapt, developing non-academic programmes to overcome the barriers enforced by the new policy.
China has recently been promoting National industrial upgrading, and for this reason, skilled talents in China are in high demand. China strongly advocates the integration of production with education by encouraging universities and enterprises to work together to develop training plans, and by establishing a number of high-level training centers.
In 2019, the government issued a framework, “Implementation plan on National Vocational Education Reform”, to reform China’s vocational education system, and allocated 100 billion yuan (about $15 billion) to develop a vocational training system. This May, China announced a budget of 27 billion yuan for this year’s vocational training. This framework has also started piloting a program of academic certificates plus skill level certificates in a “1+X” model. Non-academic training at skill and practice level, is the emerging trend.
This May the government also announced a newly revised version of regulations on private education:
However, China’s private education sector has also been extended to a much wider scope, ranging from pre-school education to higher education, from degree programs to non-degree programs. The government aims to strengthen supervision in non-state schools, and avoid the sector becoming overly commercialised, whilst at the same time, promoting not-for-profit private education beyond the compulsory years, such as vocational training.
Despite the changes in regulation and policies, China’s national policy of reform in education remains unchanged; during the process of opening up and reform, there are obvious challenges, but there are also opportunities that must not be overlooked:
Opportunities in any market come with challenges, and any Asia strategy is incomplete without a presence in China. Whilst the new government policies do pose a significant challenge to education companies and their Asia strategy, China remains a fruitful market to enter into and should not be neglected. Understanding the local market, keeping up to date with the trends and changes in policy, as well as having a trustworthy local partner are the first steps to take in order to succeed in China.