China has one of the world’s largest education markets, with revenues estimated at USD 300 billion. The country has enormous demand for high-quality private education programs and has historically offered significant growth opportunities for the education sector across different areas of the economy and society.

However, in 2018, some segments faced increased regulatory complexity for both investors and operators, while the market continued to demonstrate strong growth.
Eurasia Development Ltd. conducted its own research, which served as the basis for this infographic.

We sought to answer the following questions: Which segments of China’s education market are most affected? Where is the market heading? And should entrepreneurs and investors consider entering one of China’s most widely discussed sectors — EdTech?

Investment in EdTech
Nine of the world’s 30 largest education companies are Chinese. In 2013, there were only two.
2018 highlighted strong demand, the expansion of private education, and record investment levels: 46 deals worth a total of USD 9 billion were completed in 2018, compared with approximately USD 4 billion invested in 2017.

Key Features of China’s EdTech Market
1. WeChat remains the leading channel.
It is localized, widely known and, most importantly, used by virtually everyone. Foreign companies often underestimate the importance of WeChat.

2. The number and influence of influencers continue to grow.
They command enormous audiences. The largest and most influential group is mothers, making them one of the most effective channels for promoting EdTech products.

3. The authorities are seeking to reduce the emphasis on standardized examinations.
The objective is to make Chinese students more creative, well-rounded and capable of generating greater value. EdTech is aligned with this policy direction.

4. B2B business models, particularly in education, are still at an early stage of development.
Most successful education companies in China operate in the B2C segment.

5. Chinese EdTech companies are showing increasing interest in expanding into markets such as Turkey, Russia and other markets that are less attractive to US and European players.
Chinese education companies believe that consumer behavior in these markets is closer to that of Chinese consumers than to that of consumers in the United States or Europe. It will be interesting to see how this develops in practice.

6. Pricing is critical in China.
The more pricing options a company can offer, the better. These may include group purchases, limited-time or annual discounts, discounts linked to social campaigns, and other mechanisms.

7. Company valuations are cooling.
This is relative, but the shift from extremely high valuations toward more realistic levels still represents a cooling of the market. In the short term, raising investment is likely to become more difficult.

8. Local startups dominate because they understand customer needs and the cultural context better.
Examples include results-oriented content and celebrity teachers who have substantial influence over their audiences. Hujiang used this trend to develop CCtalk, a platform that allows teachers to teach and interact with students in real time. This enables strong teachers to overcome geographic barriers and build personal brands with thousands of students.

9. Foreign platforms such as Udemy, Coursera and Udacity have also gained popularity thanks to effective localization.

10. China’s private tutoring market is expected to reach USD 40.07 billion by 2021, with a CAGR of more than 11%.

11. B2B SaaS startups are emerging, indicating that China’s education ecosystem has become sufficiently mature to support B2B-based companies.

12. EdTech receives strong support from both the government and venture capital.

The Chinese government has implemented numerous reforms, ranging from greater flexibility in curricula to encouraging private-sector participation in EdTech.

The Role of GovernmentIn recent years, China has actively promoted various education initiatives and reforms, including the updated gaokao system mentioned above, measures to improve literacy among children, and the development of rural schools.

One initiative deserves particular attention: the shift toward STEM — science, technology, engineering and mathematics — as well as new teaching formats such as massive open online courses (MOOCs).

Venture Funding in ChinaVenture financing in China is concentrated in two main areas:
1. Companies providing supplementary K–12 education, primarily focused on helping students prepare for standardized examinations.
Examples: 17zuoye, Knowbox, Sanhao.

2. Companies providing English-language education, primarily through video calls.
English is a compulsory component of university entrance examinations and is viewed by parents as a gateway to a much broader range of opportunities for their children.
Examples: VIPKID, iTutor, DaDaABC.

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