Life was good for many of China’s training centers before January 2020. On any given weekday evening, weekend, or school holiday, centers would be buzzing with activity.
From kindergarten to middle school, students would be frantically ushered into class under the watchful eye of parents and grandparents. For many, that watchful eye would even extend to peering through the window while class was in session.
Even if you never set foot in a training center in China, they’ve been pretty hard to miss in recent years. On high streets, in shopping malls and elsewhere, glistening logos, sometimes accompanied by pictures of cheerful-looking teachers and students, have been a common sight.
An English First (EF) school in Beijing. Image via Alistair Baker-Brian/That's
After-school study, or ‘cramming,’ appears to have become part and parcel for many students in China, at least for those whose families can afford it.
Research by the Chinese Society of Education suggested that in 2016, more than 75% of K-12 students, roughly aged from six to 18 years old, attended after-school classes, as cited by China Briefing. The number is likely higher within the past five years.
An increase in disposable income, coupled with parents’ burning desire for students to get ahead at school, have fueled the growth of the industry, with many paying for tutoring in core subjects such as English, math and science, among others.
Chinese parents spend an average of RMB120,000 (approximately USD18,600) per year on after-school tutoring. That figure is estimated to be as high as RMB300,000 (approximately USD46,600) per year in the most extreme cases, according to South China Morning Post.
Against this backdrop, it’s no surprise that training centers are big business. At its height in February 2021, the net worth of New Oriental, one of China’s most recognizable education companies, rose to approximately USD33 billion. Around the same time, TAL Education Group, another big Chinese education company, had a net worth of around USD55 billion.
Chinese and foreign firms alike have made sure to get their hands on a slice of this lucrative market.
However, recent events have put the future of the industry in doubt.
Many centers are still recovering from losses as a result of the COVID-19 pandemic. Some institutions, including big players like Disney English, even shut their doors completely.
Additionally, Beijing’s new law in August 2021 dealt a big blow.
As far back as July 23, when news of the new law was leaked, the value of shares in the industry came crashing down.
For some institutions, the new law has already been their death knell.
Juren Education, which had been in the market for 27 years and offered tutoring services to students aged 5-18 years old, announced closure via WeChat, as cited by Sixth Tone.
In a more dramatic case, Jake Hall, CEO of British tutoring company Holland Park, reportedly fled from Shanghai to his native UK with over USD1.5 million, according to Yicai.com. This happened shortly after Hall announced that investors withdrew commitments to the company following the announcement of the new law.
Those that have survived must adapt their curriculum to include only non-core subject material. However, as That’s found out speaking to industry professionals, adapting will not be easy.
Officially known as the “Dual Alleviation Policy,” the new law, announced by China’s Central Government, seeks to alleviate both the academic burden on students and the financial burden on parents. The latter is intended to encourage parents to have more children as a means of dealing with China’s population crisis.
In a society where the kid’s education is the top concern of any parent, none of them would like their kids to ‘lag behind’ the others. In normal schooling, students generally get equal attention in class. But with after-school training centers, kids whose parents are wealthy enough to afford the highly priced extra-class training have a distinct advantage over those from less well-off families. Then, the latter would try to “keep up with the Joneses” by all means – save on normal household expenses, for example, to send their kids to receive extra classes. In this way, extra-school tutoring has become compulsory to some degree, which has led to Beijing introducing the new policy.
In effect, the new law bans all for-profit teaching of core subject material outside of school hours to kindergarten, primary school and middle school students. Training centers offering core subject-related tutoring services must register as a non-profit organization.
The law also features a number of other clauses unrelated to training centers, including rules on limiting homework for students.
Core subjects include ethics and the rule of law, history, geography, Chinese, mathematics, foreign languages (English, Japanese and Russian) and science (biology, physics and chemistry).
Meanwhile, non-core subjects, which are unaffected by the new law, include physical education, art (music and fine arts) and integrated practical activities (information technology and labor technology).
The COVID-19 Effect
The new law comes at a time when many training centers in China are still recovering from the effects of the COVID-19 pandemic.
American native Adam, who requested we only use his first name, set up AJ English Academy in Guangzhou in 2017. What started out as English classes in a small 25 square-meter-room, eventually grew into a business with three centers, around 500 students aged 3-12 years old and 35 staff members.
A branch of AJ English Academy in Guangzhou. Image via AJ English Academy
Adam explains that the difficulties caused during COVID-19 are largely related to how his and other training centers calculate profit.
“COVID-19 hit in February (2020). Think about it like this. The way we calculate profit is very tricky – only once you finish the service you owe to the parents does the remaining money become profit,” he explains.
“Maybe a parent will give you RMB15-20,000. Yes, you have that money right now, but it’s not profitable for eight more months (when the course is finished). So, during COVID-19, you basically had 5-6 months when none of that debt was killed off. Meanwhile, we were still paying full rent. And I was still paying my staff full salary.”
He stresses that many centers are still suffering as a result of this ‘COVID-19 debt.’
Belinda (a pseudonym for privacy reasons) worked in a senior management position with Best Learning, a company that operated training centers in Beijing, Shanghai and Shenzhen before recently announcing closure.
“Cutting out a lot of the 3 to 4-year-old classes took a huge chunk of our profits”
She says that COVID-19 was particularly devastating for the company, as their curriculum was designed for face-to-face classes, which couldn’t go ahead.
“Our curriculum wasn’t really designed for (online teaching). But, when COVID-19 hit, our curriculum team worked really hard for one or two months to build something palatable for online since it’s always different to face-to-face.”
Belinda goes on to say that they had to re-think classes for their youngest students, as managing such classes online was too difficult.
“Cutting out a lot of the 3 to 4-year-old classes took a huge chunk of our profits.”
For some companies, the COVID-19 pandemic proved to be their downfall.
Disney English used to be a major player in the kids and teens training center market, utilizing well-known Disney characters, songs and storylines to teach English to mainly kindergarten-age children.
After centers were closed temporarily due to the pandemic, Disney English eventually announced closure in China in June 2020.
UK national David Roberts worked as general manager at Disney English from 2010 until the company’s closure. He now works as an education consultant in Shanghai.
Roberts says that while for many schools online classes were a temporary solution during COVID-19, they would not effectively replace face-to-face classes for the younger children, who excel in fun and group-based interactive classroom environments.
However, Roberts explains that for older children, teenagers and adults, online learning certainly has its place as it offers a convenient solution and students are able to study more independently.
COVID-19 debt and the prolonged suspension of face-to-face classes have not left the industry in a good position and undoubtedly affects some surviving institutions’ ability to adapt to the new law.
Roberts stresses that the real challenge is for training centers to change their product offering and marketing in order to remain legal businesses.
Belinda says that at the Best Learning training centers, parents were attracted to the courses because students would show marked improvement in the core subject English. Adjusting the curriculum would effectively mean taking away one of the company’s main selling points to customers.
“We were going to adjust to make our courses more of an arts program. But, at the end of the day, investors and other people high up just realized that doing that would take too much effort and not offer enough in return,” she says.
The company attempted to adapt by rebranding the training centers as ‘Thinking Labs,’ which aimed to teach culture, art and science, among other things. However, the new branding was short-lived. A center in Beijing’s Wangjing area had a notice on the front door informing parents of the center’s closure.
A closed-down ‘Thinking Lab’ in Beijing. Image via Alistair Baker-Brian/That's
Adam offers a similar perspective, stressing that AJ English Academy’s reputation has been built on the rapid improvement parents see in students’ English reading ability.
“In the last few years alone, I wrote four textbooks,” he says, mentioning that the school also uses an American textbook entitled Wonders, material banned under the new law – given that schools cannot use foreign textbooks.
“That’s what really made us famous – the original materials and the Wonders textbook program.”
Adam emphasizes the need to teach core skills in English, such as reading and phonics, before students can learn other things.
“We’ve been told we can teach citizenship. Indeed, one of the chapters in the Wonders textbook is about being a good citizen. However, the text is in English. That means that I have to teach them how to read English in order to teach the chapter.”
“The challenge is to ensure new products meet the new legal requirements and, yet, are still marketable and attractive to parents”
According to Roberts, schools may struggle to teach non-core subjects.
“Many schools offering after-school core subject programs are currently changing their products and their marketing. It is not enough to purely change the marketing because the programs need to adhere to the new legislation. Any government inspections would be problematic if this was not the case.
“The challenge is to ensure new products meet the new legal requirements and, yet, are still marketable and attractive to parents.”
Belinda agrees that adapting will be difficult.
“Training centers will say children are learning one thing, when in fact, they are teaching children English.”
Schools can, in theory, teach English through arts and crafts, drama, music, etc. However, there are already established training centers that specialize in these subjects.
“If parents want their kids to study arts and crafts, why wouldn’t they go to a school which actually has a legacy of teaching arts and crafts? This will be the challenge core-subject providers will face as they reinvent themselves,” says Roberts.
What exactly falls within the categories of core and non-core subjects, respectively, still requires some clarification. According to Roberts, this will likely become clearer as local government education departments start implementing the policy through training center inspections.
A Bleak Future?
The future direction of China’s training centers is still somewhat uncertain.
A number of areas are cause for concern, one of which is mass unemployment resulting from changes in the industry. At AJ English Academy, Adam fears the job prospects for some of his staff.
“I have 23-year-old employees who graduated university in China to become English teachers. What are they going to do? I have one person who’s been teaching for 15 years. She’s crying to me, saying that no one will want to employ her. She’s spent her career working in an industry that might no longer exist in the future.
“I’ve spoken to a lot of people who have been teaching for over ten years. They’re most anxious that they’ve grown their career in this industry.”
Adam says that while he understands the intention behind the new law to reduce the financial burden on parents, it would be wise to look at reducing costs of other things such as kindergarten, college, rent, etc., instead of punishing training centers.
Another issue in the industry is that a “rule-bending culture” will likely develop to meet the existing demand for tutoring in English and other core subjects.
This was pointed out in a recent report by consultancy group Venture Education. The paper stresses that the closing of core-subject training centers “will likely lead to a wholesale fragmentation of the industry with a dramatic increase in the number of freelance tutors who operate below the radar.”
“What I think may happen, while the demand is still there, is that parents who can afford it may try to find teachers for one-on-one classes. These would likely be unregulated,” says Roberts.
Against this backdrop, the new law could exacerbate existing inequality regarding educational opportunities.
While training centers may suffer from the new law, Beijing has positive intentions in alleviating the financial burden of the family. This year, the government rolled out a new policy allowing families to have three children.
Belinda is skeptical that closing training centers will encourage parents to have more children. However, she agrees with the notion of reducing the academic burden on children and stresses that people in China may re-think education as a whole.
“It might open people’s minds to new views on education. Being well-rounded, such as by learning music or another non-core subject, can also develop a person.”
“She’s spent her career working in an industry that might no longer exist in the future”
Similarly, Venture Education points out that the new law may help to create a more holistic education system.
Ultimately, this law could be good news for existing training centers that teach non-core subject material. The drama academies, dance schools, music teachers, etc. may suddenly be able to gain new students who would otherwise be learning English, math and science.
However, persuading parents to part with cash is easier if they know that their child will do better at school. Convincing them to pay for education which will make them more ‘well-rounded’ may be more difficult.
The industry likely won’t feel the full effects of the new law until its full implementation. Moreover, how the law is applied by local authorities may vary.
But there is a clear indication that more training centers will close, as schools that rely on core-subject curricula grasp the realities of adaptation.
It’s sink or swim.
[Cover image via AJ English Academy]