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Ambient Insight’s The 2015-2020 China

Self-paced eLearning Market. Country Edition

Table of Contents
List of Tables ............................................................... 3
List of Figures .............................................................. 4
Abstract ...................................................................... 5
The Internet Giants Enter the Fray ............................................. 6
Surge in Private Investments to eLearning Companies in China ...... 8
Sources of Data on the China Mobile Learning Market ................. 10
Primary Catalysts ............................................................. 11
Large-scale Learning Technology Deployments .......................... 12
Massive Academic Content Digitization Initiatives ....................... 14
High Demand for English Language Learning Courses ................. 16
Consumer Demand for Online Test Prep Products ....................... 18
Booming Enrollment in Online Education Across All Segments ...... 19
Rapid Adoption of eLearning in Early Childhood Learning ............. 21
What You Will Find in This Report ....................................... 23
Who are the Buyers? .............................................................. 23
What Are They Buying? ........................................................... 27
Related Ambient Insight Research ...................................... 33

2015-2020 China Forecast and Analysis ........................ 34


China Demand-Side Analysis by Six Buying Segments .......... 34
Consumers ............................................................................ 35
Corporations & Businesses ...................................................... 38
PreK-12 Academic .................................................................. 42
Higher Education .................................................................... 48
Federal Government ............................................................... 51
Local/Provincial Government .................................................... 54
China Supply-Side Analysis ............................................... 56
Forecasts for All Three Self-paced eLearning Products Combined .. 58
Forecasts for Packaged eLearning by Six Buyer Segments ....................59
Forecasts for Custom eLearning Services by Six Buyer Segments ..........60
Forecasts for Tools and Platforms by Six Buyer Segments ....................60

Index of Suppliers ...................................................... 62

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Ambient Insight’s The 2015-2020 China
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List of Tables
Table 1 – eLearning Companies in China that Obtained Funding
in the First Three Quarters of 2015 (in US$) .................................... 9

Table 2 – "What Type of eLearning Content is More Profitable in


China?" ..................................................................................... 29

Table 3 - 2015-2020 Revenue Forecasts for Self-paced


eLearning in China (in US$ Millions) ............................................. 34

Table 4 - 2015-2020 Revenue Forecasts for Self-paced


eLearning in China by Six Buying Segments (in US$ Millions) .......... 34

Table 5 - 2015-2020 China Consumer Revenue Forecasts for


Three Self-paced eLearning Products and Services (in US$
Millions) .................................................................................... 35

Table 6 - 2015-2020 Revenue Forecasts for Ten Types of Retail


Self-paced eLearning Content in the China Consumer Segment
(in US$ Millions)......................................................................... 35

Table 7 - 2015-2020 China Corporate Revenue Forecasts for


Three Self-paced eLearning Products and Services (in US$
Millions) .................................................................................... 38

Table 8 - 2015-2020 China PreK-12 Revenue Forecasts for


Three Self-paced eLearning Products and Services (in US$
Millions) .................................................................................... 43

Table 9 - 2015-2020 China Higher Education Revenue Forecasts


for Three Self-paced eLearning Products and Services (in US$
Millions) .................................................................................... 48

Table 10 - 2015-2020 China Federal Government Revenue


Forecasts for Three Self-paced eLearning Products and Services
(in US$ Millions)......................................................................... 52

Table 11 -2015-2020 China Local/Provincial Government


Revenue Forecasts for Three Self-paced eLearning Products and
Services (in US$ Millions) ............................................................ 54

Table 12 - 2015-2020 China Revenue Forecasts for Self-paced


eLearning by Three Product Categories (in US$ Millions) ................. 57

Table 13 - 2015-2020 China Revenue Forecasts for Three Self-


paced eLearning Products Combined by Six Buyer Segments (in
US$ Millions) ............................................................................. 59

Table 14 - 2015-2020 China Revenue Forecasts for Packaged


eLearning Content by Six Buyer Segments (in US$ Millions) ............ 59

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Table 15 - 2015-2020 China Revenue Forecasts for Custom


Content Development Services by Six Buyer Segments (in US$
Millions) .................................................................................... 60

Table 16 - 2015-2020 China Revenue Forecasts for eLearning


Authoring Tools and Platforms by Six Buyer Segments (in US$
Millions) .................................................................................... 60

List of Figures
Figure 1 - Primary Catalysts Driving the 2015-2020 Self-paced
eLearning Market in China ........................................................... 11

Figure 2 - 2015-2020 Five-year Growth Rates for Self-paced


eLearning in China by Six Buying Segments .................................. 24

Figure 3 - 2015-2020 China Self-paced eLearning Five-year


Growth Rates by Three Product Types ........................................... 28

Figure 4 - 2015-2020 China eLearning Packaged Content Five-


year Growth Rates by Buyer Segment (in US$ Millions)................... 30

Figure 5 - 2015-2020 China Custom eLearning Services Five-


year Growth Rates by Buyer Segment (in US$ Millions)................... 31

Figure 6 - 2015-2020 China eLearning Tools and Platforms Five-


year Growth Rates by Buyer Segment (in US$ Millions)................... 32

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Ambient Insight’s The 2015-2020 China
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Abstract
China is the second largest Self-paced eLearning market in the world after
the US. Revenues in China will reach $5.7 billion by 2020, down slightly
from $5.8 billion in 2015. The compound annual growth rate (CAGR) is
negative-to-flat at -0.3% and revenues will remain steady over the forecast
period.

Economic conditions were challenging in China in 2015 with a stock market


crash and a significant devaluation of the yuan. Despite this economic
headwind, there has been little impact on the commercial online education
sector. The flat growth rate for eLearning is not due to macroeconomic
conditions, it is due to the sheer popularity of online education.
Over 180 suppliers
operating in China
The commercial online education market in China is entering a
are cited in this commoditization stage and suppliers are starting to compete solely on
report. This will price. The startups are focusing on growing their customer bases by
help suppliers offering free promotions and selling commercial products at very low
identify local prices. Ironically, all of the suppliers are reaching a growing number of
partners, customers, but are being pressured to reduce prices. In a commoditized
distributors, market, demand stays high, but pricing power erodes.
resellers, and
potential merger
For example, Xueda Education reported in their August 2015 financial
and acquisition
(M&A) targets. statement that "Average net revenue per student was $2,938 for the first
half 2015, compared to $3,095 for the corresponding period in 2014." The
prices that the market can bear may be falling but the number of buyers is
increasing.

Additionally, there is clear evidence that the rapid uptake of Mobile


Learning is inhibiting the demand for Self-paced eLearning in China. The
growth rate for Mobile Learning in China is a healthy 15.4% and revenues
will more than double by 2020. That said, the 20201 Mobile Learning
revenues in China will be less than half the revenues generated by the
sales of self-paced products.

The growth rates for Self-paced eLearning are only negative in two buying
segments: consumer and PreK-12. Those are the two segments with the
highest rates of Mobile Learning adoption, which is cannibalizing eLearning
sales. The positive growth rates in the other four segments are keeping the
eLearning revenues steady in China.

In terms of sheer numbers, the potential eLearning user base in China is


massive. The irony is that eLearning reaches a very small percentage of
Chinese users, so far. At any given time, there are over 150 million people
using eLearning in China.

As impressive as this looks at first glance, there were 1.4 billion people
(19% of the world's population) in China as of September 2015. A mere
11% of the population has access to eLearning so far and the demand is
quite high, pointing to breathtaking revenue opportunities for eLearning
suppliers in spite of the overall flat growth rate.

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One trend that is unique to China is the high demand for digital early
childhood learning products. While there is a demand for these products in
some developed countries (particularly in Japan, South Korea, and the US),
the scale of the demand in China is found nowhere else in the world.

The Chinese government is actively promoting the use of online education


across the population. In May 2015, the Chinese president called "for
reform and innovation in education in line with development of information
and communication technology to allow all people to access to education
anytime, anywhere".

There are two other significant trends in China's eLearning market: the
The steady proliferation of online education startups (and a spike in funding deals
demand for Self- made with them) and the growing number of large Internet companies
paced eLearning entering the market. Prior to 2014, large Internet companies tended to
products in China
invest in online education companies and in relatively small amounts; in
has attracted
suppliers and 2014 they started acquiring them and now compete directly in the market.
investors from
across the globe. There is been a spike in the number of online education startups in China
The domestic that began in earnest in 2011. According to an April 2014 article in The
suppliers are China Times, over 1,000 new online education companies opened for
attracting the business in China in 2013 alone. According to BANC Business Research,
highest there are now over 6,000 eLearning companies in China. These companies
investments.
tend to focus on specific buying segments.

The Internet Giants Enter the Fray


Several leading Internet companies entered the commercial learning
technology market in the last two years including NetEase, Sohu, Renren,
Kaixin, Jiayuan, Sina Weibo, YY, NetDragon, Youku Tudou, and Kingsoft.

What is interesting is the diversity of the Internet companies now


competing in the Mobile Learning market in China. Baidu is the largest
search engine in China. Alibaba is the Amazon of China. Tencent is an
online media conglomerate. Jiayuan is a dating site, RenRen and Kaixin are
social networks, NetDragon is a game developer, Sohu is an online media
and gaming company, NetEase is an IT giant, YY is a Skype-like platform,
Sina Weibo is a media company with a Twitter-like product, Youku Tudou is
an online video provider, and Kingsoft is a front-office productivity software
company.

To put this unusual ecosystem in perspective, imagine if Google, Google's


YouTube, Yahoo, eBay, Facebook, Microsoft, Microsoft's Skype, Gameloft,
Twitter, Amazon, and eHarmony all entered the commercial learning
technology market at the same time.

Baidu is the largest search engine in China. In August 2014, Baidu entered
the eLearning market in China when they acquired the Chinese online
education platform Chuanke.com. Baidu had invested $10 million in
Chuanke in 2012.

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Baidu has been investing in online education companies for the last few
years and continues to do so, even though they now sell directly to buyers.
In September 2014, Baidu invested $10.6 million in a new startup called
SmartStudy, which sells eLearning test prep courses for standardized
English tests.

Tencent, the largest online mass media company in China, started offering
online courses in late 2013. In April 2014, they launched Tencent
Classroom "an e-learning center that offers exam-oriented courses in
language study, skill training and certification, as well as a few lessons for
primary and high school students." By August 2014, they had attracted
over 34 million users.

Taobao is an online marketplace owned by the online retailer giant Alibaba.


Tencent announced Taobao launched an online education "market" in late 2013 called Tongxue
a joint venture (which means classmates). Tongxue is a unique product offering that
called Weixue allows users and content developers to sell their online courses in a way
Mingri with New similar to eBay.
Oriental Education
in July 2014. New Several other large Internet companies have diversified into online
Oriental had over
education in China including NetEase, Jiayuan, YY, Youku, and Kingsoft.
10 million
registered students
(of all ages) as of  NetEase is a large information technology company in China and has
mid-2015. been investing in online education companies since 2012. In April
2014, they launched their own online education brand called Youdao
Open Education. Earlier they had announced a content partnership
with US-based Coursera to localize Coursera's courses into Chines
and hoist them on NetEase's open education portal.

 Jiayuan is the largest online dating service in China and publicly


listed on the US stock exchange. They launched three online
education companies since late 2013: two for preschool and one for
English language learning.

 In February 2014, Chinese online social platform YY launched a


learning platform called 100 Education, "a platform that will offer a
range of exam preparation classes and programs free of charge. In
addition, YY will open an online enrollment channel, providing
simplified access for its millions of users to participate in the
courses."

It is interesting that the Internet giants continue to invest in online


education companies despite the fact that they now have branded products
on the market. For example, Alibaba led the breathtaking $100 million
investment in TutorGroup in early 2014. Baidu invested $4 million in an
online test prep company called Wanxue in July 2014 and $10.6 million in
another test prep company called Innobuddy in September 2014. In
Febraru 2015, Baidu invested $100 million the online language learning
provider HuJiang.

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Surge in Private Investments to eLearning Companies in


China

"China’s startup industry is still booming and the investment


money is flowing in thick and fast despite worries over the
country’s economic slowdown and stock market jitters."

Steven Millward, Tech in Asia, September 10, 2015

One significant leading indicator is the massive amount of private


investment going to learning technology companies operating in China.
Despite challenging economic conditions in China, investment is still flowing
to learning technology companies.

Domestic firms serving the consumer segment in particular are now gaining
large numbers of visitors and attracting a significant amount of private
investment.

The most active investors in online education in China in 2014 and 2015
were the venture capital firms DCM, Shunwei, Weitoulu, Gobi, ZhenFund,
Matrix, and IDG. The largest corporate investors were Qualcomm, Xueresi,
Bertalsmann, Baidu, and NetEase.

Ambient Insight considers learning technology investment patterns to be


leading indicators. The recent spike in investment to Chinese online e
ducation companies indicates that investors expect the market to grow for
the next 3-5 years (the exit horizon).

In 2012, there were only nine investments made in online education


companies in China. In the first half of 2013, 22 online education
companies had obtained funding. By the end of 2013, 47 online education
companies had received funding from investors.

By the end of 2014, 36 companies operating in China had obtained


funding. While 2014 saw a smaller number of deals, the investment total
was more than double that of 2013.

A total of $634.4 million was invested in online education companies in


China in 2014; this was just over 26% of all funding that went to all of the
learning technology suppliers across the globe during the year.

By far, the largest amounts went to suppliers selling language learning


products and early childhood learning content. There was also a significant
amount of funding going to online test prep companies in China.

In just the first three quarters of 2015 alone, over $1.3 billion was invested
in Chinese learning technology companies and $359.9 million of that
funding went to Self-paced eLearning suppliers. There were 36 deals made
in China in the first three quarters of 2015; 13 of the deals were made with
eLearning companies.

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Table 1 – eLearning Companies in China that Obtained Funding in the First


Three Quarters of 2015 (in US$)
Date of
Company Name Funding Amount
Funding

Gowell $1,000,000 Mar-15

Kano $2,400,000 May-15

WuXi Jin Xun Tong (JXT)Technology $3,366,000 Apr-15

O2O $4,800,000 Mar-15

Yiguan Enterprise Education Group $6,400,000 Aug-15

Guolairen Education Technology $7,200,000 Jul-15

Qingtajiao.com $13,760,000 Jul-15

Scholastic Teaching $16,000,000 May-15

Entstudy $24,000,000 Aug-15

Zhan.com $29,000,000 Apr-15

Best Learning $32,000,000 Jul-15

HuJiang.com $100,000,000 Feb-15

17zuoye $120,000,000 Feb-15

Total in China for First Three $359,926,000


Quarters of 2015

The total is higher considering the September 2015 investment in Baidu's


online education spinoff Zuoyebang by two outside investment firms. The
amount was not disclosed, but the investors (Sequoia and Legend)
routinely invest $10-50 million in companies.

Most commercial online learning providers focus on particular


demographics or on specific content types. Their catalogs tend to offer a
range of content designed for their target demographic. There are
exceptions. HuJiang.com specializes in English language learning and

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caters to students of all ages, although the majority of their students are
young working professionals.

Sources of Data on the China Mobile Learning Market


The financial reports from the domestic and international online education
companies that operate in China provide invaluable insight into the rapidly
evolving market conditions and revenue opportunities in the country.

There are dozens of publicly-traded online education suppliers operating in


China including ChinaEdu, ATA, BAIOO Family Interactive, China Distance
Education Holdings Limited, Xueda Education, Digital China, China
Chuanglian Education, TAL Education Group, China Education Resources
(CER), Shenzhen Kingsun Science & Technology (Kingsun), Ambow
Education Holding, NetDragon, Tarena International, China Education
Alliance, Hong Kong Education, Guangdong Qtone Education, China E-
Learning Group, and New Oriental Education.

Most of these education companies focus on a particular buying segment or


a particular product and their financial statements provide precise reporting
on particular product revenues generated in diverse buying segments.

For example, BAIOO Family Interactive targets preschoolers and Kingsun is


a K-12 eLearning company. China Education Resources (CER) works
directly with the Chinese government's K-12 education agencies and
provides online professional development courses to over a million
teachers. ChinaEdu is online education company serving the higher
education segment; they are an aggregator with dozens of higher
education partners. ATA sells test prep and online exams for corporate
licensure and professional certifications (finance, IT, etc.). China Distance
Education Holdings Limited (DL) offers professional online education and
test preparation courses in accounting, law, healthcare, construction,
engineering, and information technology exams.

The financial reports from all these companies provide detailed cross-sector
information about the inhibitors and catalysts in their particular product
market and buying segment.

The major international educational publishers are publicly traded and


active in China. Pearson, McGraw-Hill (filed for their IPO in September
2015), Houghton Mifflin Harcourt, Singapore-based Popular Holdings, and
Japan-based Benesse all have significant market presence in China. In July
2015, Pearson reported that 6% of their sales in 2014 were in China; this
equates to $375 million in revenues.

The top source for the commercial education technology market in general
in China is an edtech news website called JMDedu.com. "We observe the
dynamic development of the edtech industry, discover inspiring companies
and products, interpret policy change and market trends." They also track
private investments made to learning technology suppliers in China.

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Primary Catalysts
The most significant catalysts in China driving the sales of Self-paced
eLearning products are:

 Large-scale technology deployments in the schools


 Content digitization efforts in the various federal, provincial, and
municipal school systems
 High demand for English language learning
 Consumer demand for online test prep courses
 The booming enrollment in online education across all segments
 The rapid adoption of early childhood eLearning in Chinese
preschools.

The foundation of these catalysts is the rapid adoption of information


technology in China. China had just over 1.4 billion people by mid-2015.
China had over 1.3 billion mobile subscriptions (a 95% mobile penetration
rate) in China by the end of 2014. Over 86% of all Internet users in China
are now accessing the web with mobile devices. As of November 2014,
there were over 500 million people using wireless broadband on 3G and 4G
networks in China.

Figure 1 - Primary Catalysts Driving the 2015-2020 Self-paced eLearning


Market in China

In January 2015, the China Internet Network Information Center (CNNIC)


reported that Internet usage is growing by 31 million people a year. By the
end of 2014, China had 649 million users. The number of mobile Internet
users increased by 57 million people from the year before.

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The agency said the "online economy accounts for seven percent of GDP,
up from 3.3 percent the previous year." Internet retail sales were up a
stunning 55.6% in 2014 compared to the year before and online sales
reached over $53 billion.

In May 2015, the government announced a $1.7 billion program to


increase 4G access in the country with funding through 2017. The mobile
network operators will retire 2G networks and increase access speeds for
3G and 4G. The Chinese government's goal is to have fixed and wireless
broadband available everywhere in the country by the end of 2017.

Large-scale Learning Technology Deployments


In March 2012, China's Ministry of Education issued the Education
Information Technology Development Ten-Year Plan (2011-2020). The
plan's three primary objectives are to "ensure that everyone can enjoy an
IT study environment, form a learning-based social system supported by IT
platforms, and implement broadband coverage for all districts and schools."

The majority of eLearning adoption in 2013 and 2014 was concentrated in


the urban areas of China. This will change over the forecast period as the
government rolls out connectivity initiatives in the rural areas in an
By the end of 2014, umbrella program called Connecting Every Class, which provides
the Chinese
connectivity, laptops, learning technology, and eLearning content to rural
telecoms had
deployed wireless schools.
broadband to 94%
of the rural areas in The program's goal is to deploy "Internet access to the majority of rural
the country. primary schools by the end of 2015." Their long-term goal is to have every
primary and secondary school connected by 2020. "All students will have
access to individualized Internet-based learning services regardless of
location."

By 2014, China was spending 4% of their GDP on education. In 2010, the


government announced a ten-year plan that committed to spending 10% of
the annual education budget on technology for the schools. They set out
very specific goals including building a national education network "to be
used to lead the large-scale education digitalization program."

China Education Resources (CER) is a publicly-traded company and


develops educational products for the PreK-12 segment in China. They built
the CERSP.com portal in collaboration with China's Curriculum
Development Center of the Ministry of Education. This is a national
education portal and the primary distribution point for the new digital
curriculum.

In June 2015, CER reported that first quarter revenues in 2015 increased
by 39.1% with the online products growing by 51.9%. In collaboration with
China's education administrators and experts, China Education Resources
has been helping to transform the curriculum of the world's largest
educational system."

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CER also closely tracks the government mandates. According to CER, by


2015, "At least 60% of all schools will have high speed broadband access
and all rural schools and kindergartens will be equipped with multi-media
classrooms. The overall student-to-computer ratio will be 10:1 in primary
schools, 8:1 in junior schools, and 5:1 in high schools. By 2020, all K-12
schools will have access to broadband Internet and all school classrooms
will be equipped with multi-media equipment. The overall student-to-
computer ratio will be 6:1 and the teacher-to-computer ratio will be 1:1. All
students will have access to individualized Internet-based learning services
regardless of location."

The telecoms and mobile device makers are active in the learning
technology industry in China. Korea-based SK Telecom has garnered
several large contracts to deploy learning technology to the schools in
China. "In June 2014, South Korea-based SK Telecom announced a deal
with China’s Zhongqing Group to provide SK Telecom's T Smart Class
platform to 1,300 schools in China. Zhongqing Group provides education
services to over 20,000 schools across China and is the third-largest
education software provider in the country.

Huawei is one of the largest telecoms and device makers in the world and
has a turnkey learning platform called the Huawei Distance Education UC
China Mobile Solution designed for higher education institutions. Huawei's solution is
operates the endorsed by the Ministry of Education's Department of Higher Education
largest PreK-12 and is currently deployed at the College of Peking University, Tsinghua
educational University, and the College of Beijing University of Post and
network in the Telecommunications.
world. The web-
based platform is
In February 2014, Singapore-based Popular Holdings launched their e-
used by over 22
million students in Smart platform in Hong Kong. "This cross platform learning management
China. system is designed for primary schools. It is a customizable, flexible and
comprehensive platform allows schools to manage assignments, customize
curriculum and track student performance and competency in the new e-
learning era." Popular also has offices in Beijing and Guangzhou.

In tandem with installing technology in the schools, the Chinese


government has also launched technology centers in cities across the
country. The centers are open to anyone, but they have dedicated
resources for children. "These centers allow children to interact with and
use computers and other technologies. Additionally, center administrators
teach the students supplemental technology-related curricula that can be
targeted at a range of age groups."

The large-scale connectivity initiatives are not limited to the schools.


According to the government, by early 2013, "All central government
departments and provincial-level governments had established websites
and 99.1 percent of municipal governments have done the same."

In late 2013, a consortium of nine Chinese universities announced a higher


education portal called XuetangX on the open source platform edX
developed by MIT and Harvard in the US. "XuetangX will increase Chinese
students’ access to quality education using cutting-edge online technology,

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Self-paced eLearning Market. Country Edition

while transforming learning on Chinese campuses and enhancing inter-


university collaboration." XuetangX is essentially a national higher
education network and the consortium members are now developing the
Chinese content.

In May 2014, the second national higher education network called the
MOOC Platform of Chinese Universities launched in China. The portal was
built by a company called icourses.edu.cn and NetEase (one of the largest
IT firms in China) and has the cooperation of 19 universities in China. At
launch, there were 56 online courses.

The Chinese Ministry of Education operates a portal for teachers called the
National Network Training Platform for University Teachers. Ambow
Education, a commercial eLearning supplier, developed the portal.

The infrastructure is the foundation for learning technology tools,


platforms, and digital learning content. The high demand for the integration
of these eLearning products is a significant revenue opportunity for
services suppliers.

Deploying the learning technology in the academic institutions lays the


ground for the delivery of digital learning content. Now that national
education networks and learning platforms are nearly in place, academic
content digitization efforts are in full swing.

Massive Academic Content Digitization Initiatives


Academic content digitization programs began in the developed economies
several years ago and late-stage phases are rolling out now. These efforts
are underway in both PreK-12 and higher education.

As of 2010, the entire primary and secondary curriculum was online in


China. Although the content is online, relatively few students have access
Part of the to it yet. The Chinese government's goal is to have their entire K-12
Connecting Every population of over 200 million students online by 2020.
Class project
includes what the
Digital content is still mostly accessed in the urban schools, particularly the
government calls
electronic book private schools. This will change as the government completes its
bags, or E- Connecting Every Class program in the rural areas.
Schoolbags. It is a
conceptual term for In November 2013, the Shanghai Education Commission stated in the press
digitized textbooks. that over 1,500 textbooks would be digitized by September 2014 "and
available to all students in primary, middle and high schools. Students can
choose to use textbooks or a combination of textbooks and e-textbooks."
Shanghai is just one of many cities that are part of the national so-called
"demonstration school" project.

The demonstration school initiative involves a great deal more than porting
print textbooks to eTextbooks. It also includes an end-to end infrastructure
overhaul and the installation of learning technology and interactive digital
content. The initial demonstration schools were selected in 2012. In 2013,

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the most successful were designated as "model" schools and are now the
digitization blueprints for the rest of the schools in the country.

According to China Education Resources (CER), "By 2015, all provinces of


China will have digital education trial regions and all cities and counties will
have demonstration schools, to be used to lead the large-scale education
digitalization program."

A Shanghai company called Wicresoft is a beneficiary of the demonstration


school initiatives. They have deployed turnkey learning management
systems in Shanghai, and most recently in Anhui province. In February
2014, they announced that "In 2014, capturing the national market is our
target. We will launch E-Schoolbag projects in Beijing, Guangdong,
Chengdu, Qingdao, Hefei, Zibo, and Gansu."

The for-profit eLearning suppliers are heavily involved in the content


digitization efforts in the country. They have large government contracts;
they develop and deliver the content to millions of students and teachers in
the country.

 A company called 17zuoye.com is an online learning platform had


"2.2 million users including teachers, students and parents, covering
more than 10,000 primary schools in China" by the end of 2013.

 In February 2013, China Education Resources (CER) announced that


the Gansu Provincial Education Department hired them to "add Self-
paced eLearning solutions to the company's school platform for the
students in Gansu province." China Telecom provides the content
delivery platform.

 In August 2014, Pearson stated in their mid-year financial


statement that "In Guizhou province, we have trained nearly 200
teachers in English Language Teaching, and are providing digital
courseware for 8,700 students in the city of Guiyang."

The largest education publisher in China is China Education formed in 2010


China and from a merger between five educational companies in China (including
Indonesia are the Higher Education Press). China Education is a $1.6 billion business. China
first countries in Education is primarily focused on the higher education segment but does
the world to sell products to PreK-12 schools. China Education (not to be confused with
convert all their China Education Resources) has content partnerships with the major
primary and international publishers including Pearson, Cengage Learning, McGraw-Hill
secondary Education, Wiley, Cambridge University Press, and Oxford University Press.
academic content
to digital formats.
When Australia-based Capital Mining invested in Xingang Zhiyuan
Technology (XGZY) in October 2014, they stated in the press that "The
digitization of education publishing is still in its infancy in China, and XGZY
is regarded as having early-mover advantage in developing interactive
digital textbooks, adaptive e-learning, lecturing, tutoring, and online exams
for Chinese universities."

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High Demand for English Language Learning Courses


China is now the top buying country of digital English language learning
products, not only in the region, but in the world. The revenues for digital
English language learning products in China will reach just over a billion
dollars by 2020, up from the $701.1 million reached in 2015. The growth
rate for digital English in China is slowing somewhat but is still a healthy
7.8%. (Source: The 2015-2020 China Digital English Language Learning Market,
Ambient Insight, LLC.)

The largest buyers of digital English language learning products in 2015


were the government-run schools, followed by the private (corporate)
language learning schools, and consumers. By 2020, consumers will be the
top digital English buyers in China.

There are four major catalysts driving the current digital English language
learning market in China:

 Consumer demand for English language learning products


 Increase in the use of digital English in the schools
 Compulsory use of English in the higher education segment
 High demand for four specialized types of English in China: business
English, tourism English, hospitality English, and aviation English.

According to results published in November 2013 from a survey on the


demand for English in China (conducted by the 21st Century Education
Research Institute in Beijing), 70% of Chinese parents want their children
to learn English. "Although 90% of the parents believe that learning
Chinese and traditional culture is more important than English, their
children still pay more attention to the study of English than Chinese."

One interesting result from the survey was the age children are introduced
According to the
Chinese National
to English. Just over 47% of children were between the ages of 3 and 6
Statistics Bureau, when they were first introduced to English. Out of all PreK-12 students
"73.8% of primary taking English, the largest cohort was three-year old children at 16.2%.
school students and
65.6% of middle There are over 50,000 English language schools in China and over 90% are
school students private institutes (companies). They are heavily concentrated in
participate in extra- economically developed areas such as Beijing, Shanghai, Guangzhou,
curricular Chengdu, Shenzhen, Chongqing, and Wuhan. They are becoming a
educational
significant reseller channel for commercial digital English language learning
programs."
products.

Private language schools in China are gradually shifting to online delivery


as a way to increase margins. The presence of large private language
school ecosystems is a catalyst for eLearning as the private schools
transition to online delivery. The quickest way to get to market is to license
and resell third-party commercial products.

Tell Me More (now owned by Rosetta Stone), DynEd, and GlobalEnglish


(acquired by Pearson in May 2012) are major suppliers of digital English
language learning in the private channel. When Rosetta Stone acquired Tell
Me More in late 2013, they stated in the press that the goal was to acquire
organizational Chinese buyers.

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McGraw-Hill, Macmillan, Cambridge University Press, Pearson, and Oxford


University Press have very large installed bases in the private school
industry. McGraw-Hill has two joint ventures that focus on English language
learning in China: MaxEn with New Oriental and Mooby with TAL Education.

In May 2014, Oxford University Press (UOP) announced a distribution


agreement with Hujiang, an online private language school with millions of
registered users. The first product being sold on the platform is an online
course called Hujiang International Business English, which is an adaptation
of UOP's Business Result product.

New Oriental Education claims to be the largest provider of "private


educational services" in China. In 2013, they reported that their revenues
for "online children’s English classes are rising 35% a year." They had 8.8
million registered students as of early 2014. Interestingly, they use the
commercial LMS from US-based Saba for their internal employee training.
They have over 17,000 teachers in the physical learning centers across the
country.

Hujiang reported In March 2014, New Oriental's CEO stated in the press that "80 percent of
that they had 3 New Oriental's trainees are kids between four and 10 years of age, as well
million active paying as students preparing to go abroad for further studies. The remaining 10 to
members and 70 20 percent are candidates for the National College English Test (CET) Band
million registered
4 and 6."
members "made up
primarily of young,
white-collar The private language schools buy language learning labs and use the
workers, many who software as supplemental content used in tandem with their classroom
work for foreign- instruction. The language learning lab suppliers often partner with
owned enterprises". commercial language learning suppliers for the content in their labs.
Finland-based Sanako has a subsidiary based in Shanghai and is the
leading language lab supplier in China; they resell the digital content from
Oxford University Press.

TutorGroup claims to be China's largest private online English language


learning provider. They offer three self-paced digital English language
learning products, "TutorABC and VIPABC for English-language learning for
students in the greater China region, and TutorABC Jr. for English language
learning students between the ages of 8 and 18." In October 2013, they
reported that their sales grew by 300% compared to the previous
year.

Pearson's digital English language learning products are now used by


hundreds of higher education and vocational institutions in China. They
formed a partnership with Tsinghua University in 2004 to distribute the
software via Tsinghua University Press. As of September 2014, they had
millions of higher education students using the eLearning products.

Pearson also delivers English language learning directly via their Wall
Street English business, which consists of over 530 learning centers. In
July 2014, they reported that their student base had grown 6% in the first
half to reach over 65,000 students.

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In China, English language learning is compulsory starting in third grade,


although the quality of instruction varies greatly and often with a focus on
written English instead of verbal skills. Most primary Chinese students
never achieve fluency. Children are only required to attend nine years of
school although over 85% go on to secondary school. Those that do go on
have to master English, at least enough to pass exams. This is one of the
factors driving the demand for online test prep for standardized academic
English exams.

Consumer Demand for Online Test Prep Products


One major catalyst in the consumer segment (and the higher grades in the
PreK-12 segment) is the heavy emphasis on standardized English tests and
A domestic high stakes testing in China. Over 10 million Chinese students take the
company called the high school entrance exam (known as the "Zhong Kao") every year. Over 9
Commercial Press million Chinese high school seniors take the national university entrance
has offices in exam (known as the "Gao Kao") every year; 9.42 million students took the
Beijing and Hong
exam in 2015.
Kong and develops
digital English
language learning The Gao Kao exam takers are competing for 6.5 million available places in
apps and courses the higher education system and achieving high scores on the tests is
for the China vitally important to students and parents.
market.
Test prep in China accounts for two thirds of all spending of non-
governmental education spending. Most of the test prep is still provided in
physical classrooms and by private tutors. Both options are much more
expensive than the online products.

The largest test prep firm in China is ATA. "ATA aims to become the world’s
biggest exam training provider that focuses on government, industry,
company and personal exam businesses."

Pearson acquired test prep provider Global Education & Technology in


2011. Global has a chain of 450 test preparation and training centers in
China and an "online course delivery platform for students and
professionals." According to Pearson, over 500,000 Chinese students take
standardized English language tests each year, which has sparked growth
in spending on online and offline test preparation products.

TAL Education Group is a major PreK-12 tutoring company in China and


claims their Eduu.com portal "is the largest online education community in
China." The portal is gateway to nine online learning sites including one
dedicated to Gao Kao test prep and one for the Zhong Kao.

In higher education institutions, English is compulsory. An English


proficiency test, called the College English Test (CET), is administered to
college students twice a year. It is a standardized test developed by the
Ministry of Education. Over 6 million students take the CET each year and
the government estimates that students spend over $150 million a year on
test prep for the CET.

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The demand for test prep has created a spike in the emergence of online
test prep startups including, SmartStudy, Kuailexue, Yuanti Ku, and
Xingshuai Teach.

SmartStudy launched in China in 2014. The online courses help "Chinese


students prepare for English language tests, such as TOEFL, GRE and
IELTS."

Yuanti Ku offers a wide range of digital test prep for standardized exams
including the Gao Kao, "administrative aptitude tests, essay tests for civil
servants, entrance exams for postgraduates, first-level constructor exams,
law counselor of enterprises exams, junior accountant exams, and
securities qualification exams."

Xingshuai Teach (XSTeach) offers their certification-based online courses


on graphic design for free, but charge for the online certification exams.
Their revenues have grown on average of 150% per year since they
opened in 2012.

Consumers are not the only buyers of online test prep in China. China
Chuanglian Education is a training company that focusses on civil servant
certification. In 2013, they aggressively migrated to online education via
acquisitions of Housden Holdings and of CL Education Limited. "The
Company expects that the online education business has vast potential and
will further broaden the revenue source in near future."

Traditional training
companies are
moving fast into
eLearning. Booming Enrollment in Online Education Across All
Classroom-based Segments
providers like
Beijing Juren Enrollment in online education is booming in all the segments in China from
Education Group preschool to professional education. The wide spectrum of eLearning
and Longwen adoption is unique in the world.
Education launched
online spinoffs in In July 2013, Yu Minhong, chairman of New Oriental Education, stated in
2013, each
the press that "online education will account for 40% of the private
investing over $8
million in their new
education market in three to five years, from 10% now." As of August
startups. 2015, 22% of all education spending in China was for online education.

The adoption rate of eLearning in China's higher education segment is


nothing short of astonishing. Several online institutions are now enrolling
very large numbers of online students and enrollments are accelerating.

 Tsinghua University launched their online courses on the edX


platform in May 2013. They have 25 online courses and over
120,000 registered users.

 PRCEDU provides turnkey online degree programs to university


partners, It has "over 90,000 enrolled students and seven long-term
university partners."

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 The Distance Learning School of ZhengZhou University based in


Henan Province has over 40,000 students across China. Australia's
NSW AMES, an Australian government body that sells commercial
English language learning products, has a distribution agreement
with the university to resell their EnglishatAMES eLearning product.

 Huazhong University of Science and Technology's School of Distance


and Continuing Education also has over 40,000 enrolled students
and offers over 100 courses online and in training centers across the
country.

Until early 2014, the Chinese Ministry of Education had to officially approve
online degree programs and did not allow foreign firms to grant online
degrees in China. As of 2014, 68 universities in China have dedicated
online learning institutes. The government suspended the approval
mandate in January 2014, making it easier for institutions to go online.

Of course, large online enrollments are not limited to higher education in


The Chinese China.
government now
provides grants up  Founded in 2011, 17zuoye now reaches more than 14 million
to $10,000 to students and 700 thousand teachers in the PreK-12 segment. They
professors that hire garnered a breathtaking $120 million in investment in February
developers to
2015.
convert their
teaching materials
to online formats.  New Oriental's Koolearn online learning portal had 10.7 million
More than 12,000 registered users as of August 2015. The users are spread out over
courses developed the buying segments with a large base of children.
at Chinese
universities are now  In June 2015, US-based Coursera reported that they had over a
available online. million Chinese students taking online courses. They have deals with
the IT giant NetEase and announced a billing agreement with Alipay
in July 2015; Alipay has over 400 million registered users in China.

 In March 2013, Ireland-based Onwards Learning announced a


distribution agreement with China Computer Correspondence
College (CCCC), a large vocational education chain in China with
over 400 locations and over one million students. CCCC will
distribute Onwards Learning's catalog of third-party digital learning
content across the CCCC chain.

 China Distance Education Holdings Limited is a publicly-traded


online education provider in China that provides online professional
education, certification/licensure test prep, and continuing education
courses for several professions including accounting, healthcare,
construction, engineering, and law. They reported 2.7 million
enrollments for their 2013 fiscal year. In August 2014, they
reported that "total course enrollments reached 925,000 in the third
quarter of fiscal 2014, an increase of 42.6% from the third
quarter of fiscal 2013."

 In May 2014, Oxford University Press (UOP) announced a


distribution agreement with Hujiang, an online private language

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

school with 3 million active paying members and 70 million


registered members "made up primarily of young, white-collar
workers, many who work for foreign-owned enterprises".

 In July 2014, Alibaba Group's e-commerce division Taobao reported


that their consumer-facing online education portal called Taobao
Classmate registered over one million users in 2013 in just the first
three months of operations. Over 200,000 people log into the site
every day.

Saybot was a US company that moved to Shanghai in 2010. They sell a


subscription-based digital English language learning product designed
specifically for Chinese children between the ages of 5 and 12 called Alo7.
By mid-2013, they had over 10 million children registered on their site.

Rapid Adoption of eLearning in Early Childhood Learning


Hong Kong-based BAIOO Family Interactive Limited claims to have 40% of
the children's edutainment market in China. They filed for an IPO in mid-
2014. Their education portal called 100bt.com, "is a centralized platform
for interactive children's content through which users can access all six of
its virtual worlds and entertainment, e-learning, and other products and
services using one registered account."

In BAIOO's recent financial statement, they reported that they had 56.2
million active users in the first half of 2014, making it the largest
educational portal in the world. They are already a $90 million business
and growing by a brisk 35% a year.

One unique aspect of the China eLearning market is the adoption of


eLearning in the private kindergartens. Kindergartens in China are a
combination of what other countries would call preschool and kindergarten.
Kindergarten in China begins at age three, although it is quite common for
rural kindergartens to operate as nursery schools as well.

There are over 200,000 kindergartens (up from 134,000 in 2008) in China
and over 70% are private. In fact, the preschool segment is so
By the end of 2014,
commercialized in China that the schools are often referred to as
there were over 32
million children in "preschool educational stores."
kindergartens in
China. This is out of Even the public kindergartens charge tuition in China, although at rates
a cohort of 71 vastly lower than the private schools. This is because the government pays
million 2-5 year olds the teacher salaries in the public preschools, but not in the private
in the country. preschools. The government provides facilities for both private and public
preschools, although the large chains operate their own facilities.

The number of public kindergartens is shrinking and the number of private


schools is growing by an average of 12% a year. The demand for
kindergarten far outstrips the supply. The government is actively
supporting the private kindergarten industry. In 2011, they published a

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

three-year action plan with the goal to increase enrollment to 60% by 2014
and pledged "to build new preschool facilities, enhance and scale up
teacher training, provide subsidies for rural families for access to early
learning opportunities, and increase support for private early childhood
education centers."

RYB Education, Oriental BabyCare, Gymboree Play, and Music are some of
the leading commercial brand names operating in the private kindergarten
market. A significant number of publicly-traded kindergarten chains are
also prominent in China including Huijia Kindergarten and Hong Huanlan
Education Group.

There is a thriving private English language school industry focused on


preschool children. Disney English, New Oriental, and Pearson's Wall Street
English are the market leaders. These three develop their own content
while other chains license third-party content.

RYB Education is a large preschool chain in China and licenses content from
US-based Scholastic in their preschools across China. Singapore's Popular
Holdings has preschools in several major cities in China and licenses digital
English language learning products from the BBC for use in their preschool
language learning centers.

In March 2012, McGraw-Hill announced a ten-year licensing deal with


Beijing-based Oriental BabyCare. By mid-2014, Oriental BabyCare had over
570 preschools in 180 cities in the country. "Through the partnership,
Chinese children ages 2-6 will for the first time have access to McGraw-Hill
Education's digital learning solutions."

In October 2013, Australia-based SmartTrans announced that they had


been hired by 123 Education Group to develop "online and mobile services
in a rollout of an early childhood learning program." The 123 Education
Group operates a chain of kindergartens and "Early Years Centers" across
China.

Japan-based Benesse provides what they call "preschool services" across


China and as of April 2014, had 600,000 children enrolled in their
subscription-based correspondence preschools. A range of products are
provided in the subscription including their digital Kodomo Challenge
eLearning content. In April 2014, they released their Kodomo Challenge
tablet that comes preloaded with educational content.

In October 2014, US-based Kids ‘R’ Kids, a preschool chain with 157
preschools in the US, announced their expansion into China. The preschool
franchise "is poised to open its first international location in Shanghai at
the beginning of 2015 with nearly a dozen more schools to follow
throughout the course of the year."

Kids ‘R’ Kids makes extensive use of learning technology in the classrooms
and provides individual Computer Learning Centers in every school, which
are equipped with "the latest multi-touch screen technology and
educational software for development in a safe, child-directed learning

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

environment." Kids ‘R’ Kids licenses their eLearning content from


ABCmouse.

Shanghai-based Wicresoft has a contract with the Shanghai Municipal


Education Commission to build and maintain the Shanghai Preschool
Education Network. "Over the past ten years, the Shanghai Preschool
Education Network recorded over 800,000 registered users, covers all
public kindergartens in Shanghai and provides comprehensive information
services for preschool education institutions, teachers, and parents."

What You Will Find in This Report


There are two sections in this report: a demand-side analysis and a supply-
side analysis. Additionally, there is an index of suppliers competing in the
region.

The demand-side revenue analysis is broken out by six buying segments. A


breakout for three product types is included for each of the buying
All US$ dollar segments: retail packaged content, custom development services, and
figures in this report tools/platforms. Consumers only buy content and a breakout by ten
are based on the
content types is included in the consumer section.
dollar-to-yuan
exchange rate as of
September 2015 The supply-side analysis provides five-year revenue forecasts for three
and account for the categories of Self-paced eLearning across all buying segments combined
recent yuan and each of the three product types is broken out by the six buying
devaluations by the segments as well.
government.

Who are the Buyers?


The Self-paced eLearning buyers in China are:

 Consumers
 Corporations & businesses
 PreK-12 school systems
 Higher education institutions
 Federal government agencies
 Local and provincial government agencies

The revenues for Self-paced packaged content are heavily concentrated in


the academic segments so far. The top buyer in the 2015 market was the
PreK-12 segment, followed by corporations and the consumer segment. By
2020, corporations will be the top buyers in China, followed by PreK-12 and
higher education.

While the growth rate for eLearning in the consumer segment is distinctly
negative at -7.3%, consumers are still spending significant amounts of
money on self-paced products. Consumers spent over a billion dollars on
self-paced education products in 2015. That said, consumers in China
increasingly prefer mobile education products.

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Ambient Insight’s The 2015-2020 China
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In August 2015, the CFO of New Oriental made this statement about their
online learning portal Koolearn.com "The number of registered users
increased more than 67% year over year and the number of paid users
increased over 138% year over year. The number of cumulative registered
users has reached more than 10.7 million."

Figure 2 - 2015-2020 Five-year Growth Rates for Self-paced eLearning in


China by Six Buying Segments

Parents pay for


instruction materials
so the consumer
and PreK-12
spending overlaps.
The government
buys the tech, but
the parents buy
most of the content.

The central Chinese government and the provincial governments fund the
majority of public PreK-12 and higher education spending on learning
technology. For clarity's sake, this report includes the spending made in
the academic segments (including teacher training) by the government in
the two academic sections of this report. The forecasts in the federal
government section are expenditures made by the government for
employees, military personnel, and public safety personnel (China has a
national police force.)

In August 2015, the PreK-12 company China Chuanglian Education


reported that "By the end of June 2015, our services have 69 online
training platforms covering provinces and cities across China and among
different industries with 3.7 million registered users and 3.1 million paid
users; we are expecting to have sustainable growth in the future.

Qtone’s website www.qk100.com sells online education services to K-12


schools, students and families. Over 25 million families and 8,000 schools
use their services in China. In April 2015, Qtone announced that they had
won the $768,000 bid to build out China Mobile's web-based PreK-12
online education platform in the province of Jiangxi. The province had

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

24,671 schools (kindergartens, primary, and secondary schools combined)


by that time with over 8.3 million students and over 500,000 teachers.
China Mobile expects to have six million users and over four million paying
users by the end of 2015.

Local and provincial government agencies buy eLearning products for


employees, public safety personnel, and vocational students. The federal
government China has administrative entities called direct-controlled
municipalities, which are actually governed by the federal or provincial
governments. There are currently four of these municipalities: Beijing,
Shanghai, Tianjin, and Chongqing. All four of these direct-controlled
municipalities have designated "demonstration" schools, which act as
prototypes for the digitization of the education system across the country.

There are over 230 million students and 14 million teachers across China's
520,000 primary and secondary schools. While the federal and municipal
governments provide the majority of digital content mapped to the central
curriculum to the schools, there are huge opportunities for commercial
suppliers with supplemental content, particularly IT training and language
learning content.

Enrollment in private primary schools is still quite low in China: only 8% of


primary students attended private schools in 2014. The percentage is
somewhat higher in the secondary schools; just under 16% of secondary
students attended private schools by the end of 2014. This percentage is
relatively low, but quadruple the percentage in 2003.

Parents pay for the textbooks and instructional material used by their
children in the schools. Parents spend an average of $320-$480 per year
per child. The federal government issues a list of approved textbooks every
year. The list issued in October 2014 was the first time eTextbooks were
included. The cost burden for digital educational content will gradually shift
to parents during he forecast period.

There were over 2,800 authorized private and public universities in China
by the end of 2014. There are over 700 private higher education
institutions in China and the number of private institutions is growing by
over 5% a year.

In 2002, barely 15% of high schools students went on to college in China.


By 2013, the number had climbed to 35%. The government's goal is to
increase this percentage to 50% by 2020. The number of Chinese higher
education institutions has more than doubled to over since 2000.

The number of enrolled higher education students has increased six fold in
the last decade to over 33 million students, the largest higher education
system in the world. By the end of 2014, 16% (5.28 million students) of
higher education students in China were online students.

Previous to January 2014, one major inhibitor for online education products
in the higher education segment was the law in place requiring institutions
to gain government approval for their online programs. This was a lengthy

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

and complicated process. Only 68 institutions had managed to get approval


by January 2014 when the law was overturned.

One major catalyst in the higher education segment in China is the


proliferation of joint ventures between prestigious foreign universities and
domestic universities. As the Western universities enter the market, they
Federal and bring learning technology with them.
provincial
government The federal government funds annual training for federal government
agencies fund PreK- workers (and many municipal and provincial workers), military personnel,
12 and higher and the national police force.
education, but
municipalities and There were over 17 million federal, provincial, and municipal employees in
local agencies fund
China in 2013. Federal and provincial government agencies buy commercial
vocational and adult
education in China.
self-paced content for employee training, but they also hire custom
services suppliers to develop a wide range of courses including tourism,
literacy, vocational training, public safety, and healthcare.

One of the most significant revenue opportunities for commercial eLearning


suppliers is the vocational and adult education segment. Vocational and
adult education is primarily funded by municipal agencies, which actively
recruit local businesses to participate, fund, and provide curriculum input in
the programs. The goal is to train people to meet the needs of local
businesses. At the end of 2014, there were 2,882 vocational schools in
China, and 86% were private schools. The local and municipal
governments invest $2.7 billion a year on adult education.

The government agencies set the curriculum for the vocational schools with
input from local businesses; they have shifted away from agriculture and
industrial training to programs that map to the jobs skills in the highest
demand. These skills include finance, IT, energy, tourism, healthcare,
construction, languages, and teaching. These schools are increasingly
buying commercial eLearning products, particularly for language learning
and IT.

In August 2014, the government released a six-year Modern Vocational


Education Development Strategy. One of the goals is "to increase the
number of students in vocational educational institutions from 29.34 million
now, to 38.3 million by 2020."

Corporate spending on eLearning is heavily concentrated in the large urban


areas. One major trend is the shift in who pays for corporate training. Until
quite recently, employees quite often paid for their own training taken at
commercial facilities. This is changing fast; employers now pay for the vast
majority of commercial training.

In April 2014, Cegos Asia Pacific released the results of a survey on


workforce training trends in six Asian countries, including China. The China
results showed that companies paid for the majority of training for
employees, which is a new trend. "This corresponds with a dramatic shift
away from self-initiated learning to employer-initiated training with only
10% of employees now initiating their training compared with 43% in
2012." The China results also showed a significant uptick in the adoption of

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eLearning in the corporate segment; "Online learning is up from 16% in


Students must pay
2012's survey to 45% this year."
tuition to attend
both public and
private vocational In May 2014, the Hong Kong Institute of Human Resource Management
schools. The (HKIHRM) released their annual survey on the Hong Kong training industry.
government Of the corporate respondents, 46% said they allocated budgets for
provides a subsidy eLearning in 2013. Of those, 32% had increased their eLearning budgets in
of $240 to students 2013, 59% kept their eLearning budgets the same, and 8% reported that
enrolled in the their eLearning budgets declined.
schools.
There are over 1,000 so-called corporate colleges operating in China.
Corporate colleges are corporate training centers for employees. All of the
corporate colleges offer eLearning courses. Except for language learning
and IT training courses, most of the courses are created in house or are
university programs from major universities.

Starbucks launched their Starbucks China University in June 2012. They


have a virtual university component that provides "personalized learning
experience through various customized methods, including digital and
mobile." Mitsubishi's corporate college in China uses NetDimensions'
learning management system.

It is interesting that the corporate colleges in China often offer post


graduate degree-based business management programs, which would be
provided by grad schools in other countries. Companies that offer business
and MBA programs in China include Novartis, ZTE, Motorola, China Eastern
Airlines, Intel, Tencent, General Electric, IBM, and Hewlett-Packard.
Novartis offers an MBA program in collaboration with Peking University.
There are 100% online corporate colleges. China Telecom's Online
University is a good example. ZTE uses China Telecom's learning platform
for their online courses.

What Are They Buying?


The supply side section of this report provides revenue forecasts for three
categories of Self-paced eLearning products and services:

 Retail packaged courseware content


 Custom content development services
 Authoring tools and learning platforms

Packaged self-paced content accounts for the vast majority of revenues


throughout the forecast period. Consumers, private and public academic
institutions, and government agencies are buying a large amount of
commercial digital content. Many public school and government
procurement initiatives span 3-10 years; revenues will remain steady for
the foreseeable future.

Retail packaged content includes products delivered on tangible media such


as DVDs, as well as web-based content. Consumers only buy packaged

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

content; they do not buy custom development services, authoring tools, or


platforms.

Figure 3 - 2015-2020 China Self-paced eLearning Five-year Growth Rates


by Three Product Types

The defining
characteristic of
Self-paced
eLearning is the
pedagogical
structure imposed Despite the migration to Mobile Learning content, consumers accounted for
by formal the second-largest spending on self-paced educational content in 2015 in
instructional design China and a breakout for ten content types is included in the consumer
and systematic section:
development of the
digital courseware
 IT-related courses
products.
 Language learning
 Early childhood learning
 General academic courses (including supplemental and remedial)
 Standardized exam and test preparation courses
 Hobby and instructional "how to" guides
 Medical, health, wellness, and fitness courses
 Business and finance
 Licensure and certification
 Training and professional development

The growth rate for retail packaged eLearning in China across all buying
segments combined is negative-to-flat at -0.7%. This means that revenues
will remain steady over the forecast period.

Across all six buying segments, the growth rates for retail packaged
content and tools and platforms are negative. In contrast, the growth rate
for custom development services is positive at 2.3%, yet the growth rates

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

vary considerably for each of the three product types in each buying
segment.

There are several domestic sources of information on what content is in


highest demand in the consumer segment in China. In a survey conducted
at the International Online Education Summit in China in 2013, suppliers
were asked which eLearning content types were more profitable:

Table 2 – "What Type of eLearning Content is More


Profitable in China?"
What eLearning Content Type is
Responses
More Profitable?
Exam preparation 62%
Foreign language 41%
Staff training 40%
K12 37%
Preschool 33%
IT skills 22%
Postsecondary 21%
Other 6%
Not Sure 5%

According to ChinaVenture Investment Consulting Group, 32% of all online


education companies in China are preschool education providers and 27%
are online language learning companies.
Clearly, self-paced
language learning
(particularly English) Finland-based language lab supplier Sanako has a large presence in China
is a significant and partners with the domestic language learning firm Mintel to provide
revenue opportunity turnkey digital English language learning products to the government-
for suppliers in operated schools. Schools "benefit from a joint offering of Mintel English
China. language content, developed specifically for K12 students in China,
delivered via Sanako’s pedagogically-sound language teaching platforms."

In July 2014, Alibaba Group's e-commerce division Taobao reported that


that "the top five categories of educational purchases were:

 Foreign languages (37.6%),


 Marketing and management (14.3%),
 Primary and middle school-level supplementary learning aids
(13.2%),
 Literature and arts (11.3%),
 And professional test preparation (10.4%)."

Self-paced English language learning content for young children are


popular in China. Parents and the schools now purchase a significant
amount of digital English language learning for children under 17 years old.

In July 2010, Pearson acquired the private English language learning


schools in China owned by Wall Street Institute, a global language learning
company. Pearson rebranded the Chinese chain as Wall Street English and

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

now offers a range of online options for corporate and government buyers.
Wall Street English has dozens of international corporate clients sending
employees to English lessons, both physical and online. Wall Street English
also serves the government segments and customers include the Ministry
Private language of Education and the Ministry of Commerce.
schools, universities,
and PreK-12 schools
buy commercial The adoption of eLearning in the government and corporate segments has
language labs that created a demand for custom content development services in those
come pre-bundled segments. Higher education institutions tend to build their own content in
with self-paced house and except for a few private schools, the PreK-12 schools license
language learning commercial content mapped to the government curricula.
software.
Pearson bought GlobalEnglish in May 2012, a language learning company
that specializes exclusively in providing custom online business English to
corporations. GlobalEnglish has corporate buyers across the globe including
China. The acquisition increases Pearson's reach in the corporate segment
of China.

Figure 4 - 2015-2020 China eLearning Packaged Content Five-year Growth


Rates by Buyer Segment (in US$ Millions)

There is only one buying segment with a negative growth rate for packaged
eLearning in China and that is the provincial and local government
segment. The content needed in this segment has to be highly customized
(particularly in the local vocational schools that need content that maps to
the local businesses). It is no surprise that this segment has the highest
growth rate for custom content development services.

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

Four specialized forms of English in high demand in China are business


English, tourism English, hospitality English, and aviation English.
Corporations, government agencies, and higher education institutions buy
mostly custom online courses for all four. US-based DynEd and EF
Education First (EF) are the largest suppliers of aviation English in China;
they sell custom online aviation English primarily to the government.

China's airline industry is dominated by the three government-owned


airlines: Air China, China Southern Airlines, and China Eastern Airlines.
Chinese pilots and air traffic controllers by law have to pass standardized
tests on aviation English.

In China, the government stipulates that the aviation English courses map
to the language proficiency criteria set by the International Civil Aviation
Organization (ICAO). By law, as of 2008, all pilots and air traffic controllers
working in China must pass the ICAO aviation English test.

Figure 5 - 2015-2020 China Custom eLearning Services Five-year Growth


Rates by Buyer Segment (in US$ Millions)

The Civil Aviation Administration of China also requires flight attendants


working international flights to be proficient in basic English. Both of these
mandates have been a catalyst driving the sales of online aviation courses
and test prep apps. While individuals often pay for their own training prior
to employment, the government pays for a significant amount of the
training for employees. As each airline is operated differently, a great deal
of content has to be customized despite the presence of the ICAO
standards.

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

DynEd's Aviation English courses are used by China Airbus, Air China, and
BeiHang Flight College. China Eastern Airlines is a Wall Street English
customer. Aviation English Asia is based in Hong Kong and sells an Aviation
English Online course mapped to the ICAO.

In July 2013, EF Education First announced a deal with Xiamen Airlines,


China’s first privately owned airline, to train 1,000 employees a year in
English. "The training format will combine both online courses and offline
practice, to fit the variable schedules of Xiamen Airlines' staff. No matter
where they are, as long as they can connect to the Internet, learners can
log into EF’s online school and get access to EF’s innovative aviation
content, private and group teacher-led lessons, and 24/7 professional
teacher support. Training content available will include Aviation English and
a specially designed course for Cabin Services." EF had struck similar deals
with Air China, China Southern, the Beijing Capital Airport, Shanghai
Pudong International Airport, and East China Air Traffic Control.

Hospitality English training is provided to hotel and restaurant staff, mostly


in the major cities in China, and in the heavy tourist areas. There are also
private schools and public universities that offer specialized hospitality
English programs. Tourism English peaked in 2008 at the height of the
Olympics in Beijing. The city of Beijing alone had trained over 600,000
employees and public safety personnel. Since then the major tourist cities
in China still buy online courses for tourist-related personnel, but at a much
more modest level.

Figure 6 - 2015-2020 China eLearning Tools and Platforms Five-year


Growth Rates by Buyer Segment (in US$ Millions)

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Ambient Insight’s The 2015-2020 China
Self-paced eLearning Market. Country Edition

There are only two buying segments with positive growth rates for
eLearning authoring tools and learning platforms: the PreK-12 and the
provincial/local segments. While the demand for eLearning in the corporate
and federal government segments are relatively high, there are very few
Chinese companies and federal agencies that maintain in house digital
content development and training departments; hence there is little
demand for tools and platforms.

Commercial eLearning companies in China tend to develop their own


authoring tools. Even though the industry is thriving with over 6,000
eLearning companies, there is very little demand for specialized authoring
tools. In contrast, private PreK-12 schools (particularly large preschool
chains) and provincial/local government agencies do develop content
internally. Corporations and government agencies tend to buy international
learning platform brands and the LMS market has been commoditized for
over ten years. Adoption is high, but pricing power is quite weak.

Vocational schools operated by the provinces and local government


agencies need highly customized content and their in house development
team do need both specialized tools and learning platforms. The expertise
of in house development teams is subject matter expertise and they need
to purchase commercial tools and platforms.

Related Ambient Insight Research


Buyers of this report may also benefit by the following Ambient Insight
market research:

 The 2015-2020 China Digital English Language Learning Market

 The 2015-2020 Asia Self-paced eLearning Market

 The 2015-2020 Asia Digital English Language Learning Market

 The 2014-2019 Asia Mobile Learning Market

 Ambient Insight’s 2015 Learning Technology Research Taxonomy

“We Put Research into Practice”


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