The combination of the world economic crisis and China’s unprecedented economic growth has created
unique opportunities in China’s education and training industry. As competition in the labor market
intensifies, more Chinese are seeking ways to upgrade their knowledge and skill sets to become more
valuable in the labor market.
Additionally, large domestic corporations are turning to training as a key component of their retention
strategy. These factors have created immense demand in the industry, particularly in the areas of language,
IT and soft skills training.
The education and training market in China grew at about 12% in 2008 and is expected to reach US $200
billion by 2010(1) . Currently, there are more than 100,000 registered training companies, including key
players such as English First, Wallstreet English, NIIT and Clark Morgan; in addition to the registered training
companies, several thousand unregistered companies exist(2) .
Nonetheless, the market remains underdeveloped in many cities, where small domestic firms dominate
without any clear market leader. Hence, foreign direct investment remains strong, with US $130 million
invested in the industry in October 2008 alone(3) .
Growth in the education and training market in China is dominated by both the soft skills and IT education
and training sectors with revenues growing at more than 20% annually(4) . This is in part driven by 6 million
fresh college graduates entering the workforce yearly.
However, the market for traditional English language training is nearly saturated; although valued at US $2.2
billion in 2008 there are more than 50,000 companies in this sector.
In contrast, the children’s education sector is expected to grow rapidly and exceed US $12 billion by 2010 as
parents find it increasingly important to supplement their children’s compulsory education(5)
(1) Multiple sources, JLJ analysis
(2) JLJ analysis
(3) Mergers and acquisitions expected to increase the Chinese training market value to RMB 300 billion, 29 A
pr 2009, China education news
(4) JLJ analysis
(5) Increased segmentation in China’s education market, 5 Feb 2009, multiple sources, JLJ analysis.
Practical skills training, especially oral English, managerial and other business-related soft skills, continue to
be popular among the Chinese. This is driven partly by strong demand from companies seeking qualified and
skilled managers, which are still scarce commodities in China’s labor market.
Demand for practical skills training is also being driven by individuals seeking ways to improve their
competitive advantage in the labor market. Similarly, parents are investing more in their children’s education
and training as it is seen as a way to secure a better future for them.
Nonetheless, opportunities are useless without understanding the needs and preferences of the customers.
In general, Chinese customers for education and training services tend to emphasize brand and reputation as
their first criteria for selection(6) .
Foreign brands are generally associated with quality and international teaching methods, which are highly
sought after; an international brand and strong company reputation are especially important for the children’s
education sector, where many parents are eager to help their children obtain an edge by providing them with
an international perspective.
Additionally, it is important to assure customers that a company’s trainers are knowledgeable and well-
qualified. This is increasingly important due to a prevalence of unqualified trainers among small companies.
As a result, Chinese customers have become wary of unknown companies and tend to have a stronger
preference for well-established players.
It is also increasingly popular for institutions to provide tailored courses customized towards specific needs.
Customized courses are preferred over general courses as they help students overcome specific problems
and gain skill sets not commonly found elsewhere.
Below is a summary table of key success factors in the education and training industry in China:
Tailored courses are deemed better in helping students overcome particular problems or gain advantages over
Opportunities remain in the education and training industry in China if a training institution is able to meet the
expectations of the Chinese customer. This is especially true in Tier-2 cities, where competition is less
intense and demand is increasing.
(6) Multiple sources, JLJ Analysis
The Emerging Tier-2 Cities
Unlike the saturated markets found in Tier-1 cities(7), where intense competition already exists, opportunities
for growth are still found in Tier-2 cities(8) . The education and training market in Tier-2 cities are still relatively
new and fragmented, generally dominated by small domestic service providers with no apparent market
leaders in many of the sectors.
Consequently, first mover advantages can still be enjoyed if the services provided are able to meet the needs
of the Chinese customers.
In particular, the English language training sector in Tier-2 cities has potential for foreign investment. This is
primarily due to a lack of good English language speakers in Tier-2 cities, which has led companies to offer
premium salaries to hire such candidates; the financial rewards of language training can be significant in
Tier-2 cities, driving demand for related courses by reputable service providers.
In addition, sector based development encouraged by local governments to develop local economies, creates
niche markets within the education and training services industry, e.g. IT training.
For example, the IT industry in Nanjing is rapidly growing due to the increasing popularity of Business
Process Outsourcing (BPO) and is expected to reach a market value of US $8 billion by 2010(9) ;10,000 new
workers were employed in Nanjing’s BPO industry in the first quarter of 2009(10) .
(7) Tier-1 cities refer to Shanghai, Beijing and Guangzhou.
(8) Tier-2 cities refer to Chongqing, Dalian, Hangzhou, Nanjing, Ningbo, Qingdao, Shenzhen, Suzhou, Tianjin,
Wuhan, Xiamen, Xi’anand Zhuhai.
(9) The JLJ Group, 2009 Education and Training China Market Report
(10) Nanjing service outsourcing increased by 10,000 in the first quarter, 8 May 2009, China MofCom
Despite all the opportunities in the education and training industry, entrants can expect to face several
challenges in the Chinese market, including overcapacity in certain sectors within the near future. This is
especially so for the children educations sector, where competition continues to intensify as companies
expand rapidly despite falling birth rates.
Other issues may include the protection of intellectual property rights, as well as the difficulty of selling soft
skills training programs to private Chinese companies, which fail to recognize the value in soft skills due to
their intangible nature.
Moreover, foreign companies will have to deal with an unfamiliar and rapidly changing regulatory environment,
which can be complicated and especially daunting for the unprepared. In the education and training industry,
businesses are generally categorized into core and non-core education services, where institutions issuing
degrees fall under the “core” category and those that do not issue degrees fall under the ”non-core” category.
In particular, providers of core education services are heavily regulated and require long approval processes,
while providers of non-core education services may only need to register themselves with the local
government and follow national guidelines (11) .
While this appears to be simple and straightforward, many businesses may find themselves belonging to
neither category. This uncertainty is highly undesirable, as it can drastically affect the timely establishment
and operation of the company in China.
Although challenges exist, they can be overcome if well-managed. With an annual growth of more than 20%
across some sectors in China’s education and training industry, this is a market that should not be
neglected; related companies in the industry should consider seizing the opportunities and enter the China
Furthermore it is advised that entrants consult industry experts or professional consultancy firms to fully
understand the specific sector and city they wish to enter.
This article was contributed by The JLJ Group – a one stop service provider assisting foreign companies in
their mission to enter and grow in China.
For more information please email to Katja Friedrich at
(11) Non-core education programs may be required to operate in form JVs or with local partners