Decoding 2018 China’s Education Market | Where did Chinese parents’ money go in 2018?
2018 is marked as a special year for China’s education market. Education industry keeps booming while the overall economic development of China started to face pressure to fall. For instance, information technology systems as well as new teaching contents and materials have been introduced to an increasing number of K12 schools; more capital flows into this space. As a leading EdTech media platform in China, JMDedu is going to release our new series: Decoding 2018 China’s Education Market in the upcoming weeks to help you deep dive into this space from the following perspectives: education consumption, policy, investment, etc.
Week one, let’s start from the education bill of Chinese parents first. Their propensity to consume in education may directly form some market shift. In order to investigate parents’ education investment in 2018 and provide guidance for our overseas readers, JMDedu surveyed parents with monthly household income of more than 10,000 RMB (around $1,500) in Beijing, Shanghai, Shenzhen, Hangzhou, and 11 other first- and second-tier cities. These regions are normally the initial choices for overseas companies to penetrate China’s education market.
When Chinese parents review their annual bills at the end of the year, educational expenditure on their children undoubtedly accounts for the largest proportion due to the traits of the education industry, for instance, rigid demand, high frequency, both investment and consumption attributes. It is reported that recent economic development has formed China’s new middle class. According to McKinsey, the new mainstream which earns between 103,000–222,000 RMB annually grew from 2% in 2005, to 43% in 2016 and is estimated to reach 66% in 2025.
How expensive is the education in China?
From large quantities of parents’ perspective: “Education costs are continuously increasing, both in terms of time and money.” According to JMDedu’s research, approximately 1/3 of the interviewees have monthly household incomes over 50,000 RMB, 39.33% of them earn 20,000 to 50,000 RMB and 18.67% of them have earned around 10,000 to 20,000 RMB monthly, however, 1/4 of the respondents spent more than 100,000 RMB last year for their children’s education, interviewees spending 50,000 to 100,000 RMB accounted for 30.67%; and only under 4% of them spent less than 10,000, it seems that education really cost a lot.
As for where the money was spent, the investigation shows that most of the parents purchased courses regarding competence-based education, like STEAM, 1/3 of the parents paid for K-12 education especially for school subjects tutoring, in addition, about 1/10 of parents spent money on education apps.
Competence-based education：The most expensive investment
Parents who choose to invest in their children’s competence-based education accounts for the highest proportion, competence-based education has covered a wide range including the cultivation of all aspects of children’s abilities. From the interviews, parents generally believe that this type of course costs the most money.
Competence-based education occupying the most expenditure is mainly due to the high class price. For example, the payment for a piano class by an average teacher is around 400 to 500 RMB. Meanwhile, the cost of study tours and academic competitions also takes a high ratio, because many parents consider this kind of investment has encouraged children’s study motivation and confidence.
K-12 Education: The most extensive investment
In early childhood education stage, children take more competence-based courses, while in the K12 stage, especially when they are faced with pressure to go beyond, the children will spend more time in the school subject tutoring.
Parent’s Anxiety has become a common phenomenon in Chinese society, most middle-class parents purchase education products for their children to sustain or upgrade their social status, through transferring their economic capital into their children’s education resources. With increasing stress from school entrance exams and peer pressure, parents always spare no effort to ensure their children not to fall behind peers.
Educational Apps：Reasonable price, abundant types and increasing acceptance
Compared with the two categories above, although the cost of education applications is much lower, it can meet parents’ demand as well. According to the survey, only 9.6% of parents said that they mainly invested in education for the apps, which accounted for the lowest proportion of the four types of education expenditure, lower than school tuition fees.
Since in many areas where high-quality offline resources are not accessible, education applications have become a new choice for many families. On the one hand, educational applications can make up for the gap of time and space. On the other hand, the relatively reasonable price is also an important reason for some parents to favor them.
2019, What is the market orientation implied by Chinese parents?
In the first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, the fierce competition among students starts right from the elementary school. In order to compete for the rare enrollment quota of elite schools, the educational investment from parents even cost much more than the money for studying abroad directly.
Overall, competence-based education is still the main propensity of consumption, because a transfer into a more fruitful cultural life is a great component of an economic trade-up, and the middle class’s consumption has also undergone a shift from purchasing show-off goods to building up cultural capital.
Comparing the data of 2018 and 2019, although competence-based education has the highest proportion which has an upward trend, K-12 education will still has great prospects due to the exam-oriented education system.
More remarkably, although lower price makes educational apps take the smallest ratio of the respondent’ education expenditures, they have great advantages, which can not only help children enjoy higher-quality education resources conveniently but also help parents and children to effectively use fragmentation time and interact more frequently, which is in line with the “family education” and “parental companionship” that Chinese society has been emphasizing in recent years.
Otherwise, as more and more post-80 and 90 young people become parents, the values of education consumption have transferred from the preference of traditional products to the willingness to try out online courses, offline courses with online appointments, and educational technology products. The digital values are now outweighing traditional ones.
In general, the outcomes of this survey are of great significance for overseas companies’s 2C strategy when they enter into Chinese market, their capital will flow into developed regions firstly then slightly extend, and in the future, the middle class are still considered as the main consumer groups of education.
What’s coming up next?
In 2018, the Chinese government laid out a number of policies to regulate both public and private sectors, in which some of them may exert influence on overseas companies’ Chinese market entry to some extent. Please stay tuned for the second article regarding policy analysis of our series: Decoding 2018 China’s Education Market.