Understanding The Growth And Innovative Orientation Of China's Ed Tech Market
The continued development of innovative technologies such as Virtual Reality, Augmented Reality, Artificial Intelligence, and others, along with increased public adoption and comfort with their use, has led to current and expected transformations in the approach organizations take towards talent management, training, and workforce development. While the expected value of these new methods is great, their current implementations always seem to fall short of what’s promised by enthusiastic tech vendors and startups, indicating that more investment and development is necessary.
One entity to look to for this investment is none other than the Chinese government and VC entities from China and the rest of the world which have been heavily funding AI and other technology development to an estimated tune of over US$6 billion in recent years. Furthermore, they’ve launched a major government initiative to use AI to improve their education system. Plans and progress for this ambitious project were on display at JMDedu’s recent Global Education Technology Summit in Beijing this past November 2018. One of the present authors attended this event, and we’ve gained an inside view of China’s burgeoning Ed Tech industry, thanks to an organized tour of five notable startups that we attended.
The Global Education Technology Summit
The Summit was held in Beijing, which itself has rapidly transformed over the past 35 years. Having visited China in 1983 for postgraduate work, and again in 1996 to present a paper at China’s first Internet Education conference, the difference I perceived in the city, the people, and the field of EdTech was dramatic and breathtaking. Beijing is now a modern metropolis with affluence evident everywhere. The people appear happy and are energized with a positive outlook Fortunately, there was little indication of any animosity towards me as American due to reported “trade wars” between our two countries). The conference center was extremely modern and accommodating, located near the former Olympic Village in Beijing. There, hundreds of speakers, media representatives, and exhibitors catered to almost 14,000 attendees from over 22 regions. The halls were filled with government officials, teachers, developers, tech vendors, venture capitalists and young intelligent Chinese Entrepreneurs all excited to learn, sell, and understand developing trends in a rapidly evolving field. There was a sense of passion and ambitious drive permeating the event, participants believed their work could change everything for the better in Chinese society and culture. Education in China is still seen as the key to future success, material well-being, and happiness. Under the circumstances (described below) what could possibly be a better place to invest than education? If we follow the financial investment preferences of global and Chinese hedge funds and VCs, it helps explain why there is so much “buzz” around Chinese Ed Tech and its innovations.
VC Investment In Chinese Ed Tech Is Now Much Higher Than US
VC investment in Chinese Ed Tech is more than twice the VC spend on US Ed Tech and the disparity continues to grow in China’s favor. At the conference, Mr. P. Brothers, a Principal at the research firm of HolonIQ projected a $4.5 billion venture capital investment in Chinese Ed Tech startups in the coming FY 2019. By comparison for all of 2018, US Ed Tech startups attracted an investment of 1.45 billion. By way of confirming the big spend in China Ed Tech, (Zhang, 5/27/2019), reported in Ed Surge thatChina Ed Tech ventures had already raised more than $1.86 billion (RMB 12.51 billion) from January through March 2019. That represents year-over-year growth of 2.4 percent during that period and seems to indicate that… EdTech in China appears to be immune to the whiplash that has hit venture investing across other sectors in the country. (Zhang, 5/27/2019)
So, the previous trend of more robust capitalization in Chinese Ed Tech has continued. Previously, when I discovered how large the disparity in VC spending on Ed Tech was between the US and China, I decided that it made sense to go over to China and check out the state of the industry myself. So, when I received an invitation to attend the Global Education Technology Summit in Beijing, I decided it made sense to attend. I was not to be disappointed.
Why Is The Chinese Ed Tech Market And Investment So Hot?
The reasons for the Chinese enthusiasm and growth of educational technology in the country are in many ways unique to China. Firstly, their large population and lack of restriction on data collection enable solutions to be piloted with large populations, increasing the reliability of their results and also contributing to the effectiveness of A.I. focused solutions. Additionally, a large majority of Chinese parents are willing to make almost any financial sacrifice to ensure their children get into the best schools and are competitive for the best jobs. This, in part, is due to the expectation and necessity for children to support their parents upon retirement which in China is at age 60. There is no Social Security, and pensions are mostly non-existent. This, coupled with the fact that Public schools are crowded and teachers in less affluent provinces tend to use less innovative teaching methods, leads to parents’ belief that public education isn’t good enough. Parents are willing to spend big money to provide their children with a competitive edge. Twice as many parents in China invest in afterschool education when compared to the USA, and four times as many as parents in the UK.
Parents Investing In After-School Education
TEK Consulting (GET presentation, 2018) a firm research firm based in Singapore, has found that Chinese and Indian parents place much more of an emphasis on after-school education than their Western counterparts in the US and Europe. They are therefore more willing to pay for additional education to improve the probability of their child’s success.
These supplemental, after-school education programs, tend to fall into 3 key categories: English language learning; preparation for national examinations; and tutoring on assorted STEM topics. Previously, only location-based Tutoring Centers were available to meet this demand. Now, blended solutions combining eLearning, virtual classroom sessions, and only occasional visits to physical tutoring centers are becoming more available as well as online versions of tutoring as a stand-alone, more cost-effective approach. Parents see these new online services as a better value not only because of convenience and lower cost, but also because they often employ higher quality teachers, utilize better materials and innovative practices, and allow for more frequent practice, thus delivering improved results.
Government Stance On Education Technology
While demand for these solutions is clear, there are also cultural and political factors which guarantee continued progress and investment, because, in China, education is considered to be one of the key responsibilities of government. They’ve announced ambitious goals for the future of education such as:
- Make our country more powerful and help make things more equal
- Provide more access to quality education for less affluent families in wealthy, highly developed areas (E.g.: Beijing, Shanghai, Shenzhen) as well as in rural, less developed regions of the country
The government wants to ensure that all children have access to quality instruction and educational resources, and they plan to do this through incubation of Ed Tech start-ups and the introduction of new learning products. They plan to channel parental and foreign investment in many ways to improve education quality and level the playing field between the more affluent provinces along the coast and the less developed interior. (JMDedu: Research Report, 2019)
Latest Promising Innovations
With all the investment and interest in this area, there’s no shortage of promising innovative learning technologies and methods emerging in China. In future articles, we will cover these developments in more depth, but some interesting examples include:
- On-line and Simulated Environment Assessments which quickly group students into different cohorts depending on their knowledge and skills
- Next Generation Virtual Classrooms which utilize facial recognition software and AI to interpret the emotional states of students taking an online class at a distance in ways that help a remote instructor better understand if his students are engaged and his instruction is effective
Virtual and Augmented Reality programs improving science learning and other study techniques by enabling unique experience for example learners can climb inside an atom or travel through space to view planets and other phenomena in three-dimensions.
As these new innovations are incubated and tested by the Chinese education industry venture capitalists will no doubt seek to export and apply the most effective methods identified to corporations and other private sector training and development domains to unlock the full value of these solutions in the business world and commercial education initiatives. In our next article, we will focus on several Chinese Ed Tech companies of interest and compare how the focus of VC spend on Chinese companies is different from those receiving financing in the US.
For the reasons cited in the article above, our conclusion is that in the years to come, HR professionals will find it valuable to keep a watchful eye on the Chinese Ed Tech market in order to understand what innovations are coming next and how they can effectively adapt them to their organizational needs.
Bibliography:
- Brothers, P, Principal at HolonIQ; Conference Presentation at GET Summit, Beijing China; (11/2018)
- JMDedu, Research Report on Current State of After School Education in China (2/2019)
- TEK Consulting, Conference Presentation at GET Summit; Beijing, China (11/2018)
- Wan, Tony (12/2018); Year in Review: Our Top Edtech Business Stories of 2018; Edsurge
- Schaffhauser, Dian (1/2016) Report: Education Tech Spending on the Rise; THE Journal
- Zhang, Siyi (5/27/2019) Chinese Edtech Sees $1.86B in Q1 2019, Bucking Plummeting Venture Trend, EdSurge
