WAN Fei, a Chinese expatriate in Singapore, has noticed an increasing number of Chinese companies eager to mould her first-grade daughter’s mind and tap into her wallet.
Her friend recently invited her to join a Math Olympiad online tutoring group run by Think Academy, a subsidiary of giant TAL Education Group.
Also, while perusing a local mall, she spotted a new learning centre opened by Beijing-founded and now Singapore-headquartered Spark Education.
Tutoring companies are increasingly looking to overseas markets – especially those with many Chinese nationals or local ethnic Chinese communities – to bolster their growth after a dramatic shift in government policy sent the sector into disarray.
However, as with many Chinese companies which have looked to the international market to offset a domestic downturn, tutors have found it hard to replicate their business model overseas.
Their problems are familiar to their peers across industries – localising products across markets which each have their own norms and preferences, and finding enough local staff who can tolerate China’s demanding work culture.
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Survival mode
For years, growth was white hot and China ’s tutoring industry was worth tens of billions of US dollars.
Then, Beijing launched a sweeping clampdown in 2021 that eliminated many companies’ major revenue streams and forced the sector into survival mode. To reduce the academic burden on K-9 students, firms that offer curriculum-based tutoring were ordered to become non-profits and barred from raising capital through initial public offerings.
The crackdown wiped off billions of US dollars from the after-school tutoring industry and led to massive layoffs, closures and a rush into markets outside of the Chinese mainland.
In terms of expanding overseas, Think Academy is also preparing to open its fourth teaching centre in Hong Kong, while its first face-to-face tutoring location in Malaysia’s capital, Kuala Lumpur, opened to students in March. It also has operations in other locations including the US, UK, Australia and Canada.
While a few companies had smaller overseas operations before the clampdown, they became seen as a lifeline after that, said Li Xiao, who is in charge of the overseas business of PalFish, an online English learning platform.
Tough lessons
However, “after a few months, they realised that the overseas markets were not taking off as quickly as the domestic market”, Li said.
While many members of the Chinese diaspora can afford extra education, the fact they live in so many different places creates a challenge, said Guo Xinlin, chairman of ChineseRd, a Shenzhen-based company that provides online Chinese-language education to overseas clients.
As learning materials and local curriculums vary widely, its impossible to “do large-scale unified tutoring like we do at home”, Guo added.
He cited the example of Hong Kong, where different primary schools use different textbooks for Mandarin classes. This resulted in their team having to create multiple handouts, so classes can be relevant to every student. This creates extra cost for the company.
Also, the Chinese diaspora is very diverse, Li said, meaning ChineseRd has to cater to multiple cultural norms and varying language levels.
In fact, even without these problems, teaching companies would need to look beyond overseas Chinese in the long run due to their limited number – Li estimates that there are just a few million Chinese diaspora families with school-age children.
At the same time, firms are struggling to retain the local employees they need to power their current expansion, let alone a broader future expansion.
For a company to enter an overseas market, it must have a local team that’s sensitive to local preferences, said Hugh Yao, founder and CEO of online Mandarin learning platform LingoAce.
One employee at a Chinese tutoring firm with overseas operations says that the biggest drivers of staff turnover are overtime and demanding performance metrics.
She told Caixin that the company has an “all-out” culture and expects staff to work overtime on a regular basis. While overtime – even unpaid overtime – is common in China, many overseas employees refuse to work outside their contracted hours. In addition, workers feel under excessive pressure from metrics such as how many students they can sign up and retain, she said.
Shifting from offline
Another challenge facing these companies is the shifting preferences around online education.
While companies ploughed cash into their online platforms after the outbreak of Covid, enthusiasm for the format has cooled in the post-pandemic era.
Since 2023, many tutoring firms that have gone international have strengthened their offline offerings to keep up with demand and cut costs.
Spark Education, LingoAce and Think Academy have all opened brick-and-mortar learning centres in Singapore. Other Chinese tutoring firms such as VIPKid are also preparing to open such centres in Singapore and Hong Kong, or looking for opportunities to cooperate with local players, Caixin has learned.
Offline learning centres make good business sense in the two cities, which are compact geographically and very densely populated, meaning there are plenty of potential customers within a short distance from any centre, industry insiders said.
Offline tutoring is also more cost-efficient than online teaching, the head of a tutoring firm’s overseas business told Caixin. The latter usually requires heavy upfront costs such as creating handouts, producing videos and other visual materials to keep lessons engaging, and firms will not be able to make money until this practice is scaled up. By contrast, in even Singapore, one of the world’s most expensive cities, opening an offline store requires only S$20,000 including rent, deposit and decoration, the source said.
For these reasons, Li expects the offline business of Chinese tutors to continue growing in the long term. However, expectations for the industry’s growth generally are nowhere near what they once were.
Tempered expectations
While acknowledging that tutoring firms were “relatively active” in terms of expansion in 2021, Li said firms now need to innovate to keep growing.
In the sector’s glory days, investors could have expected breakneck revenue growth rates of as much as 30 per cent month-over-month, but now they only expect 20 to 30 per cent growth for a full year to prioritise profit, said an industry insider at one of China’s largest English-language training providers.
Consequently, investor interest in China’s education industry has plummeted. The country’s education firms secured just 52 deals worth 3.2 billion yuan (S$602 million) last year, according to research firm Edu Insight, based on announced deals. Both figures were down sharply from 241 deals and 20.3 billion yuan in 2021.
Following the sweeping rules, many institutions transformed to offer non-curriculum courses such as art and sports subjects and vocational education courses.
Still, the industry is growing more healthily than it was before the crackdown began, Li said, noting participants are not competing “viciously” or expanding chaotically.
Despite all the money flowing into China’s tutoring sector before the crackdown, companies were struggling to make a profit as they spent heavily on marketing and waged fierce price wars to secure market share. CAIXIN GLOBAL
