Supplementary (or after-school) education organizations, often referred to more colloquially as "cram schools", play a very significant role in the lives of Chinese people. In this article, we provide some background context as to why these organizations are so important, summarize the Chinese education landscape, and present a snapshot of the ten largest and most well-known Chinese education companies.
In a related article (here), we highlight the key statistics you need to know about China's education industry, while an explanation and discussion of the country's new K-12 education reforms can be found in a separate article here.
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Gaokao - The Great Social Equaliser
As is the case in most Asian countries, graduating high school students are required to take a college entrance exam (Chinese name: 高考, pronounced “gaokao”) in order to determine which university they will be able to attend. Doing well on the college entrance exam is crucial to securing a good future, as high-paying prestigious companies typically only recruit from top universities. In this sense, the college entrance exam is viewed as a great social equaliser, whereby students have the opportunity to achieve a better future for themselves no matter their family background.
The importance of the college entrance exam means that Chinese parents tend to invest heavily in their children’s education in order to boost competitiveness. This includes buying homes in districts with good public schools (in China, students are assigned to elementary and middle schools based on district), hence driving up housing prices in these areas, as well as investing in supplementary education (e.g. after-school and weekend classes) for their children.
The Financial and Time Burden of Education
With China’s rapid economic growth and rising income levels, a growing number of parents were able to invest increasing amounts in their children’s education. To meet the mounting demand and capacity to spend on schooling, the education industry proliferated with many newcomers, growing incumbents, and naturally, increasingly high tuition prices. Over time, children’s education became a significant financial strain for many Chinese families, where the average Chinese is typically characterized as facing three major hurdles in life: (1) saving to buy a house in their younger years, (2) funding their children’s educational needs during the middle age years, and (3) paying for their own healthcare as well as their parents’ healthcare expenses during the later years in life. This phenomenon is commonly given the nickname the "three new big mountains" (Chinese: 新三座大山), a modern twist to an old quote from former president Mao Zedong.
In addition to education being a substantial financial burden, having and raising children in itself is a time-consuming task. Many working parents struggle to find time to pick their children up after school, to supervise their children while doing homework, or to take their children around to attend different classes. These factors combined have led a growing number of young Chinese couples to choose not to have children, resulting in a decline in the country's birth rate.
China's Education Industry Landscape
China's education industry is characterized by the existence of very large, publicly listed incumbents such as TAL Education Group, New Oriental, and Gaotu Techedu, as well as smaller, local education organizations. The smaller companies tend to operate offline with in-person classes organized locally, while larger companies have online classes that cater to students throughout the country. The latter have particularly benefited from the shift to online learning during the COVID-19 pandemic.
The scope of subjects covered by education organizations varies substantially, ranging from supplementary classes for regular subjects covered in the K-12 school curriculum to test preparation for students wishing to study abroad, as well as domestic post-graduate exam preparation and adult education (e.g. various industry licenses or government official exams). As a whole, the K-12 segment constitutes the largest portion of the education market, since excelling on the college entrance exam is an important milestone in the lives of most Chinese people and China has more than 10 million students taking the exam each year.
Supplementary vs. Interest-Based Classes
In China, classes outside of school are categorized as either supplementary academic-oriented classes (Chinese name: 补习班) to supplement school learning, or interest-based classes (Chinese name: 兴趣班) such as arts, music, sports, or computing. Supplementary academic classes can teach students more advanced materials so they can get ahead of their peers, review class materials from school and go over test-taking techniques, or involve teacher supervision while younger students complete their homework (e.g. if the students' parents are too busy with work). Generally, academic classes are regarded much more highly in terms of importance.
Key Players in the Market
In the table below, we present a snapshot summary of the ten largest and most well-known education companies. All of the companies focus heavily on the K-12 market with K-12 supplementary classes being the dominant driver in revenue growth.
Note: the number of paid course enrollments is not a directly comparable metric between companies, since some education organizations break down the materials into a series of short courses, whereas others sell semester-long courses.
To the best of our knowledge, there is no comprehensive data on the total number of education companies or the total revenues generated by China's supplementary education industry, due to the difficulties in collecting such data. However, to get an idea of the revenue share of each of the major players, we calculate each company's share of the total revenues generated by the top nine companies (Zuoyebang is omitted due to the lack of reported revenue data).
The two oldest incumbents, New Oriental and TAL Education Group, comprise 62.5% of total revenues, followed by start-up Yuanfudao at 13.6% (we note that the companny's revenues are self-reported), and China's largest publicly listed online-only education services provider, Gaotu, at 8.5%.
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