Does the moon shine more brightly in overseas countries?

With a population of more than 1.3 billion, China has an enormous demand for quality education. Although it has transformed into the second largest economy in the world after 30 years of rapid development, the country’s massive education investment still fails to meet the exponential growth of education expenses. Better-off families who are eager to send their children to study abroad have hence become potential customers of international schools.

The survey of the National Bureau of Statistics and the Ministry of Education of the PRC indicated that the number of students studying abroad has been on the rise for the past few years. In 2015, there were nearly 530,000 students enrolled in overseas schools, representing a year-on-year increase of more than 10%. It is expected that the growth rate will be moderate in the coming years. In addition, there is a new trend of students studying abroad at a younger age. For instance, international undergraduate students have outnumbered postgraduate students in the USA since 2011. As more and more parents decide to let their children receive an international education before studying abroad, the international school market should continue to flourish.

International schools in China have the following characteristics:

(1) Small scale: International schools are primarily for children of expatriates and kids who are preparing to study abroad, hence the number of students is far fewer than those receiving ordinary education.

(2) Higher cost and entry barriers: Requirements for international schools in terms of capital, land resources and approval are usually much more stringent and the tuition fees are directly affected by reputation of the school, teaching quality and admission rate to overseas colleges. As a result, it is extremely difficult to build a brand from the beginning.

(3) Gradual expansion to second- and third-tier cities: In view of the intense competition in Beijing, Shanghai and other first-tier cities, operators of international schools are shifting their focus to second- and third-tier cities to pursue further development.

In general, private international schools target the demand from Chinese parents who intend to send their children abroad. Given that courses are available at all price levels and most of the mid-range to high end market are being targeted, the industry has substantial growth potential.

According to the statistics of New School Insight Media, China has the largest number of international schools in the world, with 597 international schools enrolling more than 236,400 students as at the end of 2015. Tuition fees vary according to the type, location, grade level and reputation of the schools, ranging around RMB20,000 to RMB250,000 per annum. Generally speaking, renowned schools for expatriates’ children cost the most, charging more than RMB200,000 per annum, while tuition fees vary most significantly among private international schools, from several tens of thousands of Renminbi to more than RMB200,000. On the other hand, international classes at public schools usually charge less. It is estimated that the total size of the international school market has reached RMB30.0 billion by the end of 2015, while the market segments for international schools for expatriates’ children, private international schools and international courses at public schools accounted for RMB7.8 billion, RMB17.1 billion and RMB5.1 billion respectively.

The “Report on Development of International Schools in China” has pointed out that high quality private bilingual international schools are to be the key growth area for the next five to ten years, due to considerations of the policy constraints on international courses at public schools and the increasingly saturated market of international schools for expatriates’ children. The combined effects of favourable policies, income and perception factors have led to the tremendous growth of private international schools in recent years, with this trend of rapid development anticipated to continue. Following the implementation of the revised private education promotion law, international schools in China are expected to operate in an asset-light mode. International courses at public schools are being replaced by private schools, while expatriates’ children are participating in local competitions. Meanwhile, international schools are pursuing differentiated development facing greater competition and online learning is set to play a larger role.

In the next issue, we will look into the business models of international schools and the competitive landscape.