You wouldn't short-change education no matter how poor you are

"You wouldn't short-change education no matter how poor you are, just like you wouldn't toil your kids even when you have to toil to the extreme.” This is the voice of Chinese parents. The per capita disposable income of urban dwellers in China has been rising rapidly. Middle-class families typically believe that a good educational background will benefit their children in the long run, and consider giving their children good education as one of their priorities, thus pushing up spending on high-end education.

The establishment and operation of private education was permitted by law the first time in the early 1980s, to make up for the shortage of public education resources. After more than 30 years of development, private education has become an important part of China's education system, and is increasingly popular with parents and students to the extent that it is considered a quality choice of the middle-class.

According to a Frost & Sullivan market report, total income of  the private basic education sector (i.e., kindergarten, primary and secondary schools) in China was RMB184.2 billion yuan [in 2015] and is expected to increase to RMB325.5 billion yuan in 2020, at a CAGR of 12.1%. The number of students who transfer from public to private schools has kept rising in the past few years, with total enrolment expected to increase from 14.7 million in 2015 to 18.5 million in 2020, at a CAGR of about 4.7%, and the penetration rate  is also expected to remain on the growth trend in the next five years.

The general belief is private schools have three major advantages over public schools:

1.    Greater flexibility: Private schools operate more independently, hence are able to  respond quickly to market demands. Moreover, they have their own employment systems and incentives which are conducive to broadening the sources of teachers and improving teaching quality. On the aspect s of enrolment, private schools are usually more flexible with less restriction on student  background. Public schools, on the other hand, usually have specific requirements regarding such as a student’s household registration.

2.    Diverse curriculum: Having to follow government regulations, most public schools are reluctant to make adjustments hence are restrained when it come to offering a diverse curriculum. On the contrary, the curriculum of private schools is more diverse and extensive, and the charging of tuition and fees is more flexible also;

3.    More proactive: Compared with public schools, private schools are able to respond to market needs and demands more proactively, with drive and guidance coming from the government. As a result, private schools have a relatively stronger incentive to continuously improve teaching quality that they may attract outstanding students and charge higher fees. In 2015, the average annual tuition and fees charged by private senior high, junior high and primary schools were  estimated at RMB7,719, RMB3,289, and RMB2,567 yuan, respectively.

Private education is developing fast in China

The Chinese government has launched a series of policies to support the development of private education institutions and encourage private investment in education. The Private Education Promotion Law, which took effect on last September 1, provides additional support to private schools. In addition, local governments also intend to roll out a number of favourable policies, such as offering free land or financial support for campus buildings, in the hope of attracting prominent private school brands to set up local operation.

The development of education is assuming strategic significance in China and the industry has been growing at rocket speed, emerging as a rising star in the capital market, with private investors making heavy investments by way of private investment, IPO and so on. This trend is expected to continue, presenting the industry with an important financing channel.