Why Chi­nese Ed­u­ca­tion Com­pa­nies Are Chas­ing U.S. Teach­ers

ForbesWeekly - - NEWS - BY YUE WANG, FORBES STAFF

If there is one thing Jing Jing thinks her 4-year-old daugh­ter Jenny should start learn­ing early on, it would be English. The 31-year-old col­lege pro­fes­sor, who lives in Bei­jing, wants Jenny to speak the lan­guage just like a na­tive, so she can be­come a global-minded per­son and have more job op­por­tu­ni­ties when she grows up.

To that end, Jing doesn’t want just any English teacher for her daugh­ter. She pays 5,980 yuan ($750) for a to­tal of 48 on­line cour­ses where a cer­ti­fied U.S.-based in­struc­tor tunes in through live video to re­motely teach Jenny ev­ery week.

“Learn­ing from a na­tive speaker will give Jenny the right ac­cent,” Jing told Forbes. “The younger she starts the bet­ter, be­cause she will ac­cept English as a nor­mal way of com­mu­ni­ca­tion.”

In China, there are tens of mil­lions of ea­ger par­ents like Jing. Un­sat­is­fied with Chi­nese class­rooms’ stilted teach­ing style—and armed with the be­lief that good English skills are a ne­ces­sity in the in­creas­ingly global China—they want to con­nect di­rectly with teach­ers from the U.S. The de­mand has given birth to a multi­bil­lion-dol­lar on­line ed­u­ca­tion mar­ket, where Chi­nese star­tups scour the U.S. and Canada to bring lo­cal lan­guage cur­ricu­lums and in­struc­tors to their home coun­try via live stream­ing tech­nol­ogy.

The process works like web con­fer­enc­ing. Dur­ing lessons, which usu­ally last for 30 min­utes, stu­dents sit in front of their com­put­ers and watch their teach­ers speak while they’re half­way across the world. The tu­tors will go through teach­ing ma­te­ri­als de­signed by their Chi­nese em­ploy­ers, who of­ten bor­row from U.S. el­e­men­tary school cur­ricu­lums, while us­ing quite a lot of hand ges­tures to ex­plain ba­sic English to Chi­nese chil­dren mostly aged be­tween 5 and 12.

Last year, the mar­ket for on­line lan­guage lessons in China stood at 30 bil­lion yuan ($4.5 bil­lion), ac­cord­ing to con­sul­tan-

cy firm iRe­search. Be­tween now and 2019, it is pro­jected to grow more than 20% a year to reach 52 bil­lion yuan ($7.8 bil­lion), when the coun­try’s en­tire on­line ed­u­ca­tion sec­tor will be val­ued at 270 bil­lion yuan ($41 bil­lion).

“Chi­nese peo­ple, es­pe­cially those born after 1980, grew up with much more ex­po­sure to for­eign cul­ture,” said Zhang Yi­wei, an an­a­lyst with con­sul­tancy firm JMDedu. “When they be­come par­ents, they want their chil­dren to speak English very, very flu­ently.”

In­vestors are tak­ing note. In Au­gust, VIPKid, a Bei­jing-based on­line English tu­tor­ing startup, raised $200 mil­lion from promi­nent in­vestors in­clud­ing Chi­nese gam­ing and so­cial me­dia gi­ant Ten­cent Hold­ings and in­vest­ment firm Se­quoia Cap­i­tal China. The firm, which says it ex­pects to gen­er­ate 5 bil­lion yuan ($750 mil­lion) in rev­enue this year, is said to be val­ued at $1.5 bil­lion, four years after it was founded in 2013. China On­line Ed­u­ca­tion Group, also known as 51 Talk, went pub­lic in New York last year. And iTu­torGroup was val­ued at $1 bil­lion in a 2015 fund­ing round that in­cluded Gold­man Sachs and Sin­ga­pore sov­er­eign wealth fund GIC.

“The mar­ket’s growth rate to­tally ex­ceeded our ex­pec­ta­tion,” said Jack Zheng, an in­vestor at Bei­jing-based ven­ture firm Zhen Fund, which backs both VIPKid and 51 Talk. “Three years ago, com­pa­nies of­fer­ing such live cour­ses made no more than $100 mil­lion in rev­enue. Now the top 20 firms can get like $2 bil­lion.”

An­other driv­ing fac­tor for this in­dus­try is China’s un­even ed­u­ca­tion land­scape, ac­cord­ing to Zheng. After years of rapid ur­ban­iza­tion, the best ed­u­ca­tion re­sources are con­cen­trated in a few cities, re­sult­ing in the rest of the coun­try in­creas­ingly turn­ing to on­line al­ter­na­tives.

Ac­cord­ing to Stan­ford Univer­sity’s

Ru­ral Ed­u­ca­tion Ac­tion Pro­gram, 84% of high school grad­u­ates in Shang­hai go to col­lege. This com­pares with less than 5% in the coun­try’s ru­ral ar­eas.

In the mean­time, Amer­i­cans are em­brac­ing such teach­ing op­por­tu­ni­ties, at­tracted by good pay­ments that are bet­ter than what an aver­age teacher would earn in the U.S. Ac­cord­ing to a

2016 re­port from the Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment, the U.S. ranks 11th out of 13 mem­ber coun­tries in high school teacher salaries—be­hind coun­tries like France, New Zealand, Es­to­nia and Chile.

Take Mikell Brown, a stay-at-home mom based in Utah, as an ex­am­ple. Brown, who has been teach­ing at VIPKid for seven months, said she learned about the op­por­tu­nity through a friend. Now, she teaches 2.5 hours ev­ery day and gets paid $20 per hour. The only downside is ad­just­ing to the time dif­fer­ence be­tween U.S. and China, mean­ing she has to wake up at 5 a.m. to greet her Chi­nese stu­dents.

“It has given me pur­pose,” Brown told Forbes. “I feel like I have th­ese Chi­nese ba­bies and I love them.”

Kira Pip­kin, who works at a lo­cal bank in North Carolina, agrees. Pip­kin said she came to know VIPKid through an ad­ver­tise­ment on Face­book, and her past four months with the com­pany have paid off fi­nan­cially.

“I ab­so­lutely love it,” she told Forbes. “It al­lowed me per­son­ally to pay off debt and pro­vided an amaz­ing ex­pe­ri­ence.”

But for com­pa­nies like VIPKid, it isn’t all smooth sail­ing. Com­pe­ti­tion, for ex­am­ple, will get much tougher, as more com­pa­nies jump on the e-ed­u­ca­tion band­wagon to pro­vide sim­i­lar ser­vices, an­a­lysts said.

That means that, for now, no one is mak­ing money from con­nect­ing Amer­i­can teach­ers with Chi­nese stu­dents, as com­pa­nies are spend­ing heav­ily on mar­ket­ing to raise brand aware­ness. Sales and mar­ket­ing costs, for ex­am­ple, took up 60% of 51 Talk’s op­er­at­ing costs in 2016, when it recorded losses of $70 mil­lion, ac­cord­ing to a com­pany fil­ing.

“The mar­ket is still at its early stage,” said Liu Jing, as­so­ciate dean at the Che­ung Kong Grad­u­ate School of Busi­ness in Bei­jing, “In the fu­ture com­pa­nies will com­pete for teach­ers, and their pay­ments will def­i­nitely be driven up.”

Pupils do ex­er­cise in a class­room in China’s He­bei prov­ince.

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