Course in 'cannibalism' a steep learning curve

Future tense

Caught in a developmental impasse, officials and industrialists expect a major shake-up soon.

"As competition becomes fiercer, the industry reshuffle will accelerate, which will lead to competition for capital, services, talent and hardware among these companies. Small institutions, or those without special products, will go to the wall and blind expansion and vicious competition will be reduced," said Jin Xin, CEO of Xueda Education Group, quoted by China Reform Daily.

Zhang Jiaxiang, chairman of the China Association for Non-Government Education, said, "We hope that the Ministry of Education will soon amend the Law of the People's Republic of China on the Promotion of Privately-run Schools, and provide detailed regulations so the industry can develop healthily and the public can actually enjoy the developments in education."

The law, enacted in September 2003, defines private educational and training organizations as nonprofit legal entities. However, they are not forbidden from earning a "reasonable" income, which makes it difficult for the State Administration of Industry and Commerce and the ministries of education and labor and social security to jointly supervise and regulate the companies' commercial activities.

Earlier this year, after much urging from the Ministry of Education and the China Association of Non-Government Education, 17 education and training institutions, including NYSE-listed companies such as New Oriental and TAL Education Group, signed a joint pledge to standardize qualifications, services, quality, fees, competitive practices and cooperation in the tuition of primary- and middle-school students.

Some training and education providers have also been in talks to explore new services to break the trend of "cannibalism" and return to the traditional ideals of education.

As the need for training diversifies, many companies are exploring business models that focus on specific demographic groups.

First Smart Education's customized tuition services for primary- and middle-school students account for 70 to 80 percent of its business. The targeted customers are from middle class and wealthy families and tuition fees are on average 30 percent higher than those charged by regular institutions.

The company's revenue has grown at an annual rate of between 200 and 300 percent in the five years since it was founded. First Smart attributes this to its educational ideals and its practice of assessing the performance of its teachers via feedback from students. "Our training is a combination of the strengths of Eastern and Western education," said CEO Zhang Xichang, quoted by Southern Metropolis Weekly.

In a speech at the 2013 Summit of the Education and Training Industry, New Oriental's Yu Minhong sought to emphasize the importance of ideals in the modern education industry: "If children attended our classes for just one day, they would definitely understand our influences and benefit from them."

Yu commented that he regretted floating New Oriental in the US, saying that if the listing hadn't happened, "The company would have been better off, overall. Four or five years after we went public, I realized that the survival of the education and training industry is closely connected to its social value and has nothing to do with stock market listings."