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Transformation of China’s Education System

Ongoing Digitalization of K-12 Education Systems

China is one of the largest K-12 education systems in the world with 225 million K-12 students (National Bureau of Statistics (NBS), as of 2019). The nation’s education system has been in the process of rapid digital transformation in recent years with strong support from the government. More specifically, the Chinese government aims for teaching and learning apps to cover all teachers and students, and digital campus to cover all schools by 2022. It also requires local governments to spend at least 8% of their education fiscal budgets on education informatization (Ministry of Education of the People's Republic of China: Education Informatization 2.0 (2018-2022), April 2018).

Increasing Penetration of Education Software

We believe educational software and digital educational resources will be a key investment focus in the Education Informatization 2.0 stage. Only 57%/64% of China's Grade 1-12 schools used smart in-school classroom solutions in 2019/20, according to Frost & Sullivan (Dec. 2020). By 2025E, 154k out of approximately 200k, or 78% of Grade 1-12 schools in China will use smart in-school classroom solutions (as estimated by Goldman Sachs, Dec. 2020).

Beyond in-school classroom solutions, software and cloud-based technologies like real-time communication technology-supported livestreaming has also been transforming the after-school tutoring industry. During Covid-19, students and teachers started to adopt these immersive online channels and technologies extensively.

Despite the government’s support, we note several hurdles that might prevent education software to scale up quickly like other SaaS (Software-as-a-Service) products:

  • China’s education industry remains very fragmented with more than 400k education institutions, among which more than 99% are long-tailed with annual revenues below Rmb100mn. (Mirae, 2020)
  • Each province has different curriculum and examination systems, which diverse needs by both teachers and students for course preparation, evaluation, study support, etc.
  • Education IT procurement for elementary/high schools is highly localized and centralized, as decisions are made by local education bureaus. Therefore, it requires massive amount of sales resources/channel partner network in order to penetrate into a large number of end-customers.

Major Verticals of Education Software

For smart in-school solution software, products could range from class preparation and delivery, homework assignment and evaluation, and student performance tracking and analysis for teachers, to online quiz library, homework submission and personal strength/weakness analysis for students, and day-to-day learning progress supervision for parents. In fact, mobile apps that focus on providing smart in-school classroom solutions have become the 2nd largest app category in the most popular apps for Grade 1-12 students in China. (Analysys, Oct.2020)

Other popular software includes question search/question banks that aggregate nationwide exam questions by subjects and provide a one-stop solution for students across different provinces, English speaking and reading assessment and many others.

Top 25 education apps for Grade 1-12 students (in terms of Monthly Active Users) by five categories

Technology Behind

We believe the continuous penetration of education software cannot happen without the support of technology development in major areas of Artificial Intelligence such as speech/voice recognition, computer visioning, machine learning, etc.

For example, speech recognition, an authentication technology that decodes human voice and processes into a written format, has already been used by many education software/hardware companies in multiple scenarios. It can help assess and harness students’ oral English skills by letting students listen to text read aloud by a computerized voice and follow what is being read on the screen, and make teachers’ in-class teaching into transcript content.

Optical Character Recognition, the use of technology to distinguish printed or handwritten text characters, is also the major underlying technology behind many question research apps.

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