This is marketing research on the education - China industry and can include information on the background, market structure, definitions, competitors, trends and developments of the distance learning industry in China and is related to other topics such instruction and training.

China: Distance Learning

Table of Contents

1 Market Demand 
2 Market Data & Best Prospects 
3 Infrastructure Overview: 
4 Education Overview 
5 Key Suppliers 
6 Market Issues & Obstacles 
7 Market Entry 
8 Sources

China is setting global standards for Distance Learning and business opportunities for U.S. education service providers are expanding. Distance Learning in China is a growing 1.45 billion dollar market, and with over 50 billion dollar in government education expenditure the industry is gaining momentum. In 2000, operation “All Schools Connected” was launched with the goal of equipping all of China’s 550,871 K-12 schools with Distance Learning systems by 2010. The Ministry also encouraged 68 top universities to offer Distance Learning degrees to produce more talent for the county’s burgeoning economy. Finally, the 11th fifth year plan calls on science and technology to speed up development in education, making the Distance Learning industry a top priority in China.

Such an emphasis on technology and education in a country with over 111,000,000 reported Internet users at a growth rate from 2000-2005 of 393.3% is enticing. The prospects however, should be viewed with caution as operating in China poses significant challenges and in most cases requires strong partners with the right relationships and connections.

Market Demand

Distance Learning is growing at a rapid pace in China. The Chinese Government and universities have embraced Distance Learning as an attractive and practical alternative to traditional classroom-based education. The 11th Five-Year Plan emphasizes the need to develop on a technological basis and for the government to invest more in education. The Chinese government has decided to enable 90 percent of middle and primary schools nationwide to share online education resources in the coming five years. English and math online courses are in highest demand for elementary education distance learning. Law, computer and management courses are most popular for higher education institutions. English and other languages, certification training, management and information technology courses are in high demand for corporate and professional distance learning.

Supporting these efforts are several programs aimed at promoting Distance Learning in China. For example, the World Bank has pledged to set up a global online development and study center in Guizhou Province. The center is designed to train more professionals by making knowledge of advanced management and information technology available via long-distance educational means and will be built with US$500,000 donated by the World Bank. Additionally a US$130 million Distance Learning education network center in the Ningxia Hui Autonomous Region is being built with the full support of the World Bank to help the remote region develop its education. Othe Distance Learning projects include the China Youth Development Foundation (CYDF) plan to extend online education to 8,000 primary schools by building websites and mulit-media classrooms. Founder Computer, a forceful IT company, has donated 2 million yuan for the project.

Market Data & Best Prospects

Distance Learning is defined as support, delivery or enhancement of learning or training via the Internet. Taking into account the countries stated goals, economics, geography, technology and demand for U.S. education methods and know how, China is highly receptive to US Distance Learning service providers. According to Chinese Premier Wen Jiabao, “science and technology are playing the supporting and the leading role in China’s socio-economic development.” With this in mind the Chinese government has invested in Distance Learning with the hopes that it will address such pressing problems as education in hard to reach rural and poor western provinces, training in industries where the aging population is taking their know how with them when they retire and producing cutting edge innovative graduates from higher learning institutions. To this end there are three major markets for Distance Learning: Elementary education, Higher Educational Institutions, and Corporate and Professional education.

Elementary Education Distance Learning Overview: There are 550,871 K-12 schools and 216 million students in China. English and math online courses are in highest demand. As of this year there were over 100,000 elementary and middle schools with online educational programs. Higher Education Institution Distance Learning Overview: In China there are 68 online Universities and 2.3 million registered students to earn online degrees. In addition over 97.2% of Chinese Universities have an intranet system in place. However problems exist with exchanging information among schools as each University has their own distinct system in place. Law, Computer and Management courses are most popular.

Corporate and Professional Distance Learning Overview: Overseas training, English and other languages, certification training, management and information technology courses are in high demand.

2005 China Distance Education Market Information (100 million RMB)

Market            K-12        Corporate     Professional and          Degree             Total
                                           Certificate training

Market Scale      15.8          1.3               14                    85                116.1
Market Share      13.61%        1.12%             12.06%                73.21             100.00%

Source: China Edu

Infrastructure Overview:

China is the world’s second-largest Internet market after the United States with more than 111 million users. China currently boasts 22.4 million broadband, 20.6 million dial up and 6.5 million leased line subscriptions to Internet access. The penetration of Internet use in China hovers at 8.5% compared to a 30.5% of all users in Asia. The geographical divide in China is significant with over 50% of all users located in East China and 91.686 million urban users versus only 19.314 rural.

Gradual spread of broadband technology has promoted the development of education through the Internet. The China Education and Research Network (CERNET) is the largest Internet network in China, with a high-speed transmission network of 20,000 km, 28 international and regional channels, and links all of China’s provinces, regions and major cities around the country. CERNET serves 95% of higher education institutions in China. It has been connected with the China Education Broadband Satellite Net (CEBSat), which began operating in 2000, for a high-speed connection to provide modern remote education.

Education Overview

The infrastructure advancements combined with the “All Schools Connected” project have successfully modernized China’s education system. Currently 63% of all elementary and middle schools in China have an intranet system, that number is expected to rise to 86% within the next two to three years. In addition 97.2% of University level institutions have intranet systems and a high percentage of those are also equipped with Internet. Over 100,000 middle and primary schools have Distance Learning programs and in 2002 the total IT expenditure of the education sector reached $2.6 billion. According to CCID, China’s leading IT market research and consultancy firm, the education software market will grow at a rate of 50% per year in the next four years. These advancements are made possible through the help of American companies such as Microsoft, which recently added another to the list of multi-million dollar commitments to the development of the Chinese IT industry. In a recent agreement between Microsoft and the Ministry of Information Industry, Microsoft promised to help China’s information industry and narrow the digital divides between urban and rural areas. Microsoft will invest $31 million in the project and will train 1,000 instructors, 20,000 software engineers and offer online courses to 50,000 engineers. In another example, American-based UGS agreed to provide 1.1 billion in software grants to 87 universities in China adding to IT advancement in China’s education. Government programs have also accelerated growth in the industry. According to the 11th Five-Year Guidelines for National Economic and Social Development, China will increase financial input for education in the coming five years and gradually raise the proportion of annual government education expenditures to 4 percent of GDP. The Government plans to have all middle and elementary schools in big and medium sized cities to reach the international standard of ten to fifteen students per computer by the end of the 11th Five-Year Plan. They also intend to have all High schools and Colleges equipped with wireless Internet by this timetable.

Computer learning in China severely lagged the rest of the world until 1999, when the trend was reversed as investment in digital resources improved. Since then basic educational resources have developed rapidly and even in the countryside 50,000 elementary and middle schools have used disks and IP. The current trend of Distance Learning in China is evident in the development of online curriculum. As of 2003 there were over ten thousand courses available online. Included in these courses is an US/China government sponsored language exchange, which was launched by the US Department of Education and Chinese Ministry of Education in 2002. The program is called the US-China E Language Distance Learning system and is powered by CERTNET and Hua Xia Dadi on the Chinese side and Northrop Grumman and Little Planet learning on the US side.

Despite these improvements, the country still has a long ways to go in many aspects. It was reported by CCID that in schools equipped with intranet, 80% do not fully utilize the system and 50% of the computers in schools were in idle status. There is a lack of education resources and much of the software is not user friendly. In addition many teachers in China are not properly trained. For example, on a national average 6% of Chinese teachers have never used a computer and 60% use a computer less than one hour a day. The rural areas, where 18% of teachers have never used a computer and 74% use a computer less than one hour a day, bring down these numbers. Encouragingly the 111 million users in China are very receptive to online learning. In fact, according to a recent national survey, 27.8% of all Chinese citizens were accustomed to reading books and articles on the Internet, an 18.3% increase since 2003. To meet these growing needs China has more than 400 publishing houses operating on-line publishing usinesses.

Key Suppliers

CHINAEDU Corporation, founded in 1998, is the leading education service provider in China. The company’s investors include McGraw-Hill companies and IDG venture investments LP, etc. The company has developed its educational services covering all age groups using diverse educational methodologies. Today, the company and its subsidiaries make available to learners a full spectrum of educational services and bring “Unlimited Learning” into life through offering education services for students from kindergarten through college. The company’s services offer both online and off-line education services to degree and non-degree programs.

Some major Chinese Distance Learning service providers are: Dawning Information Industry Co. Ltd., whose server is the number one brand in China’s educational sector. You Shun Wang Lou Company, Hua Jiao Long Distance Education Network, China Basic Education Network, and China Middle and Primary School Education Network. However, it is difficult to get the number of Chinese Distance Learning service providers.

Through joint ventures, mergers and wholly foreign owned enterprises (WFOE), foreign Distance Learning providers have successfully entered the Chinese market. One of the major exporters of Distance Learning is South Korea, which is considered by many Distance Learning experts in China to be the worlds most advance Distance Learning service provider.

Important competitors for US companies are also found in EU countries. In May of this year (06), a new Sino-European high-speed network connection, ORIENT (Oriental Research Infrastructure to European Networks) was established to help the flow of information between the two regions. The network which connects Europe’s GNT2 with China’s CERNET and CSTNET, will provide access to applications such as telemedicine, digital libraries and Distance Learning to the general public as well as the research community. European companies providing IT training are welcome by China because in addition to brand recognition, the British firms understand the Chinese market and have been training individual Chinese State Owned Enterprises, focusing on the senior managers.

Australia has also been a major exporter of higher education services to China over the past decade and has proven a fierce competitor in management training, communications, scientific research and English language training. It has worked hard on delivering services and programs in undeveloped regions in China and has a competitive price advantage as exchange rate changes improve the Australian position relative to the dollar and euro.

Prospective Buyers

All education institutions in China are prospective buyers of Distance Learning in China. In the business sector, the prospective buyers of Distance Learning are SOEs, Multinational Corporations and other large companies. Smaller U.S. providers should focus on the medium to large-sized companies with domestic distribution, as the bigger companies have followed a trend of seeking out larger providers. Most companies operating in China have a strong urge to provide English courses and Marketing courses, as the market becomes more global and English is decisively the language of business.

Market Issues & Obstacles

The Chinese education system used to be highly centralized with education provided by the central and local governments respectively and directly under their administration. This system had many disadvantages including that the state undertook too many responsibilities and the schools lacked the flexibility and autonomy to provide education according to the needs of the society. Structural reform has given schools more freedom to make decisions. Once completely under the jurisdiction of the Ministry of Education, Distance Learning obtained a great deal of autonomy in 2000 under the “Several Comments of Supporting Some Universities and Colleges to Set up Internet Education Schools and Pioneer Distance Learning”. After these “Comments” Universities were able to decide what courses to offer even outside of the subject catalogue, determine the admission quota and award degree certificates statutorily recognized.

Another recent improvement for the industry is the renewed regulation by the Chinese Government to better protect copyrights on the Internet. In May 30, 2006, a new regulation was passed to ban the uploading and downloading of Internet material without the copyright holder’s permission. Companies should still only enter the Chinese market with the expectation of having IPR problems and develop a contingency plan as part of their market entry planning. However, for degree granting Distance Learning, it is less of an issue, as only those who enrolled in the study and test could get the recognized degree. This is a marked improvement for international education providers in China but barriers still exist. Government documents concerning educational content claim that, “schools of various types and at all levels should implement the Party’s educational policies with socialistic direction, and educate the students with Marxism, Leninism and Mao Zedong thoughts and the theory of establishing socialism with Chinese characteristics.” With these existing cultural and language barriers, strong Chinese partnerships are suggested especially for product customization and marketing.

Market Entry

Partnerships with Chinese counterparts has been the trend in importing Distance Learning into the Chinese market and this method appears to be the best way for US companies to gain access. When looking for a good prospective partner, companies should be mindful of industry experience, and distribution channels and proceed with caution.

Companies also have the option of entering by creating Representative Offices. Though setting up is relatively easy, rules such as performing liaison activities are often limiting. Representative Offices cannot sign contracts, are forbidden to work in RMB and cannot buy and sell in the name of the Representative Office.

Sources

U.S. Department of Commerce].