This article (Chinese version) first appeared in Financial Times Chinese on March 9, 2020.
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China’s education industry is an important component of its tertiary sector. The industry has been adversely affected by the COVID-19 outbreak, arousing extensive societal attention and discussion. Complaints during this period have primarily been about the poor quality of some online classes, the low ratings garnered by some learning apps, the cancellation of major exams, and the stress over searching for and finding suitable jobs. Given the outbreak’s tremendous and profound impact on the market’s landscape and dynamics, Oliver Wyman here summarizes the implications to the industry’s different sub-segments and the potential changes to customer behavior, so as to highlight key market trends and identify segmental opportunities during this critical time.
We estimate that China’s education industry will witness negative growth in 2020. While school businesses will remain stable due to resilient demand, training businesses will suffer a serious economic blow, with the exception of a few sub-segments, such as businesses that focus on test preparation for admission into higher-learning institutes. Separately, the adoption of online education will accelerate, but the respective increase in terms of the number of paid users will still be limited. Meanwhile, online competition will be home to the Matthew Effect, while the gap between the leading and lagging offline players will widen, and many mid to small-sized training businesses will be eliminated due to a lack of cash flow. Consolidation will take place in the experience-based education segment, where demand has shrunk drastically due to the heavy reliance on commuting to various teaching venues. The big winners are players that focus on providing offerings to businesses, as the demand for these offerings has grown exponentially since the beginning of the outbreak.