Mainland China’s after-school tutoring industry ripe for consolidation amid tougher government oversight
Stricter oversight by Ministry of Education could lead to shakeup in industry that provides after-school teaching to help Chinese students get into the top universities.
Mainland China’s booming after-school tutoring industry is ripe for further consolidation, with large players poised to gobble up smaller rivals forced out by tougher government oversight and low profit margins, a report said.
Beginning in February, the central government signalled it would clamp down on industry players who do not meet standards. It unveiled a survey of nearly 130,000 after-school teaching institutions in May found that more than half – 65 per cent – did not have necessary teaching certificates or business licenses.
The Ministry of Education’s push to improve compliance will mean many smaller players who were already struggling to eke out profits will be shaken out of the market, according to equity research by Jefferies.
Roughly 13 per cent – about US$6.66 billion – of China’s estimated $52 billion K-12 tutoring market share will be up for grabs, said the report by Jefferies.
Big players most likely to benefit are TAL Education Group, the world’s largest private education company, and New Oriental Education and Tech Group, Jefferies said, both of which trade in the US.
“In our view, it should be relatively easy for the large players to grab this market share vacated by the small players upon consolidation,” Jefferies said in its report.