Moreover, the online penetration rate of the Chinese education industry is also said to be lower than that of other sectors such as e-commerce, news and wealth management. This also provided a vast room for new players to enjoy a market with high returns and low regulations.
However, there have been a lot of complaints recently, from the users and parents. Most of them are centered around the problems with students having to use too many apps, and some apps have collected personal information or have even contained pornography.
For example, in some schools, teachers require students to use selected apps to do homework or revisions, state-run Xinhua news agency reported (in Chinese). According to the news agency, one Beijing parent, Zhang Ying, said her child’s school uses an app that requires students to watch a 30-second mobile-gaming advertisement before providing course revision materials. And she is afraid that these ads might trigger her child’s wiliness to play online video games.
Lei Chaozi, director of the ministry's Department of Science and Technology, said the ministry conducted inspections at 100 education institutes last year in March and found that some had introduced more than 20 apps to students, which has caused some serious headaches for students and teachers.
Furthermore, Chen Feiyan – an official at an Internet security unit under China’s public security department – said, “currently, to attract users, some apps contain pornographic or gambling materials, and refuse to log their operating details,” to Caixin Global.
Moreover, parents and students are concerned about the quality and the content of the online education apps in the market. Xiao Xiao, a high school student in Chengdu, Sichuan province, said to China Daily, “My problem with the apps is that they often have lots of advertisements, are poorly designed and contain lots of bugs, which makes them very inconvenient to use."
All these laid out the imperfections of the unregulated online education market in China. Thus, the government has started watching the market closely.
In late 2018, the government began releasing a series of new regulations governing two types of online education providers – mobile apps and live streaming providers.
These regulations were focused on administrative and pragmatic issues in order to establish a better management system to effectively screen independent education providers – such as short-term, intermediate and long-term measures to standardize, and improve the quality and management of education systems in the country.
The first regulation to officially address online education came in December 2018 – the Opinion on Regulating After-school Training Institutions (Opinion 80). It called for all relevant government agencies, such as telecommunications, culture, industry, information and broadcasting sectors to cooperate in taking action within the online education sector.
A range of different measures has since dealt with specific issues of the operation of mobile online education apps. For instance, the Notice on the Prohibition of Apps from Entering Primary and Secondary School (Circular 102) prohibiting harmful apps from entering primary or secondary campuses or the Implementation Opinion Regarding Regulating After School Online Tutoring (Opinion 8), which restricted who could teach at off-campus online training facilities.
Later in 2019, the government took a more serious step. For the first time, the Chinese government has rolled out the first formal policy document to regulate education-related apps.
The Ministry of Education, along with eight other ministries, released the Opinions on the Orderly and Healthy Development of Educational Mobile Internet Applications (Opinion 55). This was essential in establishing a more long-term approach to the monitoring of mobile education apps, calling for better management and governance of these apps.
According to the guidelines, education authorities and schools should ask the opinions of students, parents and teachers before introducing online apps to students. In addition, all apps used at all levels at schools should register with provincial education authorities by the end of 2019, and a long-term management mechanism on the apps with specific standards and rules should be established by the end of 2020, the guideline said.
Provincial education authorities should work with other departments to select apps that meet the standards before recommending them to schools, the guideline added. Moreover, schools should not charge any fees for apps for teaching and student management, and these apps should not contain any commercial advertisements or games, it read. Furthermore, when the school recommends other apps to students, they cannot force students to use them or associate the use of the apps with grades, credit, or honorary titles.
Recently, the nature of the COVID-19 outbreak has also heightened efforts to bring online education to the forefront of the central government’s policy-making agenda.
Due to the outbreak, the world’s largest student population – of 176 million K-12 students – are under in-home quarantine, taking online classes.
Early on this year, the Ministry of Education, along with five other central authorities, led the charge on a campaign to check the operations, course content, and teaching qualification of online training providers.
By the end of the review, education authorities had finished scrutinizing 3,463 courses and 115,622 teachers of the 718 online training course providers. The campaign is expected to result in a provincial blacklist of the unqualified or poorly run online training providers and to suspend or shut down their services.
While these regulations made parents and students happy, they make the companies in the online education industry worried. However, China’s social emphasis on learning and knowledge, along with the country’s flourishing technological infrastructure, makes investing in online education still an exciting prospect for most of them. Companies such as Zuoyebang, VipKid, Yuanfudao, Liulishuo and Ding Ding have recently increased their investments.
Yet, businesses must be careful when entering this industry, especially foreign investors. While some segments of the market, such as K12 compulsory education, remain off-limits to foreign investment, other sections – such as foreign languages, vocational training and corporate training – continue to be promising areas of investment. Therefore, foreign investors need to seek local professional advice, especially as education remains a sensitive area of investment in China. In addition, it seems like the regulations will continue to develop as the market expands and tiger moms and students continue to address emerging problems with it.
In short, in the future online education might not be as profitable as it used to be, before the regulations. Investors need to think twice – and probably consult with tiger mothers for a sharper analysis – before jumping into the market.