Mainland China’s After-School Tutoring Is Perfect For Consolidation, According To Report

There are maths tutors across the world, and in China, they’ve only been getting more prevalent. According to a report on the industry, the Mainland’s industry is currently ripe for consolidation, with major players in the industry in the best place to gobble up smaller rivals that have been left vulnerable thanks to tougher government oversight.

Starting in February, China’s central government stated that it would be clamping down on tutor companies that don’t meet new standards. They unveiled of nearly 130,000 after-school teaching institutions in May noted that more than half of them, about 65% operated without having the necessary teaching certificates or business licenses.

The Ministry of Education’s push to improve compliance will lead to many smaller players in the industry who are struggling to make profits will be pushed out of the market, as stated by the equity research conducted by Jefferies. The report also noted that roughly 13%, or about US$6.66 billion, of China’s estimated $52 billion K-12 tutoring market will be available for grabs.

According to Jefferies, it should be of little issue that for the major players in Mainland China’s tutor industry to grab the market shares left open by the small players upon consolidation.

There’s a lot of pressure on students, hence why many of them turn to private maths tutor in order to  get into top-tier universities,  thanks to the post-graduation job market being so heavily competitive. About 15% of the country’s college graduates are unemployed in the first six months following graduation, while 25% of those with diplomas earn low wages, according to a report on the country’s education trends conducted by L.E.K. Consulting.

Consolidation might lead to improvements to the quality of teaching in the country, as underperforms leave. However, this might lead to students in smaller cities being left behind as the local centers stop operations, although the big players are expanding their reach with growing online offering.

Anip Sharma, the author behind the L.E.K. report, however,  have stated that smaller players in the tuition industry might instead step up their game in response to the government clampdown, which would lead them to, among other things, capitalize on their early edge in the smaller cities. He says that China’s segmented tutoring industries prioritizes geographical advantage, especially in the smaller cities, where many students will favor the small tutor centers close to their homes.