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China’s booming international school business untouched by slowdown

PUBLISHED : Monday, 07 September, 2015, 12:30pm
UPDATED : Monday, 07 September, 2015, 12:35pm

China’s rich “tiger parents” are becoming money spinners for the country’s private education providers, particularly international school operators that pave the way for their kids to top Western universities, an industry hardly touched by the economic downturn.

“China’s education market is huge and is only going to get bigger. Rising wealth, demand for skilled labour, the one-child policy and an obsession with brand-name universities are positive catalysts,” CLSA analyst Mariana Kou wrote in a note to clients. “We expect international schools that accept local students to register the fastest growth.”

That has led Kou to overweight China’s private education sector as a whole and a 27 and 39 per cent projected upside for three of the four stocks she covers. Among the top picks are New York-listed educational services provider New Oriental, Nord Anglia, and China Maple Leaf, China’s largest international school operator listed in Hong Kong.

International schools in China, rather than just catering to expatriates, are a coveted destination for well-off locals as well. Some 90 per cent of Maple Leaf’s 15,000-odd students come from Chinese families. That pattern of intake is becoming increasingly common for international schools in China.

Last year, 177,400 students were enrolled in international schools in the country. “This segment is poised to expand the fastest [in education sector] at an 11 per cent compound annual growth rate over 2015 to 2018,” Kou said.

The proliferation, according to Kou, is largely thanks to Chinese parents’ desire to send their children overseas, which has also proved to be a boon for the country’s informal online and after-school tutorial businesses.

China’s education market is huge and is only going to get bigger. Rising wealth, demand for skilled labour, the one-child policy and an obsession with brand-name universities are positive catalysts
Mariana Kou, analyst, CLSA

“Just like their obsession with luxury goods, it seems that Chinese also have an obsession with brand-name universities. Harvard, Yale, and Stanford in the US, Oxford and Cambridge in the UK…are some of the most popular and prestigious schools to study [for Chinese students],” Kou said.

Competition for university places is fierce in China. Official data show the admission rate for the country’s top 154 universities stands at nine per cent, compared with 60 per cent for Canada’s three best colleges and 22.8 per cent for Oxford and Cambridge.

In Chinese culture, family commitment to education is particularly strong. Books with names like “how to get your child into Harvard” are perennial bestsellers. The phenomenon of “tiger mom” – a term coined by Asian-American mother Amy Chua who wrote a book on her hyper-parenting and laser-like focus on academic achievement – is widespread.

According to the Hurun study on millionaires, the wealthy in China tend to allocate 20-25 per cent of their annual expenditure for education. A separate research by China Reality Research shows middle class households set aside an average 12 per cent of their savings for schooling.

“It’s worth it,” said Natalie Peng, a 41-year-old corporate treasurer who spends roughly 25,000 yuan (HK$30,423) a year for her eight-year-old daughter’s international school education in Beijing. “We want her to speak English like a native, and go to a top-ranking university like Yale or Harvard.’”

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