Opportunities and Challenges for Finnish Companies in the Chinese Education Sector

The Chinese education sector stands as one of the largest and fastest growing markets for investors. The entire industry has witnessed substantial growth in recent years, propelled by the expanding middle class and increasing educational needs across China. Companies offering innovative, high-quality, and adaptable solutions aligned with the country's education goals can find opportunities in China's evolving education landscape. Despite its possibilities, sudden changes in regulation make China an uncertain operating environment. Companies that recognize these risks and opportunities will be better positioned to succeed in the Chinese market.

China's education sector

The education system in China constitutes of preschool, compulsory, senior secondary, higher and adult education. Preschool education catering to children aged three to six is widely available but not compulsory. Both public and privately funded preschool institutions exist. Compulsory education in China spans nine years and is divided into primary school (six years) and junior secondary education (three years).

After completing compulsory education, students have the option to pursue senior secondary (high school) education, which is not mandatory. This level typically lasts for three years and offers general education or vocational education tracks.

Higher education in China encompasses universities, colleges, and vocational schools. Admission to universities is competitive and based on standardized national undergraduate admission exams (Gaokao). Later, adult education provides opportunities for individuals to continue their education or acquire new skills.

The government of China puts great importance on education in driving its economic growth and social development. China's latest development plan set for 2035 provides context for the most recent education reforms. In addition to setting goals of improving the quality of education across China, it highlights the central role of the Communist party in the education system. 

Regulation on private education

Private education in China has witnessed substantial growth due to the increasing demand for quality education and specialized learning options. To operate, private education institutions must obtain licenses and approvals from relevant authorities, ensuring they meet specific criteria and adhere to national curriculum guidelines set by the Ministry of Education. Tuition and fee regulations are in place to ensure reasonable charges, and inspections and evaluations assess education quality and regulatory compliance.

To address concerns about academic pressure, the Chinese government has implemented strict regulations on private tutoring. This double reduction policy has led to measures aiming to tackle issues such as excessive tutoring, high costs, and unfair competition. For-profit tutoring in core school subjects for grades 1-9 has been banned, and foreign curriculum and content are restricted. Private tutoring institutions must register, obtain approval, and adhere to limits on tutoring hours and scheduling. The government has also strengthened supervision and penalties to create a balanced and fair learning environment aligned with the national curriculum.

Foreign investment in the private education sector in China faces even more stringent restrictions, especially for core school subjects. While foreign investment is permitted in non-profit education institutions, investing in for-profit institutions offering compulsory education is prohibited. Sino-foreign cooperative institutions or programs require approval from the provincial educational administration department, allowing limited collaboration with foreign entities while maintaining control over the education system.

Recent regulations include the Interim Measures for Financial Management of Off-Campus Training Institutions and the Interim Measures for Administrative Penalties for Off-Campus Training. The former mandates registration, compliance with regulations, establishment of financial management systems, and transparent records. It also provides guidelines for tuition fees, refunds, and penalties for violations. The latter regulates off-campus tutoring for preschool and compulsory education students, imposing penalties for non-compliance.

On the other hand, the Chinese government has implemented policies to develop vocational and adult education, recognizing the importance of continuous learning and skill acquisition. The Vocational Education Quality Improvement Action Plan (2020-2023) aims to address unemployment pressures and the labor market imbalance caused by an oversupply of university graduates and a shortage of highly skilled workers.

Foreign investment in vocational and adult education is gradually opening up, with specific management measures being formulated to encourage collaboration with vocational colleges and training institutions. The State Council's document Opinions on Further Optimizing the Business Environment for Foreign Investment and Increasing the Attraction of Foreign Investment encourages foreign enterprises to collaborate with vocational colleges and training institutions to promote advanced manufacturing, modern services and the digital economy, and build a pool of new types of skilled workers.

In summary, private education in China has experienced significant growth but is subject to strict regulations, particularly in compulsory education. Foreign investment in this sector is restricted. However, there are opportunities for foreign investment in vocational and adult education, with incentives and measures to encourage collaboration.

Opportunities

While education in China is strictly regulated, there are still opportunities for Finnish companies interested in investing in the Chinese education sector. Finland’s reputation for excellent education and innovative teaching methods makes Finnish institutions and companies valuable partners.

Educational tools

Expertise in educational technology aligns with China’s goal on technological advancements in education sector. Chinese have for example seen widespread adoption of Massive Open Online Courses (MOOCs). Additionally, Chinese consumers are keen to learn online. Thus, companies specializing in solutions such as learning platforms, educational software and online learning resources are likely to meet educational needs in China. As STEAM Learning (Science, Technology, Engineering, Arts & Maths) has gained popularity, companies may also find it lucrative to supply educational tools such as coding software and robotics to Chinese schools.

Extra-Curricular Training

Non-academic extracurricular programs are exempt from the double reduction policy, such as art, drama, sports, and music programs. These subjects are still very popular amongst Chinese parents since training in these activities can help children to develop many useful skills outside of academics as well as help their psychological wellbeing. Certain high schools and universities even take into account the student's achievements in extra curricular activities in their admissions criteria, which is also an incentive for parents to invest in these subjects.

Life-long learning and vocational skills

While Chinas traditional education system succeeds in delivering education for all, there's a disconnect between the skills acquired through it and those required in the job market. Thus, focus is shifting to continuous skills development to keep pace with the changing demography, evolving economy and technological advancements of the contemporary times. In addition, China is emphasizing the development of vocational schools and skills training. By addressing these gaps in the education system, new opportunities may arise for Finnish companies. Companies specializing in lifelong learning, vocational education, apprenticeship programs and industry-specific training can contribute to this development.

Education tourism

Though still a relatively new phenomenon, education tourism towards Finland is on rise. In fact, the Chinese government has emphasized the importance of educational tourism as a means to develop international skills and competencies for both children and adults. Meanwhile the international reputation and distinctive expertise of the Finnish education system contribute to attracting diverse range of visitors from China. Among these travelers are education professionals, government officials, representatives from educational companies, teachers, principals, and students. Therefore exporting services such as short-term courses, camp schools or training on nature education can be profitable.

Early education

Additional opportunities can be found within childcare and early education that are increasingly popular in China. With parents pursuing better care for their children, companies offering these services are thriving. Though for-profit kindergartens face these days more restrictions, other potential forms of collaboration include offering curriculum content and teacher training services.

Challenges

One of the biggest challenges that Finnish companies may face in the Chinese education market is the afore discussed regulation. Chinese education sector is complex and subject to frequent changes. Foreign companies need to navigate through varied processes to establish and operate educational institutions or provide educational services. In some cases, foreign companies may get around the regulation by collaborating with Chinese organizations. It is however essential to make sure that both the Finnish company and possible partnering organizations have a strong understanding of the regulatory environment. 

The education market in China is highly competitive, with both domestic and international players looking for market share. Finnish companies will need to differentiate themselves by highlighting the unique aspects of their educational offerings and demonstrating their value proposition to Chinese customers.

Due to cultural and language differences localization should be taken into consideration. Adapting Finnish educational methods to suit the Chinese context can be challenging but essential for success. This process may involve modifying curriculum content, incorporating Chinese language and culture, and understanding the specific needs and preferences of Chinese students and parents. Moreover, the market is not an environment for quick wins, but requires commitment and resources in the long run.

Protecting intellectual property rights can be a concern when operating in China. Finnish companies should take measures to safeguard their educational content, technology, and innovations to prevent unauthorized use or infringement. It is also crucial to evaluate possible risks of transfer of technology or know-how with China. Many technologies such as AI and cyber infrastructure may be primary civilian in their application, but can be leveraged to support internal repression or military capabilities.

In conclusion, while there are opportunities for Finnish companies in the Chinese education market, it is essential to conduct thorough market research, understand the regulatory landscape, and develop localized strategies to address the challenges and maximize the potential for success.

Opportunities through Team Finland

Team Finland network is ready to offer internationalization advice for any companies wanting to explore opportunities in the Chinese education sector.

Text: Annika Belov (Trainee) & Zhifen Pan (Assistant)

More information: Olli Suominen (Counsellor, Education and Science Affairs)