Blended Learning in China: Blurring the Lines of Online and Offline English Language Learning

BLENDED LEARNING
IN CHINA:
BLURRING THE
LINES OF ONLINE
AND OFFLINE ELL
BY: ERIC SKUSE

2
China’s English Language Learning (ELL) Boom Evolves
ELL in China has experienced a decade of blistering growth—it
was a $4.9 billion industry in 2013 and is currently growing by an
average of 12-15% a year1
—but fundamental changes are underway
due to changing consumer preferences and the availability of new
technology. Dreams of getting into top-flight universities continue
to propel students from all over the Middle Kingdom into English
language classes at fee-paying supplementary schools. However, the
question that remains for industry stakeholders is, what is the ideal
position to take in China’s rapidly evolving ELL landscape? Emerging
Strategy’s recent study into long-term trends affecting ELL in China
sheds light on the trends that will impact future demand.
In discussing the rising demand for ELL in China, assessing
motivation and demand drivers is exigent. Admission to high-quality
higher education institutions remains the fundamental driver of
demand behind China’s ELL boom. Due to the premium placed on
quality higher education in China, coupled with the steadily rising
incomes of the middle class, Chinese students have surpassed all
other international student populations at most universities in
English-speaking countries. With urban household incomes expected
to climb higher into the next decade, Chinese families will continue
to pursue higher education in English-speaking countries for their
children.
“There are now more
Chinese people learning
English than there are
native English speakers
on the planet, which is
astounding really. The
Chinese are very hungry
to learn English,”
-Chief Marketing Officer,
English First Education
1
Ambient Insights (2013)
Phone: (+86) 21 6191 1101 Email: info@emerging-strategy.com
Share of urban households by annual income (%)*
Source: McKinsey Global Institute (2013)
*Conversion based on 2010 USD/CNY exchange rate of 6.73 CNY/$
2000 2010 2020
(forecast)
Afﬂuent (>$34,000) Mainstream ($16,000-$34,000)
Value ($6,000-$16,000) Poor (<$6,000)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
36%
10%
82%
6%
2% 6%
61%
36%
7%
63%
1%

3
To a lesser extent, middle- and high-income Chinese families are
now considering English-based curriculums at secondary school
level. An unprecedented number of Chinese students are currently
studying at high schools outside their native country—23,795 Chinese
students were studying in U.S. secondary schools in 2013.2
Not only
are more Chinese students studying in English-speaking countries
than ever before, but increasing numbers of students are studying
English-language curricula in China. International schools in first-
tier cities such as Beijing and Shanghai are quietly opening their
doors to local students to study English-language curricula including
the International Baccalaureate (IB) and Cambridge International
Examination (CIE). International programs at Beijing secondary
schools experienced enrollment growth of 25% in 2013.3
Families who aspire to send their children to costly international
schools both in China and abroad must turn to traditional fee-
paying supplementary English language schools, online-only ELL,
or a combination of both to give their children the quality English-
language instruction that public schools do not provide. English-
based curricula can better prepare students to compete for highly
coveted places in top colleges both in China and abroad.
“In my experience,
families want their
children to do the IB for
two different reasons.
Some are interested in
the curriculum and the
IB helps their children
gain access to foreign
universities. The others
chose it purely to
develop their child’s
English”
-Coordinator, Peijia
Bilingual School
2
Emerging Strategy (2014)
3
Chinese Education Online (2014)
Monthly urban household education expenses
by development tier (%)*
Source: iResearch China, 2015
*Conversion based on 2015 USD/CNY exchange rate of 6.2CNY/$
<$16 $16-$50 $50-$80 $80-$160 $160-$320 >$320
Tier 3/4 Tier 2 Tier 1
35%
30%
25%
20%
15%
10%
5%
0%

4
Blended learning’s bright future
Emerging Strategy conducted a study to analyze long-term trends
affecting ELL in China as well as in other major markets. Our analysis
is informed by primary research conducted with industry leaders
and experts. The information gathered in this study points to
fundamental changes primed to affect China’s ELL market.
A cursory glance at the macro level may suggest that due to rising
incomes and smartphone penetration, mobile ELL will experience
rapid growth. From this angle, mobile ELL certainly presents a myriad
of opportunities in China, however, a more nuanced approach is
needed to shed light on trends affecting the industry. Advancing
technology complicates the backdrop against which ELL operates due
to the uniqueness of the Chinese market.
In first- and second-tier Chinese cities, competition for market share
between online-only and brick-and-mortar institutions will only
intensify as traditional online and offline boundaries begin to fade
whilst blended learning thrives. Blended learning solutions, where
in-class and online instruction are packaged together, are likely to
become a high priority for traditional supplementary fee-paying
schools and online startups alike. Online-only ELL companies in
particular stand to gain a significant competitive advantage from
establishing footholds in brick-and-mortar ELL classrooms.
In second- and third-tier cities where high quality brick-and-mortar
penetration is low, a number of opportunities are present. Lower
quality brick-and-mortars often cannot provide the high quality

5
verbal English instruction now demanded by middle class families.
Online delivery of high quality verbal English could directly address
an underserved segment of learners by providing quality verbal
English instruction in China’s rapidly urbanizing cities. Strong cultural
biases will likely impede widespread adoption of purely online-only
ELL options, therein lessening resistance for blending learning into
the digital ELL market.
For online-only ELL providers looking to enter the Chinese market
– contingent on circumstance – blended learning partnerships with
traditional brick-and-mortar schools could generate substantial
growth opportunities.
Combining the classroom experience with supplementary technology
such as peer-to-peer video, speech recognition technology, and a
host of other new technologies, will be a win-win scenario for both
online ELL providers and China’s traditional brick-and-mortars going
forward.
Focusing on the underserved segment of lower tier Chinese cities
would prove strategically valuable. Our analysis shows that when it
comes to education expenditures, third- and fourth-tier cities each
currently have a higher total of high spending households than the
first- and second-tier cities combined. If current trends concerning
population growth and education expenditures continue, ELL
providers can expect to find a market of 34.4 million high-spending
urban households in third- and fourth-tier cities by 2020.
“Take middle and
elementary school
education as an
example. The users
(students) and the
payers (parents) are
not the same group.
So, a tough problem
for online education
organizations has been
to promote courses to
the payers and in the
meantime stimulate
the interest of the
users. The parents are
all holding a “trial”
attitude towards online
education.”
-IT analyst, China
Economic Net

6
Practical English for K-12 Students
In previous years, most fee-paying supplementary English language
schools have functioned merely as “cram schools”. These schools
supply test prep classes tailored to high school and university
entrance exams; the “gaozhong” and “gaokao”, respectively. In
an effort to boost test scores, many providers employ pedagogy
based on rote memorization of vocabulary and grammar, usually
to the exclusion of authentic verbal communication. Every year
approximately 10 million students take the national university
entrance exam4
, and precisely because these high-stakes exams
determine admission to China’s most selective high schools and
universities, they are critically important in the eyes of Chinese
families. Maximizing performance on these high-stakes English exams
Number of urban households with above average monthly
spending on education, by development tier (millions)
Tier 3/4 Tier 2 Tier 1
4
5
1
7.9
11
16
34
11.6
23.7
2000 2010 2020
(forecast)
70
60
50
40
30
20
10
0
Sources: iResearch, Nielsen’s, McKinsey Global Institute
Note: Above average spending > USD 160/month.
Projections based on Emerging Strategy analysis*
4
Ambient Insight (2014)
*Projection analysis is based on: 1) share of urban households, by city development tier as of 2010,
2) urban household expenditures on education by city development tier as of 2015

7
has been a foundational demand driver for ELL from the inception
of the industry. However, recent policy changes at the Ministry of
Education have reduced the overall weight of English test scores
for the gaokao. In Shanghai and Zheijiang province, students will be
allowed to take the English test twice – in January and June – and will
be permitted to the use the higher of the two scores as their gaokao
English test result. These policy changes are intended to reduce the
tremendous stress endured by the nation’s high school students, but
this may also produce a change in consumer preference away from
traditional test prep ELL.
Out of China’s test prep-centric ELL culture a phenomenon of “yaba
yingwen” has taken hold. The term translates to “can read but cannot
speak”, and refers to people who have studied English reading and
writing while neglecting oral English to the point where they cannot
confidently express themselves verbally, despite having completed
years of diligent practice. Backlash against the “yaba yingwen”
phenomenon, coupled with ongoing policy changes to high-stakes
English exams at provincial levels, indicates that preferences are
shifting from test prep to more communicative, verbally-focused
products and services. Companies are well aware of the growing
importance of verbal English instruction and are continually adapting
to customers’ tastes.
Riverdeep Immersion Subject English (RISE English) is a Chinese-
American joint venture between Beijing Riverdeep International
Education Technology and Houghton Mifflin Harcourt (HMH), a major
publisher. RISE English offers English-based subject matter classes
in math, science and other subjects using HMH materials. As the only
Chinese provider licensed to use their software, they have uniquely
positioned themselves to leverage the blue chip brand name of
their foreign partner. The school was founded 2008 and is currently
operating in 80 cities across China.
While RISE English’s offering may be unique, their joint partnership
with a major American education company is not. In 2012, McGraw-
Hill founded another Chinese-American joint venture with Oriental
Baby Care, a preschool chain operating 450 schools in 180 Chinese
cities. By 2014, Oriental Baby care had 570 preschools throughout the
country using McGraw-Hill’s digital ELL materials. Consumer trust and
preference for foreign brands gives unique advantages in the Chinese
market that Chinese firms are well aware of.
“Currently, the
importance of English
language learning
seems to be found
mainly in commerce
and industry. To
take Shanghai as
an example, many
western companies
have branches and
investment in the city
and the lingua franca is
English, so many local
people require English
in order to find and
secure a job in these
companies”
-Head of Instruction,
English First

8Phone: (+86) 21 6191 1101 Email: info@emerging-strategy.com
5
iResearch Group (2014)
Total number of online language learners in China
by market segment (millions)
Pre-K students ProfessionalsPrimary & secondary students
Students studying abroadPost-secondary students
3.585
1.368
0.292 0.091
0.919
3.938
6.499
12.361
2009 2010 2011 2012 2013 2014 2015f
2016f
2017f
f = forecast
Source: iResearch Group (2014)
What’s next for ELL in China?
China’s online education market is undergoing an unqualified
boom—investments in Chinese online education totaled USD $470
million in the second half of 2014 and blue chip firms such as
Alibaba, Tencent and Baidu are scrambling to get a piece of the
action. These Chinese tech giants are rolling out their own platforms
and acquiring smaller firms in order to gain market share in this
growing space. A recent report from iResearch Group estimated the
number of China’s online language learners would grow from ~5.3
million people in 2009 to ~25.8 million in 20175
. Given the necessity of
English language proficiency for academic and career opportunities,
many millions of Chinese people will be going to online platforms to
learn English in the near future.

9
“The education system
is shifting from being
teacher-centric to
student-centric. The
modern student
demands high quality,
flexible, personalized
learning. The current
bricks-and-mortar
education system is
simply not equipped to
do this at scale,”
-Area Service Director,
Wall Street English
Phone: (+86) 21 6191 1101; Email: info@emerging-strategy.com
6
iResearch Group (2014)
While post-secondary students are forecasted to make up the
majority of online language learners, the number of professionals
learning English online will rise as well. The rising demand for
verbal English proficiency in the Chinese job market will also act as
a catalyst for this. Among other things, English proficiency can open
doors to some of the most sought after careers at the most desired
employers. State-owned enterprises (SOEs) represent the gold
standard of employment for young Chinese professionals seeking
prosperous, stable careers. Employment at these firms is competitive
and English proficiency is increasingly required for entry-level
positions. Companies such as China Mobile, China Southern Airlines
and Industrial and Commercial Banking Corporation (ICBC) all require
English language proficiency demonstrated through high-stakes
verbal English exams.
Outside of the upper echelons of the Chinese corporate world, a
number of organizations require English speakers with specialized, or
technical language proficiency. Specialized vocational ELL products
are high demand in business, hospitality, finance, law, medical, oil
& gas, tourism, aviation and engineering. Due to the growing need
for workers with English proficiency in order compete globally, firms
in these priority industries are now requiring English proficiency of
their employees. A survey of online language learners found that
the primary reason for learning another language, cited by 53% of
respondents, was for employment purposes6
. Specialized English
training programs are needed to meet the demands of employers
and job seekers alike. This presents fruitful opportunities in the
specialized and technical English spaces.

10
“At first students are
skeptical but once they
realize they don’t have
to travel, or get out of
bed, they never come
back to the center… we
have a big housewife
community, this is very
convenient for them.”
-Area Service Director,
Wall Street English
7
Emerging Strategy (2014)
As demand for online learning builds, is brick-
and-mortar ELL crumbling?
Online-only ELL offerings will certainly gain ground on traditional
fee-paying supplementary institutions (i.e. brick-and-mortars) for
two key reasons. First, online-only ELL services like the live video
conference-based classes such as those offered by TutorGroup,
HuJiang and 51Talk appeal to busy, working adults. Video classes
can be accessed from home, at any time, and do not require a long
commute. Secondly, the online-only nature of these offerings ensures
equal accessibility for underserved segments outside of the major
cities—leading brick-and-mortar ELL providers are now just moving
into select second-tier cities. Our research shows that beyond those
second-tier cities, there is not a sufficient customer base to support
a physical presence. As China develops further economically, the
leading brick-and-mortars will continue expanding but Chinese
students and professionals outside the major cities will likely remain
underserved for some time. In fact, some brick-and-mortar ELL
providers must fly English instructors out to less developed cities for
private lessons at great expense to clients.
Pearson-owned Wall Street English launched classes delivered via
online video in 2013 to appeal to their young professional clientele. It
is now a rapidly growing program, but online-only students currently
account for just 10-15% of their business7
. The question of online
delivery versus face-to-face for China’s ELL market is an interesting
one. But one thing is for sure, classes delivered online rather than
face to face present an opportunity for offering convenience and
accessibility.

11
For all the arguments in favor of an impending online-ELL takeover, it
is premature to herald the demise of the brick-and-mortars. Arguably
most importantly, cultural biases will continue to weigh heavily
against online-only ELL. English learners in China strongly value the
teacher-centric model. Up till now, online-only ELL for K-12 school
students has been met with skepticism by parents due in part to
the central role of the teacher in Chinese society. Moreover, English
classes at brick-and-mortar schools present valuable networking
opportunities for professionals in first- and second-tier cities.
Leveraging the physical classroom experience that local partners
can provide through blended learning agreements poses interesting
opportunities for online-only ELL providers which are trying to reach
households in China’s less developed urban areas. As the country
develops further, demand for quality ELL will continue to outstrip the
supply in much of the country, leaving a rising number of upwardly
mobile Chinese families woefully underserved when it comes to
quality verbal English instruction.

12Phone: (+86) 21 6191 1101; Email: info@emerging-strategy.com
About Emerging Strategy
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Blended Learning in China: Blurring the Lines of Online and Offline English Language Learning

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