China’s Biggest Private Ed. Company to Invest $220 Million in School Tech Market

Managing Editor

New Oriental Education & Technology Group, which describes itself as the biggest provider of private educational services in China, has announced it will make a $220 million investment in ed-tech companies there.

The decision by the Beijing-based firm underscores the ascent of the ed-tech sector in China and investors’ conviction that many young companies in the nation of 1.3 billion people have a promising upside.

Beijing and Shanghai have absorbed a huge influx of capital flowing from investors into ed-tech companies over the past few years, recent data has shown. Some Chinese-based venture capital firms and education companies are, in turn, pouring money back across the Pacific into education companies in the U.S., with the goal of either recouping financial returns or importing products and ideas back into the Chinese market.

The news about New Oriental was reported by the China Money Network. In perhaps the most intriguing aspect of the announcement, the story said that New Oriental “plans to set up a parallel U.S. dollar fund in September, with an overall size and investment strategy equivalent” to the money being poured in the Chinese sector. 

The investment by New Oriental, worth 1.5 billion yuan, will focus on several areas of private education in China, including K-12 education, preschool education, vocational education, out-of-school learning and international education, New Oriental said in an e-mail to Marketplace K-12.

The New Oriental Fund’s investments will also be supported by other institutions, including the Industrial and Commercial Bank of China, Zhangjiagang Industrial Capital Center, Sunlands Education and Gaodun Finance, according to the China Money Network.

The investments will focus mostly on early-growth education companies, the report said.

English Language Training, Tutoring

Founded in 1993, New Oriental oversees a broad education portfolio in China. It sells products and services focused on English- and other foreign-language training; test-preparation; after-school tutoring; primary and secondary education; online lessons; and software, according to its website.

The company, which is traded on the New York Stock Exchange, says it has had more than 36 million student enrollees in its programs, including 6.3 million in fiscal 2018. In addition, it says it operates 87 schools and more than 1,000 learning centers.

In its most recent quarterly results released in July, it reported that its total net revenues rose 44 percent over last year, to $701 million, and that its net income increased 9 percent, to $57 million.

New Oriental Executive Chairman Michael Minhong Yu said last month that the company has reaped the benefits of strong enrollment growth in its schools and programs, particularly its after-school tutoring programs. That segment produced a 46 percent increase in revenue during fiscal year 2018, and fueled nearly 60 percent of New Oriental’s total revenue, he said.

“We are confident about the overall market [prospects], and well-placed to continue gaining market share over the long term.”

Many U.S. education companies are trying to make inroads in China’s market, which is alluring not only because of its size but because of the burgeoning private school sector and families’ rising spending power. At the same time, as EdWeek Market Brief recently reported, China-based ed-tech providers pose increasingly stiff competition to foreign businesses trying to succeed there.

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