Business Report

China’s Startup Boom in Online Learning

Will a surge in distance learning for traditional subjects, test prep, language, and trade skills leave the poorest out?

China knows a thing or two about distance learning. For two decades, the country’s education ministry has used the television airwaves to broadcast agricultural lessons to more than 100 million rural students—making it the largest such program in the world. And in the early 2000s, the charitable Li Ka Shing Foundation installed satellite dishes and computers to broadcast lectures to 10,000 rural schools. Now this top-down model of online learning is being joined by a surge in new commercial and university offerings.

And it’s no longer just about reaching rural provinces. In China a rapidly rising middle class—part of a population that now totals 1.4 billion—is creating a demand for education far outpacing what traditional teachers and schools can supply. In response, Chinese startups are identifying market niches and developing entirely new products, while universities are emulating online platforms first developed in the United States.

The trend is strikingly on display in Beijing’s technology district, Zhongguancun, often called China’s Silicon Valley, where a building housing 15 education-technology startups has become known as the MOOC Times Building. (The acronym formally means “massive open online course,” but in China “MOOC” is used to describe any kind of online educational offering.) The startup community around Zhongguancun includes Hujiang, which has 80 million registered users, including three million who pay fees. Many are cramming for tests like the “gaokao,” China’s main college entrance exam. A startup called Jikexueyuan created a platform offering tutorials on programming and Web design that has signed up more than 800,000 users. And the newest entrants are more diverse platforms such as the parental-advice site Babytree. (Just enter Mom’s due date and “you can get for you and your baby a tailored parenting guide,” the site says, in Chinese.)

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Chinese investment in education technologies has climbed from $137 million (in U.S. dollars) in 2013 to more than $1 billion in 2014, according to TAL Education Group, a publicly traded Chinese education firm based in Beijing.
And the startups in Zhongguancun are joined by a wide range of university and private entrants. Xuetang, a MOOC supported by Tsinghua University, for example, offers some courses on edX, an online platform sponsored by MIT and Harvard University.

Homegrown Chinese platforms for university education are emerging, too. One-Man University—founded by a former physics student at Peking University—has started distributing instructional 15-minute videos prepared by teachers to its more than 130,000 registered members through 56.com, a video-streaming website.

And the startups in Zhongguancun are joined by a wide range of university and private entrants. Xuetang, a MOOC supported by Tsinghua University, for example, offers some courses on edX, an online platform sponsored by MIT and Harvard University.

“There is a tremendous demand in China to get a U.S.-quality education,” says Bryan Stolle, a general partner at Mohr Davidow, a venture capital firm in Menlo Park, California, that is funding Hotchalk, a company in Campbell, California, that’s attempting to give U.S. universities a digital presence in China. Each year 750,000 Chinese students apply for college in the United States, and fewer than 200,000 are accepted, he says.

There are some concerns accompanying this trend. Although China has by far the world’s largest number of Internet users, with more than 640 million people online, Internet penetration is only about 46 percent, compared with 87 percent in the United States. And a number of studies suggest that the benefits of online education accrue mostly to the already advantaged. Justin Reich, executive director of the PK12 Initiative at MIT and a research scientist in MIT’s Office of Digital Learning, who recently spent time touring startups at the MOOC Times Building and talking to educators in China, says he also heard concerns about students becoming isolated and losing out on useful peer pressure, but that he generally encountered great enthusiasm.

“In China, all of these concerns are voiced against the backdrop of a much larger concern that there is a tremendous unmet demand for education,” he says.

Online courses can in some cases not only fill a brick-and-mortar void but actually do a better job at teaching certain specific skills, says Rong Wang, a professor at Peking University who researches education finance. Traditional schools are very exam-oriented, “and many teachers don’t have adequate capacities in delivering practical skills instruction to students,” she says. And working adults aren’t being served by traditional schools, which generally have only limited classes on evenings and weekends, she says.

Reich adds that there has been some discussion within the government of defining a set of requirements for degrees and then letting students meet some of them through MOOCs. If the government were to allow MOOC credits to apply toward a degree, he points out, such a scheme could rapidly be implemented nationwide.

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