EDDi Extra: Opinion Piece

China & International Education Special

Sep 10, 2021

by Dr Stephen Whitehead (views are author’s own)

“Anywhere but China!”

That is what is now coming out of the mouths of those UK independent school Heads and Governors still hoping to boost their school’s coffers, leave a legacy, and expand their ‘franchise’ overseas.

OK, that’s not what many of these school leaders were saying just a year ago, though who can blame them for now being avidly risk-averse regarding the no-longer slumbering Giant of the East?

Education in China has, this year, imploded. Or, at least the for-profit sector has.

If you are the Head of a UK or US independent school would you want to be reputationally if not financially exposed, having to justify to your governors (and parents) why you embarked on the ‘big Eastern adventure’ in the first place?

Right now? No, of course not.

Such has been the speed of change in China over the past few months that it’s difficult to keep track. But here is a potted summary:

November 2020:

Up to this point there were no big red flags signalling what was coming though clearly all was not well within international education.

Sure, blame it on Covid-19, the xenophobia of Donald Trump, growing anti-Chinese rhetoric in the West, and the general wariness of many governments from Canada to Germany over the intentions of Xi Jinping but, at this stage last year, the worst effects were limited to the closing of Confucius Institutes in a growing number of countries and the dramatic hollowing out of Chinese international student applications, especially to the USA.

Indeed, only in June had China’s Ministry of Education published a new opinion piece on accelerating and expanding the opening-up of China’s education sector claiming the government intended to globally brand ‘Study in China’ and eliminate barriers to reform.

2021:

January:

Still no negative vibes, in fact just the opposite. On the 14th one notable investment research operation was advising those with money:

“New Oriental is the largest private education provider in China with a sterling brand reputation. Chinese K-12 tutoring will grow and prices will remain elastic given the importance both parents and students place on zhongkah and gaokao result. New Oriental is well-positioned for growth in Chinese after-school tutoring.’

In a similarly optimistic, expansionist vein, at the end of this month Forbes posted an article saying ‘How China is Transforming its Economy through Lifelong Learning’; though the writer did go on to note how:

‘China intends to drastically transform its education system through digitization, collaboration, vocational training.’

In hindsight, the key word there is ‘drastically’.

February:

First warning signs - on the 4th, Bloomberg publishes an article that declares:

China’s schoolchildren are next in line for intensifying study of President Xi Jinping’s teachings ahead of the ruling Communist Party’s centennial celebration in July.

That same week there were numerous global news reports claiming that ‘China promotes education drive to make boys more manly.’ Those reports jumped out at me because, as a gender theorist, I know only too well why Xi Jinping is worried about ‘sissy Chinese males’ - he sees Western cultural soft power behind this ‘problem’ and a direct threat to the CCP’s influence with Gen Z – and one place to find such power being demonstrated on a daily basis is in China’s growing number of UK international schools.

A further red flag is waved at China’s EdTech sector. Chinese EdTech has attracted several billions of dollars from bullish investors in 2020 but now there are warnings these investments are ‘not risk free’.

Also in the first week of this month, the inevitable happens in Hong Kong with the imposition of ‘sweeping pro-China curriculum reforms on schools’.

March:

Wednesday 10th and today there is a problem. Rumours start circulating of a change in stimulus policy in China leading to New Oriental and TAL Education group shares dropping by 14% and 11.6% respectively. Suddenly investors in Chinese education are looking worried. Previously these two educational giants looked untouchable – a bit like Jack Ma was a year ago. Such nervousness was compounded by the China Education Ministry issuing new guidelines for evaluating schools including bilingual schools and declaring that any schools teaching local pupils must follow the national curriculum, including international schools.

April:

Whatever warning signals are being seen by others, they are not being picked up by UK independent schools. On 17th April, a major article in the SCMP confidently declares:

‘Harrow, Kings School and Wycombe Abbey flock to Greater Bay Area as demand for international schools soars’.

However, in fairness, coincidentally, also on the 17th, The Times notes:

‘British schools beat retreat from China…Private schools with branches in China fear their brands may be damaged by tighter restrictions on international education in the country.’

One prestigious UK independent school not seeing (or determined to ignore) the signs was Benenden, by now partnered with New World Developments (HK) to open its first school in the Bay Area. As I wrote in EDDi that weekend (17th/18th), ‘quite an intriguing one for international school China watchers.’

May:

The roosters are now crowing loud and clear and if you cannot hear what their message is you must be stone deaf.

Wall Street Journal (17th): investors in Chinese education stocks ‘have been ignoring the risks for too long’. Reuters (17th): China’s State Council has announced tough new curbs on school curricula and ownership of private schools. SCMP (17th): Jack Ma’s school for business elites drops ‘university’ from its name.CISION (21st):The tightening control of education in China has raised concerns for expats...private schools retreat amid crackdowns on private education.

June:

This month we start to see the Bulls really backing off and the Bears coming out of the woods. Even the most optimistic international educationalist cannot any longer ignore the fact that there is now a major retreat from private education provision being driven by Xi Jinping. SCMP (21st):

‘With ignorance or indifference [China] has allowed private capital to play an active role in the last decade [in education] but has now decided to tame it. Beijing’s crackdown on private education and tutoring is logical as it moves to curb irrational expansion of capital.’

From hereon it’s just lots more of the same, only intensified and louder. It is now apparent to everyone that the gravy train is off the rails.

July:

A busy month for China news; just a sample:

Forbes: China’s internet tycoons suffer $13.6 billion wealth drop as regulatory crackdown triggers market self-off.

CNBC: Chinese stocks are now among Asia’s worst performing as Beijing crackdown spooks investors.

Hustle: Chinese education and tech stocks have lost $1T+ since February. Why?

Reuters: China bans for-profit tutoring in core school subjects.

Seeking Alpha: Kyle Bass: ‘Unconscionable’ for fund managers to invest in China

The Economist: China’s crackdown on the online-education business marks a turning-point.

August:

It’s my birthday month but few international school operators in China are now in the mood to crack open the bubbly. If you’re in any way invested in China education as a foreigner or indeed as a Chinese entrepreneur, then this month triggers the wake-up to reality call.

British teachers expecting to get a job in a plush Chinese international school at twice your salary? Maybe, but increasingly, maybe not. American teacher with a job offer in China, intending to take her/his family along with them? Unlikely. Big visa clampdown by the authorities. UK independent school moving along nicely with the business negotiations regarding that state-of-the-art new franchise in Guangzhou? Prepare to have the brakes put on – your increasingly anxious phone calls to the investors will be going unanswered. Chinese entrepreneur who has spent much of the past four years planning, designing and preparing to open an amazing British curriculum kindergarten in Foshan? Sorry, say goodbye to that dream.

You can take your pick of the bad news now coming out of China. For anyone hoping that international schooling will return to the good ol’ days pre Covid, the press reports are depressing at the least.

A few more examples:

CNBC: ‘Crackdown shows China’s ready to do ‘whatever it takes’ when it sees social problem, major Asia bank says…For sectors that face high risk of regulation such as education, it’s ‘prudent for the investor to basically expect the worst.’.
Bloomberg: ‘Xi Jinping’s capitalist crackdown sparks a 1 trillion sell-off’
Nasdaq: ‘The Chinese government is cracking down in a big way on education providers in China.
The Wall Street Journal:Chinese stocks have lost billions of dollars in market value in the past couple of weeks as Beijing announced regulations that could wipe out much of the after-school tutoring sector.
Reuters: ‘With one stroke, shares in TAL education and New Oriental Education have become almost worthless. Globalisation is slowly going into reverse.’
Quartz: ‘China will teach Xi Jinping thought to schoolchildren…foreign textbooks are now barred from use in primary and middle schools
Financial Times: ‘Private schools distort China’s property market, frustrating Xi Jinping’s egalitarian quest.
Financial Times: ‘UK private schools face curbs on China links in Beijing’s education crackdown.’

How bad can it get?

Well, it can always get worse, you can bet your money on that:

Radio Free Asia: Shanghai bans English exams amid calls for less English teaching

Once English language becomes persona non-grata in schools then it won’t be long before Westerners themselves follow suit.

By the end of August China (education) watchers are asking the inevitable question:

Inews: ‘Have British private schools in China reached their highwater mark?’

Answer: Yes

Bulls n Bears

Those UK independent schools committed to opening in China will probably still do so – they won’t be as bullish about their prospects as they would have been a year ago, but they probably reckon they have little choice having already signed the deal.

However, any schools still at the planning stage will now sensibly back off. To proceed under these conditions would be professional/financial if not career suicide. Not only are UK independent schools risking ‘reputational damage’ and running big risks of ‘arbitrary seizures and new educational laws’ in China, they now have the UK government on their backs:

“Whilst I’ve always had moral objections to independent schools investing in China, it just seems like really bad business as well now.”
(Andrew Lewer, The Conservative MP who chairs the All Party Parliamentary Group on Independent Education).

Interesting that both the UK and Chinese governments can find something to agree on:

Both governments now believe UK independent schools should stay out of China.

Is that it then?

Is it simply a matter of UK independent schools now cancelling thier Zoom meetings with Chinese billionaire property owners each of whom is secretly hoping to have an ‘Eton’ on their doorstep?

Well, it is as a far China is concerned and therein lies a problem.

As anyone who reads my intermittent musings on international education, certainly since Covid-19 hit us all, you know I can veer a little between Bull and Bear. But what I have never wavered on is my claim that international school growth depends on what happens next in China.

No China growth, no international school growth.

It is as simple an equation as that.

Where Next?

Yes, I know there are voices now shouting about India - pumping up the possibilities. But really? Rather you than me. And rather your money than mine.

What about the Middle East? Yes, UAE remains a hot spot in every way. But climate change, electric cars and a pandemic take the shine off. And that is before you take note of the Saudi government’s gobsmacking decision to ban all foreign teachers – even in international schools – over the next three years.

Africa? Sure, Nigeria has possibilities if you can afford to take risks and play the long game, and at least the continent has a growing population – they are definitely going to need more schools in Africa during this century – just don’t expect them to make investors any money or offer Western teachers lucrative packages. Gates and Zuckerberg have the right angle on African education – Bridge Schools for the ‘bottom billion’. Though that is not quite the market elite UK independent schools have in mind.

South America? It may be a massive continent but as far as international schooling is concerned it remains decidedly small and niche. U.S. investors may be tempted.

Which leaves us where we’ve always been – South East and East Asia. Which, quite frankly, is not much anymore.

But let’s look a little closer at the options.

First off, we should get the hopeless cases out the way: Myanmar, Laos, Cambodia. They never were that attractive locations for expansionist, up-scale international schools and today they look downright awful.

Taiwan? I love the place. However, one of my sons owns a kindergarten in Taipei so I have a very personal interest in that county’s continued peace and stability. Right now, it is peaceful, but over the next decade?

Japan? Personally, I can never work out the Japanese economy – it’s as confusing and contradictory as Japanese culture. What is very clear, however, are the deadly demographics. The Japanese aren’t having babies and no babies means no schools. Which is why the Japanese government is starting to surreptitiously close them down. Well, actually the government is hoping its schools can stay open by being filled with the children of foreign workers because without those workers who is going to keep the country going?

Malaysia? Yes, this has possibilities though I just don’t see how you can justify any more international school expansion in a country whose government is using education to create divisions between religious and ethnic groups? Malaysia is getting radicalised and anyone who fails to recognise that is not paying attention.

Vietnam? Sure, one of my favourite countries and its definitely got potential for international school growth. Strong economy, fairly stable demographics, rising middle class. Just remember the lesson from China, however: Vietnam is ruled by a communist elite and we know they don’t love capitalism and certainly not when it brings social inequality – which it does.

South Korea? To paraphrase Bill Clinton, ‘it’s the demographics, stupid’.

Hong Kong? I don’t think so. That train has long since left the station.

Thailand? Yes, still the most attractive destination for many UK independent schools and there are certainly now acquisition opportunities among the great and not so great international school names in Thailand. But, where will the students come from? Not Thailand – the country is now in a worse financial mess than it was during the 1997/98 financial crash. Latest surveys show a third of Thais are in deep financial trouble with household debt at over 90% of GDP and rising. The Thai tourism industry will take years to recover so it’s not going to get better anytime soon.

The only event which will keep premium international schools afloat in countries like Japan, Thailand, and Malaysia is enrolling students from China. Indeed, if you can show me a sizeable international school anywhere in South East or East Asia that hasn’t factored in Chinese student enrolments within its current five-year business plan then I’d be surprised to say the least.

However, this all presumes:

1) The end of Covid;
2) the Chinese government not eventually putting a total embargo on its schoolchildren going to study abroad; and
3) that Chinese parents can actually get their money out of the country to pay overseas school fees. Have you ever tried moving money out of China?

All I can say is good luck with that.

I think it is incredibly naïve to assume the Chinese government under Xi Jinping is going to be in any way benign towards its citizens voting with their feet and sending their children to British international schools overseas so as to avoid being taught ‘Xi Jinping Thought’.

Well, they may let them leave but will they let them back in? And if they do, under what circumstances?

There are any number of ways the Chinese government can make it difficult if not nigh on impossible for its school kids to go and study in Western overseas schools. For one thing don’t forget the ultimate sanction; the social credit system. Fall foul of that and frankly you’re not going nowhere and nor is your family.

OK, I admit I may have been a little bearish with some of the countries above regarding their potential, but not much.

And whichever way you play it, the game has changed.

Slowing Growth or No Growth?

In just a decade, we went from 2,000 international schools to 12,000.

Do you seriously think this rate of expansion is going to continue once Covid-19 is under some degree of control?

Moreover, will you put your money on it?

This extraordinary growth was largely driven by China’s emergence as a world superpower from 2000 onwards but we are in a very different stage of globalisation today than we were back then. It is increasingly looking like globalisation is going in reverse and if that is the case then Western international school franchises in exotic countries will become an anomaly.

My point is this is over.

We may never again experience such expansion. Well, ‘never’ is a big word, admittedly, but you get my drift.

The big players – Nord Anglia, Cognita and GEMS will survive indeed they may even thrive as they buy out – at bargain basement rates – failing international schools. There are already signs of that happening in SE Asia. They then rebrand these schools into low to mid-market operations targeting local parents will less disposable income than they had back in 2019.

However, the big-name up-scale UK franchises will have to be very careful because if they are over-exposed in China, and thus vulnerable to reverse globalisation, then they may survive but their empire building days are history.

What I’ve written so far may sound critical of China and especially Xi Jinping.

Actually, I am not.

If I were in his shoes I’d do exactly the same – more or less.

I certainly disapprove of his attack on womens’ rights, LGBT+ rights, feminism, and his bizarre attempt to make Chinese men more manly. While Shanghai University’s ‘listing of LGBTQ+ students’ is nothing less than creepy and smacks of Nazism at its worst.

However, he must tackle neoliberal capitalism head-on and under no circumstances can the Chinese government allow Western-style social divisions to emerge via the classroom.

The over-riding priority of the CCP must be stability for its 1.5 billion people, and that means tackling, ideally avoiding, social inequalities which will inevitably arise if you allow independent and for-profit education to cream off the children of the wealthy urbanised elite.

Do we really hope that China becomes an Asian version of America or the UK?

You might. I certainly don’t.

I believe China can do better than that.

These social/cultural capital class battle lines are drawn in the classroom, a point made by Marxist philosophers such as Bourdieu, Althusser and Gramsci, back in the last century. Globalisation hasn’t erased these divisions but it has exposed new fault lines and they are today frighteningly vivid to Xi Jinping and his crew.

And yes, fear is what is driving these educational changes in China.

The idea that Xi Jinping is in total control of what is happening in his country has as much basis in reality as do notions of deep state in the West. He is not in control, but he is trying to exert control and in ways which maintain not just social cohesion but also economic growth.

Whichever way he plays it there are risks.

Nor is it possible to avoid the importance of education to China’s future.

But is it to be an education based on the Western (UK) model – Rugby, Eton, Dulwich, Westminster – for the wealthy few and something much less grand for the remaining billion plus? Or is it to be truly egalitarian, representing a 21st century China at peace with itself, its unique culture, and the rest of the world?

In all sincerity, I wish the Chinese people well.

I am sad to see the end of the international school expansionist era but all things must pass.

If the end of UK independent school franchises means stability, cohesion and growth for China then you and I both know it’s a cheap price to pay.