The online education sector in China has become one of the country's investment hot spots. Despite a number of problems that have emerged in the wake of the rapid expansion of the industry, investors and analysts are still bullish on the potential of its growth.
Through Sept 20, the year has seen 147 deals of public financing in China's online education sector. This is higher than the 120 deals made in the lukewarm year of 2016, according to consultancy iResearch.
By 2018, the market scale of online education sector in China is expected to reach 200 billion yuan ($30 billion), with a growth rate of nearly 20 percent every year, iResearch said.
Looking at the amount of financing netted in the different segments of online education, K-12 education, followed by vocational education and language education, have been the sections that are most favored by investors.
The scales and frequencies of financings that K-12 online education landed have far exceeded other subdivision sections. In May, Yuantiku, an online smart exam database, received its E round of financing of $120 million.
On Aug 14, Zuoyebang, an online platform that provides learning guidance to middle school and primary school students, netted its C round of financing of $150 million.
On Aug 23, online children's English education startup VIPKID announced that it has finished the D round of financing and received an investment totaling $200 million.
Mi Wenjuan, founder and CEO of VIPKID, said: "The K-12 education focuses on the education periods of primary and middle school. Compared with adult education, there are more exams involved during these periods and parents are willing to spend money for their children.
"In the future, China is expected to become one of the most dynamic online education markets globally, following the consumption upgrade trend and the implementation of the second-child policy."
Nevertheless, with its high-speed expansion, the online education sector faces various challenges. For example, the valuations of some enterprises are too high, and the profitability of those enterprises still needs to be tested. Besides, it is also a difficult problem to guarantee the quality of online education.
By the end of last year, there were more than 400 online education platforms in operation in China, but only 5 percent of them could make a profit.
About 10 percent of companies had flat performances, while 70 percent were experiencing losses, and the other 15 percent are on the average of bankruptcy, according to the National Business Daily.
Neil Wang, president of consulting firm Frost & Sullivan China, said that although a large number of online education companies are still losing money, the emphasis of education by Chinese parents and the huge amount of netizens still give the industry considerable room for growth.
"Online education platforms can help consumers to utilize their fragmented time for learning, and the education contents are more diversified," he said.
"Online education companies should upgrade their hardware facilities and focus on enriching the teaching resources, and provide more tailored services to attract more customers."
