A method of coordination using a mix of markets and centrally planned mechanisms, on the works for decades, seems to be giving China’s education industry key advantages to become the indisputable leader in EdTech innovation for decades to come. Part of the success relies on its ability to support an ecosystem that lowers entrepreneurial costs, leverages technology to accelerate success, and above all, establishes education as a socially inescapable prerogative.
When free markets stifle innovation, and how China solves EdTech’s Marketing V. R&D trap
It took years for the Chinese government to kindle the fires that power the now exemplary tech hubs across the nation. It was not a straight line. Many of them were remedial efforts designed to address decades of inefficient resource allocation, arguably due, among other things, to an overreliance on centralized planning.
While openness was essential, it is difficult to support the argument that the booming success is due exclusively to the introduction of free market mechanisms. It would lead to believe that the positive outcomes would be all that higher if more economic freedom was available —which there could be, a lot more— or if it had been much earlier. In reality, history repeatedly shows that desirable economic outcomes can be achieved a number of ways, and with the right elements in place, internal coordination can be more effective than markets. Great examples, wonderfully taught, come from the U.S. Fordism era as documented by Alfred Chandler’s The Visible Hand.
Adam Smith’s words about the visible hand still ring true and are as relevant as ever. But the role it deserves to understand how an industry behaves is less akin to law, and more to grammar. Broadly speaking, it holds true, but there are countless exceptions. In the case of China, the examples could literally go as far as the Ming Dynasty. Just to name a few:
- Even before the advent of Socialism, China enjoyed some prosperity at the beginning of the XX Century and even weathered the Great Depression with ease. Explanations are still a matter of academic debate, but the agreement points out to a balance of economic and political power between the agricultural might of rural areas and the increasingly influential urban centers.
- After decades of chaos, famine and derailment coinciding with the death of Mao and the rise of Deng Xiaoping, agricultural and organizational reforms move forward in tandem, as the Communist Party accepts “bottom-up” initiatives from industry and agricultural unions, to carefully adopt market-based coordination practices and slowly welcome foreign capital and know-how.
- Perhaps the most direct initiative of government origin towards the current stage of development, especially at the tech hubs, is the Special Economic Zones. It was essential in the surge of Shenzhen as the world’s maker capital and a global hub for hardware, robotics and AI.
Silicon Valley bites the 灰尘
You might think this could spell opportunity for the global EdTech entrepreneurs. You are at best partially right. China is an EdTech powerhouse starting to look abroad.
If there is one place in the world that lives and breaths
money EdTech, is Beijing, home to over 2,000 EdTech startups, unmatched in Unicorns, and the highest scoring “EdTech Cities” worldwide due to its high-level coordination of government, private sector, VCs, incubators and educational actors. For a given entrepreneur, it’s several times easier to assemble a team, build a product, test it with actual customers, finance and get support for the company all the way to its profitability path; compared to anywhere else in the world.
People refer to Beijing as China’s Silicon Valley. But in EdTech perhaps it should be the other way around, and call it Val-jing. (This is not my forte.)
As China’s wages rise, it can no longer be the factory of the world. Rising per capita incomes come hand in hand with the capture of a higher share of the chain’s value. Part of the design of the Belt and Road Initiative, connecting the mainland with the neighboring Southeast Asian region all the way to Africa, could be explained as the result of a search for the world’s lowest wages.
It’s true that Chinese manufacturing follows poverty. But just like other nonrenewable resources, it seems to be chased down to near extinction.
AI leadership tops a new, global offensive era
It is an open secret that there are many structural advantage that have made China’s intrusion across industries easier: From the straightforward volume of the population alone and the labor productivity costs, to the murkier accusations of currency manipulation and intellectual property theft. But the common denominator, of a relatively more harmonious mix of industry and social policy, of market and central planning mechanisms, is easy to spot at every turn. The advantages are usually the result of long-term planning, with a fair amount of crunches and setbacks, but one that time and again has proven resilient and quick to react.
China is both the head and tail of labor productivity thinking and praxis. The government-led plans for AI, unanimously embraced by society, have no match. Goliath is faster, smarter, more focused, and starts the race with a leg up a couple of years worth.
Put the money where the AIs
Determination and billions of renminbis are already acting towards making China the world’s AI leader by 2030 and the first AI superpower in 2050. Lots of hurdles are coming up, talent being the main crucible. If only there were an ambitious EdTech inititative… Chinese students already make up the bulk of AI majors, graduating from all over the world, either going back or establishing international research networks.
Tutoring de force
Looking into specific education sectors, the most effervescent is without a doubt the online tutoring market. It is mainly attributed to parents’ tendency to give their children every advantage in the race towards a place in the university system. Admissions are technically egalitarian, but money can make it more equal for some. The largest unicorns, including VIPKid, iTutorgroup, TAL and New Oriental provide some form of complementary education as a main or sole line of business.
Bitcoin-fueled EdTech, or the other way around?
The precipitous fall of Bitcoin made everyone swear of the fateful cryptocurrency for good, until someone didn’t. Only this time, nobody is sure what’s behind the recovery of what is now the fastest growing asset value of the year. From trade tariff anxieties to good old fashion speculation, let me float another crazy sounding, yet fully plausible theory: Undercover mining operations by Chinese companies, including publicly listed organizations. It follows on a series of broad reports about government partnerships, as well as rumors about some Ministries embracing blockchain to fight plagiarism and the growing issue of fake diplomas, among other educational issues.
Chinese Pulse Updates
Moodle’s snap MoodleMoot China
"Education should prepare students to face global issues". Last week our CEO & Founder @moodler joined Higher Education professionals and the Chinese Moodle Community in the first ever MoodleMoot conference in the country. Learn more: https://t.co/qFxBsAL277 #MootCN19 #SDG pic.twitter.com/qOCsJlOlcS— Moodle (@moodle) May 30, 2019
The first Moodle-focused event (MoodleMoot) on China took place on May 19th. The host, Xi’an Jiaotong-Liverpool University, issued a press release on the event, followed by a note at Moodle’s official updates site. The event seems to have enjoyed good attendance.
Tencent Education is born
The Shenzhen-based giant springs yet another tentacle, with the latest announcement of an education division. It will reportedly consists of 20 products, closely linked to the massively popular WeChat messenger app and other divisions. As a whole, Tencent is said to serve over 300 million users in education-related solutions alone.
EdTech Unicorn VIPKid is closer to you than you think
A small army of native English speakers already provides on-demand tutoring services for Chinese kids thanks to unicorn VIPKid, the jewel in the crown of the Beijing startup ecosystem. It has already climbed into the top 100 most valuable Chinese brands, 5 years after inception.