Kindergardens in China

From CGTN:

In August of 2017, Shenzhen-listed Gansu Huangtai Wine-Marketing Industry Co Ltd suspended share trading and announced a company reorganization to focus on the pre-school education industry.

Wine to Kids! You don’t see that every day. I suppose it could be a classroom management strategy. “Hey Susan, have a sip of this…”


In 2015, China primarily approved amendments on private education regulation and officially allowed for-profit private schools since September 1, 2017, which means private schools are free to charge and seek profits.

The combination of a hungry market and profit seeking being allowed has encouraged investors to rush into the industry.

The sector economics: more little kids (families having more than 1 kid), limited # of teachers.

The first tier cities, which attract young laborers from all over the country, showed remarkable newborn growth. For instance, Beijing reported 200,000 newborns in 2016, up 63 percent year-on-year.

With the second-child policy coming into force since 2015, there has been a growing need for child-care service and the peak is expected to come in 2021, when China will need an additional 109,600 kindergartens, together with 3.35 million kindergartens teachers, Li Ling, an education expert at Southwest University, estimated in a paper on China’s education resources allocation in the next 20 years.

So, of course, new entrants to the market.

The promising preschool education market attracts numerous listed companies. In 2015, numerous listed companies got involved in kindergartens, for instance, Jiangsu Xiuqiang Glasswork Co., Ltd. acquired Whole Person Education, Vtron Technologies Ltd. took over Hoing Education and Golden Cradle, Time Publishing and Media Co., Ltd. built its own kindergartens.

But low market concentration. Still mostly Mom And Pops.

EtonKids is growing fast, mid/high market, mostly bilingual. Here’s an HBS mini-study from 2015, by Susan Wang.

Strong R&D team to develop Montessori curriculum: Etonkids invests heavily to integrate Montessori philosophy with Chinese local context…with education Ph.D. backgrounds.

Hmm. My experience is that correlation of Ph.D. backgrounds and actually good curriculum is low.

Competitive compensation and rigorous training program to retain talents: Majority of Etonkids’ teachers have received certifications from American Montessori Society, demonstrating their professional training in the approach.

Research shows low correlation between various types of certification and actual teacher quality. Though sometimes parents care about the “signal value” of such things.

Etonkids also established an internal training academy to provide systematic and continuous training on Montessori approach for its employees.

This is probably a big driver of actual quality. Of course nursery schools don’t typically have value-added data that allows us to truly separate good and bad ones. In the top charter school networks, which probably have the best such outcome data in the world, it seems like in-house training/coaching is indeed one key part of what allows them to outperform other charter schools.

To maintain high quality education and protect its brand image, Etonkids expands judiciously and does not franchise its business.

Bridge has done the same. “Owned and operated” have 2 specific quality advantages. One is: talent pipeline. Second is: internal coherence (the 10,000 little things, as my friend Jasper says, can fit together).

The company also established 13 handbooks, procedures and processes to standardize all key operations, including safety, food safety, teaching, etc. across all campuses.

Schools boil down to 3 things. Data. Talent. Systems.

The data should help you constantly do better at Talent, and then re-edit the Systems.

The latter is a mix of easy fixes to the 13 handbooks (“Hey, we need to refrigerate the fruit when it’s delivered”) and complicated ones (“Math is not going well, so we need to change curriculum, teacher selection, teacher training, teacher coaching, parent communication, materials budget, seating arrangement, etc).

Most high-end kindergartens in China charge a high premium because of its superior campus and facility while Etonkids has been able to charge a premium mainly for its high-quality educational experience.

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The rent advantage is huge. Reminds me of Bright Horizons in the USA.

Here in SupChina, Lucas Niewenhuis describes his visit to a kindergarden called Golden Cradle.

The school was a maze of brightly colored walls plastered with children’s artwork. Teacher Li shuffled us through the many hallways, energetically introducing the art and activities of the kindergarten’s different classes.

A staircase was annotated with a sampling of bilingual culinary vocabulary; another wall was covered with paintings of the Smurfs. One area displayed Chinese folk art made by the students, while other sections of the building were devoted to music and even rollerblading.

Bilingual food terms, Smurfs, folk art, and rollerblades — just a few of the many things that Golden Cradle kindergarteners are exposed to.

The hallways reflected the wide range of subjects that the students are exposed to. This exposure, Hou explained, is a key principle of the educational theory that these kindergartens were founded upon. They seek to “activate” the children’s own organic social, physical, and mental capabilities, rather than drilling comprehension at such a young age.

For example, while most kindergartens teach their students 300 Chinese characters and then repeat the lessons many times, Golden Cradle teaches 800 characters, enough in the Chinese language to at least sound out a typical newspaper article, even if the kids aren’t yet able to understand what everything meant.

Students range in age from two and a half to six, divided into roughly 30-member classes. Golden Cradle emphasizes outdoor activities and maintains at least two hours of naptime each day. Li insisted that we take a closer look at the walls around us, where he pointed out how the complexity of the children’s artwork progresses with each class level.

Let’s just zoom in for a moment on 300 versus 800. Both are plausible. The tradeoffs are obvious.

One key: when teachers are hired, is Golden Cradle able to genuinely assess teacher buy-in for their particular approach?

At Bridge, this was pretty important: we respected both teacher applicants who liked our way (scripted lessons) and didn’t (preferred to make their own lessons). But we worked hard to choose only the ones who genuinely liked our approach (versus those candidates willing to pretend in order to get hired).

Same is true at top charter networks like KIPP, when it comes to discipline practices, and the raw workload expectations, which are high.

I’ve noticed that traditional HR people often fear the transparent approach (respectfully revealing things to teacher candidates that they might not like, in mutual hopes that they would then choose another job).

That’s because in the short term, the school loses out on some candidates with very strong resumes! But in the medium term, the school ends up with a much more aligned team of teachers. That stronger professional culture is what really drives successful teacher recruiting — and retention.

One of my HR friends in China at a prominent group of Chinese schools smiles winsomely at me when I say that. She thinks I am a dreamer, divorced from reality.

“My butt is on the line right now to fill openings! I can’t afford to think about our retention 2 years from now…”

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