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November 11, 2005

bookofjoe China update

Jlihl

Go ahead and click on the pie-chart graph above and read down the list of countries from which joeheads happen to be viewing this post.

What do you see?

Bringing up the rear, at 0.7% of my readership, is China.

The camel's proverbial nose under the tent.

Over the past few months I've noticed whenever I've wandered over to my statistics pages that there seems to be a small but slowly growing — ever so slowly, but steadily — contingent of Chinese joeheads.

Also, I've been getting about one email a week for the past month or so from a Chinese reader.

That's one more per week than I received before.

So it would appear that bookofjoe is getting through the mighty Chinese internet firewall remarked upon here in the past.

And that my toehold is growing ever firmer in the mighty ruling nation of the dawning century.

I'm loving it.

I'm reminded of a September 19 Wall Street Journal story by Jason Dean about the booming business of teaching English in China.

Dean noted that there are now as many as 30,000 English–teaching schools and companies across China.

New Oriental Education and Technology Group, China's biggest chain of English schools, expects nearly $90 million in revenues this year.

New Oriental opened its first school in 1993; by the end of 1995 it had 20,000 students.

The company now has 800,000 students in 20 cities.

And each and every one of them is a potential joehead.

Officials in both Beijing and Shanghai have kicked off "Everyone Study English" campaigns in anticipation of the wave of foreigners who will descend on Beijing for the 2008 Olympics and Shanghai in 2010 for the World Expo.

Want more?

Here's the Wall Street Journal article.

    Chinese Flock to English Class

    Learning the Language Is Viewed as Key To Opening Opportunities

    English, the language of global commerce, is itself becoming big business in China, as the country's growing middle class pays to feed its hunger for international savvy.

    When Wall Street Institute opens one of its English schools in a new city, it usually takes at least a year to enroll 1,000 students.

    Its first school in Beijing, opened in May 2000, topped that mark in a few months.

    Five years later, Wall Street Institute has 14 branches in three Chinese cities and is preparing for a major expansion.

    In February, U.S. private-equity firm Carlyle Group bought the Baltimore company, in large part because of the venture's "tremendous" potential in China, says Brooke Coburn, the Carlyle executive who did the deal.

    The English-teaching business is booming in China, an example of the opportunities opening up as the spending power and sophistication of China's people increases.

    Foreign and domestic investors are flocking to serve the burgeoning group of Chinese who have both the interest and the means to learn a language seen as a vital for improving their future.

    Industry executives estimate there are as many as 30,000 English-teaching schools and companies across China.

    For some of them, the trend is proving lucrative, though profits are far from guaranteed in an increasingly competitive market.

    Demand is coming from a broad swath of society.

    Chinese parents, who traditionally place a huge premium on their children's education, are lavishing money on English study for their children.

    Working adults are learning the language as a path to better-paying jobs with foreign businesses, while Chinese companies, increasingly eyeing overseas markets, are pushing their employees to learn English, too.

    For some, learning English has even become a kind of accoutrement, a "symbol of social status," says Terence Peng, a former Microsoft Corp. researcher who now helps run Dell English International, of Beijing.

    New Oriental Education & Technology Group, China's biggest chain of English schools, expects nearly $90 million in revenue this year, on which it will earn a healthy profit, says Chairman Michael Yu.

    Wall Street Institute has 13,000 students in China, and expects revenue there to increase nearly 13% to about $27 million this year, from $21 million in 2004.

    After several years of investing to build a presence, it expects to turn its first profit in China this year.

    Tim Daniels, chief executive of the Baltimore company, expects China to become its biggest market within three years.

    Dorothy Zhen, a 25-year-old reporter for a Beijing newspaper, plunked down 22,000 yuan, about $2,720, recently for 18 months of English lessons at Wall Street Institute, which goes by "Wall Street English" in China.

    She wants to land a spot at a foreign joint venture and says "fluency in English speaking and writing will give me more advantages" in the job hunt.

    Chinese officialdom also is embracing the English boom.

    Hoping that the hordes of foreigners that will descend on Beijing for the 2008 Olympics, and on Shanghai two years later for the World Expo, will be impressed by the country's cosmopolitanism, the local governments in both cities have kicked off "Everyone Study English" campaigns.

    Taxi drivers are getting supplied with cassette tapes for studying while on the job.

    English study long has been popular in other Asian countries, but industry executives say the speed and strength of the recent boom in China is remarkable.

    EF Education, a Swedish company founded in 1965, opened its inaugural English First school in China in 2000, and the country already is its biggest market for English instruction.

    Olaf Rietveld, who runs the company's Chinese operations, says study in China is more intense than in countries such as Indonesia and Thailand.

    "It's pretty serious business in China," he says.

    English First offers classes for adults as well as corporate training, but it also focuses on younger children.

    In most other markets, children start its classes as early as age seven.

    In China, the company offers classes for pupils as young as four, in response to demand from parents.

    The hope is they will keep coming back.

    "The kids running around here, we hope that they're going to be with us when they're 18 or 19," Mr. Rietveld says.

    The zest for English is creating opportunities beyond the classroom.

    Hogan Sun has parlayed his own language aptitude into a growing multimedia empire.

    He could barely speak a sentence of English nine years ago, when, while working at a Beijing television station, he stumbled into a job producing a five-minute-a-day English program.

    He was a quick study.

    Within a couple of years, Mr. Sun was hosting the program, and, by 1998, he had started his own company.

    Now Mr. Sun markets a range of products under his Modern English brand, including classes, books and CD-ROMs.

    Last year, he reached a deal with Fairfield Language Technologies to offer online language training in China using the Harrisonburg, Virginia, company's Rosetta Stone software.

    He has a children's program in addition to his weekly English-education show, which is carried by 60 stations covering 300 Chinese cities.

    Mr. Sun still stars in the show, a role that has made him famous.

    "People recognize me as the fat guy who speaks English," laughs the jowly Mr. Sun, whose smooth English is peppered with Americanisms.

    For its latest venture, Mr. Sun's company last month launched a TV game show modeled on "American Idol" in which contestants, instead of singing, compete by speaking English.

    In China, English has been taught for decades, but it long was the province of the state-run education system.

    That started to change in the early 1990s, thanks in part to Mr. Yu's New Oriental.

    Mr. Yu learned English as an undergraduate at China's prestigious Peking University. After graduating, he spent several years fruitlessly trying to get a scholarship to a U.S. university.

    When he had spent all of his money on application fees and postage, Mr. Yu decided to teach English full-time as a way to pay the bills.

    He quickly realized there was an opportunity in offering an alternative to the staid style of instruction he had experienced in college, where teachers tended to be older and "very boring."

    So Mr. Yu set out to teach English with some pizzazz.

    He opened his first school in 1993, after spending six months wooing education officials for a license.

    His first class had just 30 or so students, he recalls, but word spread quickly.

    "When New Oriental came out, [students] found they could learn the same material, but that the classes are so happy and so interesting," says the affable 43-year-old, whose constant smile has etched parentheses in his cheeks.

    By the end of 1995, New Oriental had about 20,000 students. Mr. Yu made his first trip to the U.S. that year, and hired some former classmates who had moved there.

    In 2000, as Wall Street English was setting up shop, Mr. Yu began expanding outside Beijing.

    New Oriental now is the biggest English-teaching company in China, with 800,000 students in 20 cities.

    Revenue is expected to rise more than 20% this year to about 700 million yuan, and the company's net profit margin is about 12%, Mr. Yu says.

    He is considering seeking a public listing, perhaps on the Nasdaq Stock Market.

    For now, Mr. Yu's main goal is an expansion that will put New Oriental at the forefront of the race to spread to less prominent Chinese locales.

    English schools have proliferated in many second-and-third tier cities, but they tend to be less well-run, offering an opportunity for Mr. Yu's better-known operation.

    In the next three-to-five years, he aims to push New Oriental into nearly every Chinese city with a population of more than 500,000 -- about 100 in all, he estimates.

    For inspiration, he looks to an American company that has expanded quickly.

    "We can be like a local Wal-Mart" in the English industry, he asserts.

    Pedagogical styles run the gamut in China's English-teaching business.

    On a hot afternoon in August, nearly 200 students crammed into a long room in a building near Beijing's university district for one of New Oriental's classes for beginners.

    Teacher Duran Weng, a 30-year-old with spiky hair and a goatee, leads the students in basic grammar lessons, interspersed with his own observations on cultural distinctions between China and the West.

    Students in the back of the room watch him on closed-circuit TVs suspended from the ceiling.

    About 80% of the lesson is in Chinese.

    At the other end of town, at Wall Street English's main Beijing location, students crowd around Dell computers in a language lab.

    Wall Street English uses proprietary software to teach its lessons, with students checking their pronunciation by speaking into microphones monitored by International Business Machines-based voice-recognition programs.

    That is supplemented by small English-only classes with foreign teachers.

    In one such session, four students practice how to buy and sell a used TV, their British instructor offering pointers.

    Only English may be spoken.

    The English-teaching business in China can be thorny.

    Because education remains a sensitive industry, government regulation is heavy.

    Finding qualified managers to run facilities is often difficult.

    Foreign investors must work with local partners, and licenses for new schools and visas for foreign teachers can be hard to get.

    Consumer loans for English -- widely available in other countries -- aren't allowed in China.

    Competition is rampant, with cut-rate copycats quickly emulating any new idea.

    "There's a lot of cowboys out there," says Mr. Rietveld of English First.

    Wall Street English has had its struggles in China, acknowledges its founder, Luigi Tiziano Peccenini.

    Although he sold the business he founded several years earlier to a U.S. education company, Mr. Peccenini retained rights to the Chinese franchise (Wall Street Institute is run as a franchise in most of the countries it operates.)

    But he had delegated hands-on management to someone else, who wanted to slash the premium prices it demands in other markets.

    "They didn't understand that China... would emerge to what it is today," he recalls.

    "China may be a third-world country in [some parts], but not in Beijing or Shanghai."

    The Italian native took the cue to plunge back into the business, successfully opening the first branch in May 2000.

    Its immediate success created another problem: a lack of space.

    Education officials waited for months before approving a second location.

    With new licenses in hand, Wall Street English began expanding too quickly, taking on more students than it could comfortably handle.

    By early 2003, things had settled to a steadier pace, and the company had expanded to eight locations.

    Then SARS struck.

    Widespread fear and government bans on congregating kept students from coming to class.

    "We lost a fortune," Mr. Peccenini says.

    "That was a disaster."

    More was in store.

    As the outbreak of severe acute respiratory syndrome faded, Wall Street English was hit by competition from a spate of imitators.

    The company's advertisements were copied almost exactly, down to the font, recalls David Kedwards, its chief executive in China.

    It took Wall Street English until early last year to get business back on track.

    Executives say the tribulations have been helpful.

    "We've been through a lot of learning," Mr. Kedwards says.

    One lesson they have learned: how to avoid red tape.

    With the advice of a former Chinese Ministry of Education official, Wall Street English is finalizing what Mr. Kedwards calls a "fairly cutting-edge" legal structure that will reclassify it as a training company and thus remove it from the purview of education regulators.

    Wall Street English is embarking on another major expansion.

    It already has expanded into one new city in the south -- Guangzhou, near Hong Kong -- and expects to open in nearby Shenzhen in November.

    Next year, it plans to open as many as 10 schools.

    Other companies have moved more aggressively.

    English First, which uses a franchise model outside of Beijing and Shanghai, has opened more than 70 schools; it is present in all but three of China's 31 provinces and territories.

    After English First opened a school in a remote oil town called Kelamayi in western China's Xinjiang territory, one of its students there did well enough to land a job far away in Shanghai.

    Word of that generated new sign-ups back home.

    "We're the talk of the town in Kelamayi," Mr. Rietveld boasts.

November 11, 2005 at 12:01 PM | Permalink


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Comments

I guess I am that one per cent for Poland! :)

Bookofjoe rocks!!!

Posted by: ferrisferris | Nov 16, 2005 8:05:16 AM

It could be that your blog is being read in China - or - it could be that your blog is being hit by spamming machines located on Chinese domains/IP addresses.
Sorry for the bubble bursting. :-/
Either way if you are getting legitimate email from Chinese readers then I hope it is more the former than the latter.

Cheers
KJ

Posted by: KJ | Nov 11, 2005 4:41:57 PM

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