The market size of Chinese K12 (kindergarten through 12th grade) education has doubled in the past five years and the pace is expected to continue in the next five years, according to Edwin Chen, co-head of Asian small/mid-caps research of UBS Securities.

The driving force behind the continued growth of Chinese K12 education market can be largely attributed to the country’s ongoing urbanization, the second-child policy, rise in income which has resulted in growing demand for differentiated educational resources, and the inadequate supply of public educational resources, said Chen.

He also said that over 90 percent of the K12 industry practitioners used to be teachers working at public schools, or those working for small-sized studios. Major industry players such as Beijing-headquartered New Oriental Education and Technology Group and Beijing-based Tomorrow Advancing Life accounted for less than 10 percent of the market share. Even though in first-tier cities such as Beijing and Shanghai, these two industry leaders only took up 15 percent and 12 percent of the local K12 education market share respectively.

“But the trend for 2018 and the next few years is that such large educational groups will see their market share increase, as the central government tightens its grip on the regulation of public school teachers taking other posts at other institutions,” he said.

With their market share further consolidating, the leading educational groups will probably reach into other courses which they did not touch upon in the past and reach for students of other age groups to seek more rapid growth.

While a large number of public educational companies have been discussing about the adoption of artificial intelligence technology into educational scenarios, the use of this technology is still confined to preliminary attempts such as face recognition. There is no clear business model at present, he said.