China’s EdTech Market: Growth Trajectories and Future Prospects

• China’s educational technology (EdTech) market reached US$133.9 billion in 2023, fueled by increasing internet penetration and enhanced digital literacy. With a projected compound annual growth rate (CAGR) exceeding 6 percent through 2028, the sector presents significant growth potential, especially in terms of global expansion.
• While policies such as “Double Reduction” have posed challenges for many educational institutions, they have also prompted numerous companies to pivot toward online education, further expanding the EdTech landscape in China.
• Additionally, advancements in artificial intelligence (AI) and language models are shaping the industry, creating diverse opportunities and growth directions.

China’s EdTech market at a glance

In 2023, China’s EdTech market was estimated to reach approximately US$57.3 billion, reflecting a strong 14.17 percent year-over-year growth.

Over the past five years, China’s EdTech market has experienced several ups and downs. The market saw significant growth in 2019 and 2020, partly due to the impact of the COVID-19 pandemic, as parents and educators sought alternative ways to meet educational objectives. However, in the post-pandemic era, particularly in 2021, growth slowed due to regulatory pressures from the policy known as “Double Reduction.” Nevertheless, the market returned to growth in 2022 and 2023, with the user base for various types of online learning platforms expanding in 2023 to 349 million users, up 11.14 percent from the previous year.

The upturn trends to overcome the Double Reduction impact was partly because many institutions pivoted their services from subject-based learning to courses focused on personal development, critical and logical thinking, liberal arts, or outdoor sports.

EdTech platforms, combined with advanced AI technologies, made it easier to provide learning materials for students and parents. In addition, students can better benefit from personalized and diversified learning experiences, objectives, and pathways.

Currently, China and India are two powerhouses that invest heavily in education, particularly through venture capital. This has led to a growing number of startups and small businesses entering the EdTech market and rapidly expanding. According to China’s Ministry of Education (MOE), a total of 291 million students were enrolled in all levels and types of educational institutions in 2023, a figure that has remained stable for more than five years, indicating that the student population is generally not changing much. The strong foundation of K-12 students also makes K-12 digital education the largest sector within online learning platforms.

By the close of 2023, the total market capitalization of the top seven leading EdTech companies stood at US$30.7 billion. Below are the values of some leading companies and the segments they belong to:

Navigating China’s EdTech sectors with great growth potential

China’s EdTech can be generally divided into three categories: online learning platforms, technological learning kits, and study support software. Among these, online learning platforms represent the largest market.

Among all these sectors, the following are expected to experience significant growth in the near future, driven by China’s policy direction and social environment.

Online learning platforms

AI learning

Using AI’s capability to promote educational equity and teaching efficiency in schools or at home. One key player in this field is Fei Xiang Xing Qiu, a digital educational brand developed by Yuanli Technology. In May 2024, Yuanli Technology unveiled its independently developed educational large model, which enabled Fei Xiang Xing Qiu to introduce a range of innovative educational technology products.

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Among these new offerings are Fei Xiang Psychology, Fei Xiang Science, and Fei Xiang AI Writing Assistance. Each of these products leverages AI’s capabilities to provide personalized learning experiences and support students in various subjects. Additionally, existing products like Fei Xiang Classroom and Fei Xiang Smart Homework have received significant intelligent upgrades based on the educational large model, enhancing their functionality and effectiveness.

Looking to the future, Fei Xiang Xing Qiu has committed to investing RMB 100 billion (US$13.7 billion) over the next decade in AI-education integration development.

This investment aims to further advance the application of AI technologies in education, promoting equitable access to high-quality educational resources and improving overall teaching efficiency.

AI support

In the context of large models increasingly serving as the technological foundation, educational groups are strategically launching AI-native applications. These platforms leverage natural language as a new entry point for user interaction, harnessing real-time interaction and feedback capabilities to enhance the overall learning experience. Key players in this category include QAnything launched by the NetEast Youdao, a local knowledge-based question-and-answer system based on retrieval-augmented generation (RAG) technology. This system allows users to upload various formats of data, including PDFs, images, Word documents, TXT files, and even audio files, to seek answers to their questions that arise from both life and study.

Another prominent player in the educational technology sector is Dolphine AI Learning, which leverages advanced AI technology to enhance learning interactions. The platform offers personalized practice packages and tailored study plans based on individual learning experiences and habits. It effectively categorizes challenging and frequently misanswered questions into targeted practice sets while also curating relevant learning resources.

Policy support

In March 2024, the MOE officially launched the “Artificial Intelligence Empowering Education” initiative, introducing four specific actions: the “AI Learning Column,” upgrades to the National Smart Education Public Service Platform, demonstrations of AI large model applications within the education system, and the establishment of a digital education international exchange platform.

On August 3, the State Council issued the “Opinions on Promoting High-Quality Development of Service Consumption,” aimed at fostering a new consumption model typified by digital education, which injects new momentum into the efficient and orderly development of the AI education sector.

There are notable disparities in educational levels between urban and rural areas as well as among different regions in China. Essential educational resources, such as teachers, teaching facilities, and financial investments, tend to be concentrated in developed areas and urban centers. Therefore, promoting AI-integrated education will be a promising initiative for the Chinese government to address the imbalances in educational quality, resource allocation, and the level of educational informatization across regions. The application of AI in educational settings presents a viable pathway to tackle the challenges of equity and efficiency in education.

Technological learning kits

China’s technological learning devices have long been a staple in education, but the recent surge in demand can be attributed to two key factors. First, the Double Reduction policy, which caused many offline educational institutions to struggle, forcing them to pivot their business models. A common strategy has been transformed into online platforms that offer diverse, non-exam-oriented learning resources and support services. Second, advancements in AI technology have inspired educational companies to incorporate AI into hardware learning devices, further driving the industry’s growth.

A prime example of success in this evolving landscape is Xueersi. Founded in 2003, it was a prominent offline educational institution by the early 2010s. However, in response to the challenges brought by the Double Reduction policy, Xueersi quickly shifted its focus from traditional exam-oriented tutoring to offering a wider range of comprehensive learning resources. This strategic transformation contributed to its parent company, TAL Education Group, achieving a notable turnaround. In fiscal year 2024, TAL’s net revenue reached US$1.4 billion, a 46 percent increase from the previous period. A key driver of this growth was the release of Xueersi’s xPad2, which was powered by the independently developed MathGPT model and supported by 10 AI-driven learning tools, including AI-powered conversation learning, math assistance, and AI encyclopedia Q&A.

The broader learning tablet market in China is also experiencing rapid growth. In the first half of this year, the E-commerce Department of the Ministry of Commerce reported that AI learning device sales surged by 136.6 percent. During the first quarter alone, online sales of learning tablets reached 689,000 units, marking a year-on-year growth of 79.9 percent. Xueersi led the market, ranking first in both sales volume and revenue.

The evolution of technological learning kits in China is shifting from merely focusing on the devices themselves to emphasizing how AI can enhance the quality of educational content and resources. Manufacturers with strong educational backgrounds, such as Xueersi, leverage their expertise and established user bases to dominate the market. These companies possess a natural advantage in offering personalized, targeted, and specialized services. Looking ahead, AI-powered learning devices that focus on delivering personalized, diverse learning materials and supporting students’ independent learning are poised for significant growth, making this sector a compelling opportunity for investors.

Study support

Language learning

In 2023, the market size of language learning applications in China reached approximately US$478 million, while the global market size was around US$4.07 billion. According to projections by a consulting company, the global language learning application market is expected to expand significantly, reaching an estimated US$9 billion by 2029.

China’s language learners can be broadly categorized into four groups: preschool learners, K-12 learners, those studying or working abroad, and self-development learners. Preschool learners are particularly encouraged to engage with foreign languages at an early age, which can be effectively achieved through online learning activities. Prominent industry players such as NetEase Youdao, Betakid, and 51Talk provide online applications tailored specifically for preschoolers to introduce them to foreign languages. Additionally, these platforms support K-12 learners by offering resources and assistance for their language learning needs, both in school and beyond.

According to the latest data from the Center for China and Globalization report, more than 1.02 million Chinese tertiary students were studying abroad in 2021. English is the most widely spoken language, followed by Spanish, French, German, and Japanese. In recent years, overseas education destinations in Southeast Asia, such as Singapore, Malaysia, and Thailand, have also been on the rise, contributing to increased demand for foreign language learning. With the expected integration of AI in the industry, the online language learning market is projected to grow significantly.

Homework support

The AI-powered homework support industry in China is emerging as a high-potential investment opportunity within the rapidly expanding EdTech market. The most common format of these applications involves AI-driven search tools that allow students to upload homework questions through text or images, receiving accurate solutions in real time. Initially targeting K-12 students, these platforms have evolved, integrating AI-enhanced storage and analysis capabilities, resulting in significant improvements in service delivery.

Zuoyebang, one of the key players in this space, exemplifies the robust growth potential. Founded in 2015, Zuoyebang now boasts over 145 million monthly active users, making it the only education application in China with more than 100 million monthly active users. What began as a homework assistance tool has now expanded into a comprehensive suite of services, including online practice packages, video tutorials, and a parent-focused edition to further assist with home learning. Moreover, Zuoyebang has strategically diversified into hardware, offering AI learning desks, smartwatches, mini student printers, and learning tablets to deepen user engagement and expand its market share.

Beyond its core digital learning services, Zuoyebang operates across multiple sub-sectors, including tutorial book publishing, well-rounded education activities, and the development of smart learning hardware. Its online courses alone serve 65 million users, while its hardware solutions have reached 10 million users, demonstrating significant scalability across diverse revenue streams.

A notable innovation in Zuoyebang’s portfolio is its self-developed “Galaxy” large language model, launched in September 2023. Designed specifically for educational applications, the Galaxy model swiftly topped two authoritative evaluation benchmarks—C-Eval and CMMLU. This AI model offers multi-disciplinary, multi-grade, and multi-scenario support, positioning Zuoyebang at the forefront of AI-driven education technology.

This level of innovation, coupled with a solid user base and diversified offerings, underscores the immense growth potential in China’s AI-powered homework support industry. Investors seeking to capitalize on the intersection of AI and education will find this sector ripe with opportunity, as AI’s transformative impact continues to redefine how students learn and engage with educational content.

What are China’s policies towards EdTech?

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In 2021, the National Cybersecurity and Informatization Committee released the “14th Five-Year Plan for National Informatization,” which aims to enhance the construction of educational information infrastructure. This plan focuses on building a high-quality support system for education, expanding access to quality digital educational resources, and promoting the integration of information and intelligent technologies in teaching. Furthermore, it advocates for the use of online education and virtual simulation training to leverage big data analytics in education, ultimately expanding lifelong learning services.

In 2023, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued guidelines on establishing a “Balanced Basic Public Education Service System.” This policy emphasizes strengthening the development of intelligent education platforms for primary and secondary schools. It aims to create a connected and shared digital education resource platform, providing a comprehensive range of educational resources that cater to the holistic development of students in various areas, including moral, intellectual, physical, artistic, and labor education. This initiative specifically targets rural and remote areas to enhance educational quality and accessibility.

These policies present a dynamic environment for investors looking to enter the Chinese EdTech market. Despite the challenges posed by the Double Reduction policy, leading EdTech companies are leveraging their resources to pivot toward non-exam-oriented learning solutions. By offering programs that focus on arts, physical education, and mental well-being, these companies align their services with government priorities, catering to parents and students seeking enriching educational experiences beyond traditional academics.

Moreover, the integration of AI into educational practices is driving further growth within the EdTech sector. As traditional teaching methods face restrictions, companies are increasingly adopting AI technologies to personalize learning experiences. AI platforms can analyze students’ learning patterns, offering tailored educational content and adaptive learning paths that meet individual needs.

In conclusion, the government policies that promote digital education development and the strategic adaptation of leading EdTech companies position China’s EdTech market as a promising landscape for investment. The ongoing emphasis on digital transformation, holistic development, and innovative learning solutions creates a unique opportunity for investors to align with government objectives while contributing to the enhancement of educational practices. As these policies continue to shape the educational framework, the EdTech sector stands ready to capitalize on emerging opportunities.

Strengths and opportunities

One of the primary strengths of China’s EdTech market is the vast user base, which reached 349 million users for online learning platforms in 2023. This substantial audience enhances the potential for scalability and profitability, particularly for companies that successfully leverage technology to meet diverse educational needs, such as leading companies Chalk Technology and NetEase Youdao, which have thrived by catering adult education, test preparation, and language learning.

The adaptability of businesses within the sector also showcases resilience. After the Double Reduction policy prompted a shift away from traditional tutoring services, many EdTech companies pivoted their offerings to focus on personal development and innovative subjects, such as critical thinking and liberal arts. This shift not only maintained user engagement but also stimulated new market segments. The integration of AI technologies further enhances this adaptability, allowing companies like Zuoyebang and Fei Xiang Xing Qiu to provide personalized learning experiences and automate tutoring processes, thereby improving efficiency and accessibility.

Moreover, robust policy support from the Chinese government plays a crucial role in fostering market growth. Initiatives like “Artificial Intelligence Empowering Education” demonstrate a commitment to improving educational equity and integrating AI across the educational landscape. This supportive environment presents an encouraging outlook for investors, as it signals ongoing investment in infrastructure and technological advancements.

Overall, China’s EdTech market presents substantial opportunities for investment, particularly in expanding into diverse learning markets and personalizing educational experiences. With a vast user base, companies can tap into the growing demand for adult education and lifelong learning by developing specialized programs focused on digital skills, vocational training, and personal development. This adaptability enhances student engagement and positions companies to capture market share in emerging sectors.

Moreover, strategic collaborations with traditional educational institutions can facilitate the seamless integration of technology into classroom settings, creating a hybrid learning environment that enhances both online and offline educational delivery. Additionally, the emphasis on improving educational equity, supported by robust government initiatives, opens avenues for EdTech companies to develop affordable solutions targeting underserved populations. By leveraging emerging technologies such as virtual reality (VR) and augmented reality (AR), companies can create immersive educational experiences that engage learners and improve comprehension.  These factors collectively signal a favorable landscape for investment, underscoring the potential for sustainable growth and innovation within China’s EdTech sector.

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