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TABLE OF CONTENTS 1. Introduction To China And The English Training Market..................

1.1 China In The 20th Century........................................................................................2 1.2China in the 21st century............................................................................................2 1.3 China Under Mao Zedong (1949-1976) ...................................................................2 1.4 China under Deng Xiaoping (1978-1997)...............................................................3 1.5 Country Profile: China..............................................................................................3 1.6 Snapshots on the English Training Market in China................................................4

2.The English Training Market in China...................................................6

2.1 The Main Drivers of the English Training Market....................................................6 2.2 Segments Based on the Purpose of Training.............................................................7 2.3 About ELTIS (English Language Teaching Institute of Symbiosis)........................10 2.4 How does one invest in China.................................................................................10

3.My Proposal..............................................................................................16
3.1 Symbiosis can enter the Chinese market by opening English Training Institute ...16 3.2 Major Cost Heads in Setting Up English Training Institute ..................................17 3.3 Calculation of simple pay back period....................................................................18 3.4 SWOT Analysis........................................................................................................18 3.5 Conclusion...............................................................................................................22

1. Introduction To China And The English Training Market China is undoubted the most talked about country these days in any forum. It has come a long way from being a country under the rule of Mao Zedong; a country that was completely closed to the outside world to one of the highest recipients of FDI and one of the largest exporters in the world. One of the most crucial areas to Chinas quest for becoming a world superpower is the skill possessed by its citizens in English language. China has realized this fact and it is doing everything to overcome this barrier. This has led to a huge demand for English Training Institutes. In such a scenario, the potential for an Indian player setting up English Training Institute is worth

exploring. I have taken Symbiosis as a case and tried to explore the potential of an Indian player entering this lucrative market.

1.1 China In The 20th Century China entered the twentieth century in decline. Its territorial fringes-and, thanks to the Boxer rebellion, its capital was occupied by foreign powers, its sovereignty impaired by unequal treaties. The countries ideology and institutions, founded in the previous millennium to serve a timeless, universal empire, were in crises. Dissent stalked the capital, regional governors resisted recentralization. Hardly a province was untouched by rebellion.

1.2China in the 21st century China enters the twenty first century in stronger shape. It has recovered much of its lost territory and is determined to recover more. The Chinese Communist Party is in supreme command and neither rich nor remote regions dare defy the central government when national interests are at stake. Chinas nuclear weapons, military modernization and above all its rapid economic growth have given it the status of a permanent member in the UN Security Council. Indeed the transition of China from an economy that was completely closed to the outside world to the second highest recipient of FDI in a short span of 25 years is indeed dramatic. As Chinas quest for becoming a world superpower continues, it has realized that one of the most indomitable barriers to its dreams remains the barrier of language; of English language. China is doing everything that it can to overcome this barrier. The logical outcome is the immense market potential for English Training Institutes. The transition of China from a poor agrarian state to one of the largest economies of the world is incomplete without a mention of the two erasa. China Under Mao Zedong (1949-1976) b. China under Deng Xiaoping (1978-1997)

1.3 China Under Mao Zedong (1949-1976) The era under the leadership of Mao Zedong had a great impact on the course of economic development of China. Mao Zedong envisaged the economic development of China based on the Soviet model of industrialization. He believed that China could progress only if the dependence on the outside world was curbed. Thus all foreigners and all foreign enterprises were driven out of China. 1956 saw the collectivization of agriculture and nationalization of industry. Communes were set up wherein the farmers were required to pool in land, animals, tools and all other possessions. Everything from cutlery to bicycles was turned into steel for the industry.

In 1958 Mao pressed for the Great Leap Forward, wherein which combined his desire for a complete, political, social and economic transformation with a belief that it could be accomplished at once and by sheer will. A leap into Communism would not only establish Chinas superiority in the Capitalist world, it would take China even further along the socialist road than the Soviet Union. In the event, the wholesale communization of life did none of these things. Instead it provoked a split in the Chinas Communist leadership, contributed to the ruin of relations with the Soviet Union and caused a famine that cost about 30 million lives.

1.4 China under Deng Xiaoping (1978-1997) The era under the leadership of Deng Xiaoping saw the undoing of many of the things that had caused so much harm to the Chinese economy. The era is famously known as the era of socialism with Chinese characteristics. One of the most famous quotes of Deng is Black cat or white cat: If it can catch mice, it's a good cat. The quote clearly brings about a more liberal approach that Deng was willing to follow. After years of stamping out every vestige of enterprise at home, China encouraged profit motive, first in agriculture, then in industry and finally in every area of life. Agriculture was decollectivized and control over industry was decentralized. Chinas foreign policy saw a shift and started with the establishment of full diplomatic relations with the United Stated in 1979. It welcomed foreign investors, long barred from a promising market to newly established Special Economic Zones. The results of these reforms were startling. The Chinese economy grew at a compound annual growth rate of 9% from the period of 1978 to 2000 making it the second largest economy in the world (Purchasing Power Parity). Deng had aimed to quadruple the GDP of China by 2000. The goal was achieved by 1995, 5 years ahead of time. China became the second largest recipient of FDI and this year is expected to be the highest recipient of FDI. China has a cumulative FDI of US $823 billion. The transition of China from an economy completely closed to the outside world to one of the highest recipients of FDI in the world has meant a huge demand for English language. Before looking at the English Training market in China a brief country profile of China. 1.5 Country Profile: China

Area: 9,596,960 sq km Population: 1,261,832,482 (July 2001 est.)

Age-structure: 0-14 years: 25% 15-64 years: 68% 65 years and over: 7% Religions: Daoist (Taoist), Buddhist, Muslim Languages: Standard Chinese or Mandarin, Yue (Cantonese), Wu (Shanghaiese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese) Literacy:Defined as people above the age of 15 who can read and write Total population: 81.5% Administrative divisions: 23 provinces, 5 autonomous regions and 4 municipalities GDP: purchasing power parity - $4.8 trillion (2001 est.) GDP - real growth rate: 8% (2001 est.) GDP - per capita: purchasing power parity - $3,800 (2001est.) Currency: 1 Yuan = 10 jiao Exchange rates: Yuan per US$1 - 8.2793(2003) FDI in China (Cumulative): US$ 830 billion (2002)

1.6 Snapshots on the English Training Market in China

1. Primary school children to take up English from next school term- Ministry of Education:

Primary schooling in China will take up English teaching from next school term in the fall of this year. This is aimed to foster pupils' interest in learning English, cultivate their language sense for laying a good foundation of pronunciation and intonation, and start to talk in this Occidental language. The focus will be on situational English teaching or practicing in the way pupils' listening, speaking, acting, singing, playing and performing abilities are to be cultivated and raised. Pupils to be given the course will start from the third grade and training of writing ability in the fifth and sixth grade year. China has about 290 million children under the age group of 14, which means the size of the market for English training is huge.
2. 11 Million university students to use textbooks in English within 3 years- Ministry of Education: The Ministry of Education requires Chinese universities under its direct administration to use English textbooks in teaching the English language, information technology, biology, finance and law. 5 percent to 10 percent of the university courses will be taught in English within 3 years.

Those universities, which are not currently ready to implement the Ministry's requirement, may phase in the project by first giving lectures using the English textbooks while still using the Chinese language. 3. English is a compulsory language at junior school level: English has been made a compulsory language at the junior school level. Students are required to study English from the sixth grade onwards. To meet the demand for English teachers in private schools, the Chinese government has appointed an agency called China Tesol. The China TESOL Teachers Register is the Registry and China Government authorized employment agency for all TESOL, TESL, ESL, and TEFL teachers engaged for the specific purpose of teaching oral and conversational English with educational institutes throughout the People's Republic of China. 4. English language training is becoming a profitable industry in China, as more Chinese

become aware of the importance of the usefulness of an international language. Statistics

show that last year, the industry in Beijing made a gross profit of 700 million Yuan (US$84.68 million) by providing English language training courses to nearly 200,000 people.The oral English course of Beijing New Oriental Language School reported an income of over 90 million Yuan (US$10.89 million) last year, while the Eastern English Services and Wall Street English schools all grew rapidly in the city at the same time. Sources from the Eastern English Services say that it has set up four schools in Beijing. Each has brought in 500,000 Yuan (US$60483.6) monthly, while the Wall Street English language schools charge trainees more than 20,000 Yuan (US$2419.35) each for one term. Shanghai is another of the country's hot spots for English training. The Wall Street Institute (WSI) invested 40 million Yuan (US$4.84 million) to set up branches there and very quickly attracted more than 1,000 trainees, mostly from foreign companies. The Beijing New Oriental School also began rapidly expanding. It extended its business to Shanghai over one year ago, and so far over 10,000 people have been through the school. Zhongshan city, a major city in south China's Guangdong province has its sights set on parents' pockets. An international English training school there offers training to children aged from three to 12 years old. The cost of teaching materials for one person can reach up to a staggering 7,800 Yuan (US$943.55). 5. According to incomplete statistics, there are about 3,000 institutes for foreign languages in China. In Beijing alone, the potential market size is Yuan2 billion (HK$1.8 billion) a year.

2.The English Training Market in China

The demand for English Training Institutes has kept on increasing along with the economic development and the increased dependence of China on the outside world. However, two events have fuelled this demand to levels hitherto unheard of are: a. China becoming the 143rd member of the WTO on 17th Sep 2001 b. China winning the International Olympic Committee bid to host the 2008 Olympics Beijing on 13th July 2001.

2.1 The Main Drivers of the English Training Market

1.China winning the IOC bid to host 2008 Olympics (July 2001) While bidding for the 2008 Olympics, China promised that the service providers would know English. As a result, the various service providers including taxi drivers, shop assistants, hotel staff and other service providers have been taking English training sessions. In fact, a taxi driver in Beijing has to be able to speak basic elementary English in order to be able to apply for a license. Even the hotel staff and other service providers are being encouraged to learn English by linking their salaries to the knowledge of English. The Chinese government has also taken many steps to ensure that the government officials know English before the 2008 Olympics. Government officials like police (6000) and civil servants (8400) have learnt English. Beijings municipal government has launched English-study programs to improve the language skills of its residents, beginning with civil servants and athletes. Some 20,000 of all 100,000 civil servants in Beijing now have taken part in an English-language training program, according to statistics from the municipal bureau of personnel. Civil servants with bachelor's degrees or higher education backgrounds are expected to be able to speak at least 300 English sentences, while other officials with lower educational degrees must master over 100 English sentences, according to the regulations. Beijing will also select some 600 officials selected from all the trainees for a three-month intensive training program designed to equip civil servants with enough language skills for international communication. To improve the image of the capital city as well to welcome the 2008 Olympic

games, Beijing's police are enrolling in various English classes as part of a large-scale training campaign among the common citizens organized by the municipal government. More and more children are learning English with the motivation that knowing English will help them volunteer for 2008 Olympics 2.China becoming a member of WTO (Sep 2001) The second major driver for the English language training industry in China is China becoming a member of the WTO. China has scrapped/revised 2300 regulations in response to its commitments in the WTO. This means a greater integration of China with the outside world. Over the past 9 years China has been the highest recipient of FDI in the developing world. It is now the 2 nd largest recipient of FDI in the world after US. This year estimates show that China will overtake US as the highest recipient of FDI in the world. Chinas foreign trade (Imports, Exports) is to the tune of US$700 billion and growing rapidly. China is already the 7 th largest exporter and 8th largest importer in the world. As China is becoming more and more integrated with the outside world, the Chinese have come to believe that knowing English will make hunting for jobs easier. This is especially true for companies that are foreign funded and have their operations in China. These companies are keen to recruit local Chinese talent who has a better understanding of the local environment. With over US $800 billion in FDI in China, there exists a huge potential. Also, more and more students now want to go abroad to study in overseas universities. They think that getting a degree from an overseas university will give them the cutting edge in the highly competitive job market. In order to get admission to overseas universities, the students need to clear certain exams in English language proficiency like TOEFL, IELTS. The number of students taking such tests has been increasing at a phenomenal rate over the last couple of years. E.g. 40000 sat for IELTS last year. This year the number is likely to go unto 80000. IELTS is an exam to check the English level of people who want to work or study in countries where English is the main language. About 210 US Universities apart from Universities in US, Australia, Canada etc. accept the test scores as valid.

2.2 Segments Based on the Purpose of Training

2.2.1 School children

Chinese government has introduced English at junior school level and has appointed an agency called China Tesol for recruiting teachers to teach English in the public schools. There is large scale hiring of English teachers for this purpose. Although the magnitude of hiring teachers is phenomenal, the level of teaching leaves much to be desired. This is because the quality of teachers that the agency hires is not very good. The problem of dumb English is widespread. Dumb English is a situation wherein the students cannot use (speak and comprehend) the English that they have learned over so many years. However, now children are dumping dumb English as they have become more aware of the importance of English and the parents have become concerned about children learning English from sources other than the school teaching. Many children use summer vacations to learn English. 2.2.2 Students Wanting To Go Abroad As more and more students realize that a degree from overseas universities would give them a cutting edge in a China that is very closely knitted with the rest of the world, there has been a steady increase in the number of students taking exams like the TOEFL, GRE, GMAT. The New Oriental School is the market leader in this segment of the market and has made its name by helping its students to get better scores in the GRE, TOEFL and IELTS tests which qualify them for further studies abroad. The institute specializes in test oriented training with emphasis on grammar and written English. More than 70% of all mainland students studying in the U.S. have taken courses at New Oriental New Oriental School is famous for its foreign standard examinations, such as TOEFL and GRE which are favored by people who want to go abroad. New Oriental is the biggest private English training institution in China, with annual enrollment surpassing 200,000 students. It charges Yuan300 (HK$283) for higher middle school level English classes, Yuan600 (HK$566) for "new concept" English, Yuan1, 500 (HK$1,415) for listening skills, and Yuan2, 000 (HK$1,886) for English for overseas studies. The school offers a whole range of English-language courses in addition to classes like "Thinking American, New Oriental supplies students hungry to go abroad with a mouth-watering array of servicescourses on all of the major standardized tests, a "writing center" stocked with native English speakers to "polish" applications, and a bookstore that carries everything from English literature to pamphlets explaining how to apply for a visa. The problem of dumb English however still persists as the emphasis is still on written and test oriented English. Many students get admissions to reputed overseas universities but are unable to converse in English even at the very elementary level.

2.2.3 Business English

Main customers are employees working in foreign funded organizations. This market is the highend market where in there are specific courses devised for specific industries. The main focus is on improving speaking ability and conversational ability. International institutes like Wall Street English and Dell English dominate the market. The Wall Street Institute is a haven for the high-income group. It has 7 centers across Beijing. The centers are located in the comfort of five-star hotels in downtown Beijing. The Wall Street Institute uses imported teaching software and offers one tutor to a maximum of four students. A complete set of courses at Wall Street costs 124,100 Yuan (US$15,000) all up, three to four years' salary for an average office worker. 2.2.4Adult Learners More and more people, from government officials, taxi drivers, shop assistants to senior female neighborhood committee workers regard it as an honor to be able to speak a little English and comprise the market of adult learners. Focus here is on very elementary operational English. In order to improve people's English, the Beijing TV Station has been running an educational program on how to learn English. Also, Beijing Radio and Beijing Foreign Studies University have jointly produced two educational programs, "100 English Sentences for Beijingers" and "300 English Sentences for Beijingers", which are broadcast on three radio frequencies four times every day. These programs have evoked wide repercussions in Beijing. Many people have bought the teaching materials and have been listening to and watching the programs, and taking an active part in the hotline live programs. Some work units are organizing their employees to learn together, and some schools invite teachers to give English lessons to nearby residents. English learning has become a major component of Beijingers' spare-time cultural life. The ratio of Beijingers with a fairly good knowledge of English is 15 percent. The Beijing Municipal Government wishes to increase the ratio substantially by encouraging more residents to learn and speak English. Let us now take a brief look at the institute that I have taken as reference for an Indian institute setting up an English Training center in China.

2.3 About ELTIS (English Language Teaching Institute of Symbiosis) ELTIS was established in 1972 to enable non-English speaking students to pursue higher studies in India. It offers 2 courses both of which are government recognized. Additional courses are offered on demand. 1. Long Term Certificate Course in English Language: The course covers the essential structure of the English language to facilitate effective communication, reading with understanding, listening with understanding, speaking & being understood, writing effectively in correct English. This course runs for one academic year (9months) and involves about 25 hours teaching per week, which works out to be about 1000 teaching hours for the entire course. 2.Short Term Certificate in English Language: The course covers: The revision of Essential structure of the English Language, some advanced structures of the English Language, rapid Reading with understanding and taking down notes of lectures on academic topics. The course runs for a period of four months with 15 hours of teaching per week and works out to be about 250 teaching hours for the entire course. The institute has uses modern techniques of teaching students. The institute has facilities like a reading room cum library, a well-equipped language lab, a computer centre etc. to facilitate effective learning. Apart from academic teaching, the institute organizes extracurricular activities like cultural/traditional day, cookery contest, drawing contest, handwriting contest, elocution contests to help students learn more effectively.

2.4 How does one invest in China 2.4.1 Alternatives available for the form of investment In order to direct the foreign direct investments in compliance with the national industrial planning and to avoid blindness in investment, the Interim Regulations on FDI Directions and the Industrial Catalogue Guiding Foreign Investment were formulated and promulgated in the June of 1995. For the first time, the industrial policies aiming at inviting foreign direct investment were publicized in the form of laws and regulations, which promote the transparency of policies. A foreign investor can invest by one of the 3 ways: 1.Sino-foreign Co-operative Joint Venture: can also be called contractual joint ventures.
In establishing this kind of enterprises, usually foreigners provide all or most of funds, Chinese enterprises or individuals provide land, factory buildings, available device and facilities, some of which also provide some fund.


2.Sino-foreign Joint Venture China-foreign joint ventures may also be called equity joint ventures. It is established by foreign companies, enterprises and other economic organizations or individuals and Chinese counterparts to invest to invest together in China (Rights and duties of each Bide are stipulated in the contracts signed by different sides. China-foreign).Its characteristics are as follows: all joint side invest together, manage together, share risks according to the investment proportion and share losses and benefits, Investment of every side should be converted to investment proportion and the proportion of foreign investment can't shill ranks a considerable proportion in attracting foreign investment. 3.Wholly owned foreign enterprises: It means enterprises established in china by foreign
companies, enterprises, other economic organist or individuals, according to china's Laws, in which all the funds are invested by foreign investors.

According to the stipulation of the foreign Investment Enterprise Law, establishing this kind of enterprises should favor the development of our national economy, and at least meets with one of the following: adopting advanced international technology and device, most or au products exported. The form of it is commonly Limited Liability Company.

After deciding the mode of investment, the investor has to submit the investment proposal to the Ministry of Foreign Trade and Economic Co-operation (MOFTEC). The proposals are subject to item-by-item examination and registration system. The entire process from proposal submission to registration takes around 45 days. 2.4.2 Establishment Procedure According to the current rational laws and regulations, in establishing foreign investment enterprises, a term wise government approval and registration system is being carried out, In applying for establishment of China-foreign joint ventures and co-operative enterprises, four steps are generally needed: 1. Submit item propositions for establishing enterprises; after the approval from relevant Departments C Project admin is triton or technical transformation administration, investors may embark on work with item feasibility study as center; 2. Submit reports on item feasibility study. After approval, investors may negotiate and sign Laws and documents such as contracts and statutes of establishing enterprises;


3. Submit contracts and statutes of establishing enterprises; after approval from foreign trade administrations, the Approving authorities may issue approval license to foreign investment enterprises. 4. Investors may go through formalities in industrial and commercial administrations with the approval license issued by approving authorities. The procedure of establishing foreign funded enterprises is easy, after initial item application is approved in a written form by the governmental approving authorities, relevant documents such as formal application and company statutes may be submitted. After approval, investors may go through formalities of registration with approval license. 2.4.3 Law of the People's Republic of China on Chinese-Foreign Joint Ventures (Adopted by the Second Session of the Fifth National People's Congress on July 1, 1979, first amended according to the Resolution on Revising the Law of the People's Republic of China on Chinese-Foreign Joint Ventures adopted by the Third Session of the Seventh National People's Congress on April 4, 1990 and amended for the second time according to the Resolution on Revising the Law of the People's Republic of China on Chinese-Foreign Joint Ventures adopted by the Fourth Session of the Ninth National People's Congress on March 15, 2001) Article 1 With a view to expanding international economic cooperation and technical exchange, the People's Republic of China permits foreign companies, enterprises, other economic organizations or individuals (hereinafter referred to as ``foreign partner in a joint ventures'') to join with Chinese companies, enterprises or other economic organizations (hereafter referred to as ``Chinese partner in a joint ventures'') to establish joint ventures in the People's Republic of China in accordance with the principle of equality and mutual benefit and subject to approval by the Chinese government. Article 2 The Chinese government protects, in accordance with the law, the investment of foreign partner in a joint ventures, the profits due them and their other lawful rights and interests in a joint venture, pursuant to the agreement, contract and articles of association approved by the Chinese government. All the activities of a joint venture shall comply with the stipulations of the laws and legal regulations of the People's Republic of China. The state shall not nationalize or take over joint ventures; under special circumstances and according to the needs of social public interests, the state may requisite joint ventures according to legal procedures with due compensation. Article 3 The joint venture agreement, contract and articles of association signed by the parties to the venture should be submitted to the competent foreign economic and trade department of the


state (hereafter referred to as the ``examining and approving organ'') for examination and approval; and the examining and approving organ shall, within three months, decide whether to approve or disapprove them. After approval, the joint venture should register with the competent administration department for industry and commerce, obtain a license to do business and start operation. Article 4 A joint venture shall take the form of a limited liability company. The proportion of the investment contributed by the foreign joint venture(s) should generally not be less than 25 percent of the registered capital of a joint venture. The parties to the venture shall share the profits, risks and losses in proportion to their respective contribution to the registered capital. No assignment of the registered capital of a joint venture participant shall be made without the consent of the other parties to the venture. Article 5 Each party to a joint venture may make its investment in cash, in kind or in industrial property rights, etc. The technology and the equipment that serve as the investment of the foreign partner in a joint venture must be advanced technology and equipment that actually suit our country's needs. If the foreign partner in a joint venture causes losses by deception through the intentional use of backward technology and equipment, it shall pay compensation for these losses. The investment of a Chinese partner in a joint venture may include the right to the use of a site provided for the joint venture during the period of its operation. If the right to the use of the site does not constitute a part of a Chinese partner's investment, the joint venture shall pay the Chinese government a fee for its use. The various investments referred to above shall be specified in the joint venture contract and articles of association, and the value of each (excluding that of the site) shall be jointly assessed by the parties to the venture. Article 6 A joint venture shall have a board of directors, which shall have its size and composition stipulated in the contract and the articles of association after consultation between the parties to the venture, and the directors shall be appointed and replaced by the parties to the venture. The chairman and vice-chairmen of the board shall be decided by the parties to the venture through consultation or elected by the directors of the board. One side of the venture, and that of the vicechairman, by the other party, shall assume the office of chairman of the board. The board of directors shall decide major problems of the joint venture in accordance with the principle of equality and mutual benefit. The board of directors is empowered, pursuant to the provisions of the articles of association of the joint venture, to discuss and decide all major problems of the joint venture: expansion


programs, proposals for production and operating activities, the budget for revenues and expenditures, distribution of profits, plans concerning manpower and pay scales, the termination of business and the appointment or employment of the president, the vice-president(s), the chief engineer, the treasurer and the auditors, as well as their powers and periods of employment, etc. The respective parties to the venture shall assume the offices of president and vice-president(s) (or factory manager and deputy manager(s)). Matters such as the employment, dismissal, payment, welfare, labor protection and labor insurance of the staff and workers of joint ventures shall be provided for in contracts reached in accordance with the law. Article 7 Staff and workers of joint ventures shall establish their trade union organizations, conduct trade union activities and safeguard their lawful rights and interests according to the law. Joint ventures shall provide necessary conditions for the activities of the trade unions within the enterprises. Article 8 After payment, pursuant to the provisions of the tax laws of the People's Republic of China, of the joint venture income tax on the gross profit earned by the joint venture and after deduction from the gross profit of a reserve fund, a bonus and welfare fund for staff and workers, and a venture expansion fund, as provided in the articles of association of the joint venture, the net profit should be distributed to the parties to the joint venture in proportion to their respective contributions to the registered capital. A joint venture may enjoy preferential treatment of tax reduction or exemption in accordance with state tax laws and administrative regulations. A foreign partner in a joint venture that reinvests in China its share of the net profit may apply for refund of a part of the income taxes already paid. Article 9 A joint venture shall open a foreign exchange account with a bank approved by the state foreign exchange administration or other financial organs for handling foreign exchange businesses, with its business license. The pertinent foreign exchange transactions of a joint venture shall be conducted in accordance with the regulations on foreign exchange control of the People's Republic of China. In its operating activities a joint venture may directly raise funds from foreign banks. Insurance companies within Chinese territory shall furnish the various kinds of insurance coverage of a joint venture. Article 10 In its purchase of required raw and processed materials, fuels, etc. within the approved business scope, a joint venture may make the purchases from Chinese market or the international market according to the principle of being fair and rational.


A joint venture is encouraged to market its products outside China. Export products may be distributed to foreign markets through the joint venture directly or through associated agencies, and they may also be distributed through China's foreign trade agencies. Products of the joint venture may also be distributed in the Chinese market. Whenever necessary, a joint venture may establish branches outside China. Article 11 The net profit that the foreign side in a joint venture receives after fulfilling its obligations under the laws and various agreements and contracts, the funds it receives at the time of the joint venture's scheduled expiration or early termination, and any other funds, may be remitted abroad in accordance with the foreign exchange regulations and in the currency specified in the joint venture contract. The foreign side in a joint venture shall be encouraged to deposit in the Bank of China the foreign exchange that it is entitled to remit abroad. Article 12 The wages, salaries and other legitimate income earned by the foreign staff and workers of a joint venture, after payment of individual income tax under the tax laws of the People's Republic of China, may be remitted abroad in accordance with the foreign exchange regulations. Article 13 The contract period of a joint venture may be decided through consultation by the parties to the venture according to its particular line of business and circumstances. The joint ventures of some trades should decide their contract periods; and the joint ventures of other trades may or may not decide their contract periods. If the parties to a joint venture with a prescribed contract period agree to extend the period, an application for extension of the contract should be made six months before its original expiration date. The examining and approving organ should make a decision within one month from the day of receiving the application. Article 14 In case of heavy losses, failure of a party to fulfill the obligations prescribed by the contract and the articles of association, force majeure, etc., the contract may be terminated through consultation and agreement by the parties to the venture, subject to approval of the examining and approving organ and to registration with the industry and commerce administrations of the state. In cases of any losses caused by a breach of contract, the party violating the contract shall assume financial responsibility. Article 15 Disputes arising between the parties to a joint venture that the board of directors cannot settle through consultation may be settled through mediation or arbitration by a Chinese arbitration agency or through arbitration by another arbitration agency agreed upon by the parties


to the venture. In cases where the parties of a joint venture have not made any stipulations on arbitration in their contract or have not reached an agreement on arbitration in writing afterward may take proceedings to the people's court. Article 16 This law shall come into force on the day of promulgation. 3.My Proposal 3.1 Symbiosis can enter the Chinese market by opening English Training Institute

3.1.1 Form of investment: Sino-Foreign Co-operative Joint Venture I propose that Symbiosis enters into a tie up with a Chinese player and set up the institute in the form of a Sino-Foreign Co-operative Joint Venture wherein the Chinese partner would do all the investment on infrastructure and Symbiosis would do provide with the human talent. The reason for choosing this route of investment is that first of all it is easy to get entry into China by this method. Another aspect is that the Chinese partners know how of the local environment can be very helpful specially when Symbiosis will be new in the market. 3.1.2 Target market: School children The market of school children is the most feasible for Symbiosis. The foremost reason is that Symbiosis already has the expertise in teaching beginners. Second, the other 2 market segments i.e. the students wanting to go abroad and the Business English market are already dominated by huge foreign players who have a far greater expertise and use much more modern methods of teaching as compared to Symbiosis. Also the Indian origin may come in the way of this market accepting Symbiosis, as this market requires a higher level of expertise in teaching. 3.1.3 Staff size: 10 catering to 600 students This staff size of 10 comprises 6 teaching staff and 4 non-teaching staff. Each teacher will teach 4 batches of 25 students each thus catering to 100 students. 3.1.4 Marketing can be done by way of presentations in schools, newspaper advertisements, presentations at places of community gatherings, beauty parlors etc. Symbiosis can tie up with a local marketing agency, which can be handed the responsibility of marketing, and the commission of this agency can be linked to the number of enrollments that this agency brings in. 3.1.5 Divide the course into levels: Starters, Movers, and Flyers The Long Term Certificate Course in English Language can be modified and divide into 3 categories or levels Starters, Movers, and Flyers


Duration of each level is equal to one academic year with 9 hours teaching per week. This is because the target market is school children that already have about 8 hours of classes per day in school. So it will not be advisable to expect them to spend more than 1.5 hours per day in additional teaching. Number of weeks in an academic year (9 months)=39 Number of teaching hours per academic year (@9 hours per week)=350. So the Long Term Certificate course that involves about 1000 teaching hours can be modified and broken into 3 levels each involving 350 teaching hours.

Course fees= Yuan 2500 per level.

3.2 Major Cost Heads in Setting Up English Training Institute

3.2.1. Building with the following facilities Classrooms with a seating capacity of 20-25 students: For any language training, the ideal class size is 20-25 students. This size of the class facilitates optimum learning. Library and reading hall: The language training institute should be equipped with a well stocked library and a reading room where the students can come and learn by referring to various books. Language lab (with audio video facilities for 25 students): Any language training institute si incomplete without a language lab. The language lab has to be equipped with the audio-video equipment. The language lab is very important to improve the listening and speaking skills of the students. Computer lab: A computer lab is an important part of the language training institutes infrastructure. Set up costs: Yuan300, 000-Yuan450, 000. This cost does not include the infrastructure costs, as the infrastructure costs will be borne by the Chinese partner. 3.2.2 Staff costs (Staff of 10 people) A director, 3 co-coordinators, 6 teachers Average monthly salary director=Yuan 8,000 Average monthly salary of teachers=Yuan 4,500 Average monthly outlay on teachers salaries= 6*4500= Yuan 27,000 Monthly accommodation expenses per person =Yuan 1000 Average monthly outlay on accommodation=(1,000*10)= Yuan 10,000 Average salary of co-coordinators =Yuan 2,500 Average monthly outlay on co-coordinators salaries=(3*2500)= Yuan 7,500 Total yearly outlay on salaries =12*(8,000+27,000+10,000+7,500)


= Yuan 630,000~ Yuan 600,000

3.3 Calculation of simple pay back period

Pay Back Period Calculation (all figures in Yuan) Note: Does not consider factors like time value of money, inflation etc. Year Number Outflows Set Up cost Staff Salaries Other Costs Total Outflows Number of Students Inflow@ Yuan 2500 Net Inflow Cumulative inflows Pay Back Period 1 2 3 4 5 6

350000 600000 200000 1150000 200 500000 -650000 -650000 2.64 years

600000 150000 750000 400 1000000 250000 -400000

600000 150000 750000 600 1500000 750000 350000

600000 150000 750000 600 1500000 750000 1100000

600000 150000 750000 600 1500000 750000 1850000

600000 150000 750000 600 1500000 750000 2600000

3.4 SWOT Analysis

3.4.1 Strengths 1.Experience and expertise in setting and managing educational institutes: Symbiosis as a group has been in the market forover 25 years now and has around 30 reputed institutes under its umbrella. It has the experience and expertise in setting and managing educational institutes.It also has a English training institute(ELTIS) which has been around for about 30years now and has been highly successful. 2.Established infrastructure to train teachers in Chinese for effective communication: In order for the English teachers teaching English in China it is very important that they are able to converse in Chinese. This will help in better communication between the students and teachers and in turn facilitate better learning. Symbiosis already has the required infrastructure to give Chinese training to the teachers who will go to China to teach English. As a case in point, a student who


did a short Chinese course in Chinese from the Symbiosis Institute of Foreign Language (SIFL) is now teaching English in China to schoolchildren. 3.Financial muscle: Symbiosis has the financial muscle to go and set up English Training Institute in China. 4.Political clout: The political clout that Symbiosis has is a vital strength in order to gain entry into the Chinese market.

3.4.2 Weaknesses 1.The Indian origin: This remains as the biggest weakness as traditionally; Indians are not accepted as teachers of English language. The Chinese may not look at Indian teachers as possessing the required level of expertise and skills in English teaching as teachers from other English speaking nations. This factor will also be an impediment in Symbiosis entering higher ends of the market, which requires a higher level of skill as compared to the lower end of the market. 2. Lack of expertise as compared to bigger foreign players: The Chinese market is already flooded by many foreign players whose very modern techniques of teaching and have huge financial backing. Symbiosis may not be able to compete in terms of the modern methods of teachings and the level of expertise. 3.4.3 Opportunities 1.Diversify into other segments e.g. CELPIP testing centers: CELPIP is the Canadian English Language Proficiency Index Program which is fast replacing tests like TOEFL etc in order to get entry into Canada. It checks the English proficiency of people from non-English speaking nations and grades them accordingly. This test is conducted by and organization called Test Secure International. This organization has about 25 franchisees in China and is involved in both training the students as well as conducting the tests. As China has a huge number of people migrating to Canada, the importance and the use of this test will surely rise which means a need for more such franchisees. Symbiosis can enter into collaboration with TSI and become a franchisee. 2.Tie-ups with interactive software English training providers


3.Diversify into other forms of education such as management education: Currently, there are only 62 universities / institutes in China that offering management education officially enrolling 32,000 students in all. More over, the d emand for management education has increased 105-times in last 9 years. Some data to support the facts Enrolled number of students in Under-Graduate courses was 5.56 million in 2000 Enrolled number of students in Post-Graduate courses was .301 million in 2000 A huge gap of nearly 94% here New Entrants in Under-Graduate courses was 2.21 million in 2000 New Entrants in Post-Graduate courses was .129 million in 2000 A huge gap of nearly 94% once again The data clearly shows that there is a huge demand for management education in China. This coupled with the fast growing economy and the increasing FDI in China means that the demand is likely to go up. Symbiosis already has the expertise in the field of management education and has been providing excellent training ground for management students in India. Symbiosis can look at entering the management education market. It could couple this with the English training institute by providing English education and then management education to Chinese students.

4. Executive Programme on Educational Co-operation and Exchange between the Ministry of Education of China and the Ministry of Human Resource Development of India: On the recent visit of Prime Minister Atal Bihari Vajpayee to China, India and China signed nine documents on cooperation in economy, law and justice, science and technology, and culture. One of the nine documents signed was Executive Programme on Educational Co-operation and Exchange between the Ministry of Education of China and the Ministry of Human Resource Development of India. Under this executive programme, both sides aim to consolidate and strengthen mutual cooperation in the field of education through sharing of experiences between the educational administrators and through the study of education systems and innovative education programmes in each country. The two sides agree to exchange views and conduct discussion on mutual recognition of academic degrees. They will also cooperate in such areas as the development of curricula for primary and secondary school education, exchange of teaching materials, teaching methodologies as well as the feasibility of conducting joint research in various modes of preresearch and in-service teachers' training and will examine the possibility of jointly establishing a Demonstration Center for Teacher Training. They will also take measures to encourage higher education institutions from their respective countries to establish direct exchange and cooperation through exchange of lecturers, scholars, books, research materials and audio-visual aids, holding


of joint seminars/ symposia etc. They have noted the importance of student exchange programmes in various areas including IT and have provided for 25 post-graduate scholarships to be offered annually by both countries. They have also agreed to exchange two language teachers in Hindi and Chinese respectively. This programme will be valid from June 2003 to 2006 and will be extended for another three years if both sides so agree. Symbiosis can leverage this positive development in order to gain entry into Chinese market.

3.4.4Threats 1. No repatriation of funds possible in the education sector: As of now, repatriation of profits is not permitted in this sector. Another restriction is that the profits earned need to be re invested in the education sector. However, this is not a major threat in the short run, as Symbiosis will not expect to make profits at least in the first 2-3 years. Even after this time period, Symbiosis will be looking at expanding their operations either by opening more institutes or by expanding the operations of the existing institutes. By this time it is expected that the foreign exchange norms will be more liberal and profit repatriation will be allowed as Chinas economy is opening up rapidly. 2.Focus of bigger players like New Oriental School shifting towards school students segment: The focus of larger players is slowly shifting towards the market of school children. The reason is that the larger players have realized that there is a huge demand for English institutes in this market. Also the general attitude of the Chinese is shifting from knowing English just for the sake of knowing English to knowing English that can be used by them in the long term. Another reason for the shift in focus of institutes like New Oriental School towards this market is the recent dispute with ETS, which conducts tests like TOEFL and GRE. ETS had legally authorized New Oriental School to use its TOEFL exam materials; however, ETS learned that New Oriental School violated this agreement. For this reason, ETS has deferred any decision regarding authorization of New Oriental School to use its GRE exam materials. Without ETSs permission, New Oriental School has used, copied and sold ESTs copyrighted GRE exam materials. This dispute has dealt a severe blow to the reputation of New Oriental School and it

has realized that is not advisable to depend too heavily on one market.
3.Retention of teachers may become an issue: There is a huge demand for English teachers in China. The teachers who will teach at the institute set up by Symbiosis will have lot of good opportunities in the same field. Thus retention of teachers may become an issue.


3.5 Conclusion Looking at the immense market potential and the expertise that Symbiosis has in the field of education, I feel that there exists a definite potential. A lot depends upon how well Symbiosis can leverage its political clout to gain entry and the Chinese partner it ties up with. The major roadblock remains the Indian origin, which might make it difficult to climb up the value chain and enter the higher end markets.



Persons Contacted 1.Ms. Seema Ginde: General Manager, Test Secure International, South East Asia 2.Ms. Beena Menon: Head of the department, ELTIS 3.Mr. Sun Xinquan: First Secretary, Education Office, Embassy of PRC in India 4.Ms.Shruti Ganu English teacher in Zaoyang Province Books Referred 1.Modern China by Graham Hutchings 2.The Business Guide To China by Brahm and Li Websites 7.