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COMMENTARY: A Case Study in Private-Sector vs. State-Owned Enterprise Performance

Beijing’s stab at running highly coveted after-school learning centers for children leaves parents – and their kids – wanting to get out.

Mark Melnicoe
    Sep 29, 2018 4:35 AM  PT
COMMENTARY: A Case Study in Private-Sector vs. State-Owned Enterprise Performance

China's private sector drives most of the country's rapid economic growth, which isn't a surprise even in the Middle Kingdom's hybrid market economy in which the government plays an outsized role.

Private companies tend to perform more efficiently and respond to market dynamics much better than state-owned firms. A reminder of that came this week with an article in the news portal Caixin. It reported that parents in Beijing are highly dissatisfied with an after-school learning program for children that isn't exactly measuring up to the commercial competition.

The story portrays the education centers run by the school district in Beijing as a poor alternative to those off-campus, with staff often not engaged with the children. Instead it quoted young children and parents about how the kids often are doing little more than sitting around watching television while waiting for their parents to pick them up.

Chen Yuan and Lin Hui, third-graders at a school in Beijing's Haidian District, actually persuaded their parents to take them out of the program. Teachers at their school just "watch the class" during after-school sessions, but commercial tutors "give us guidance with homework," they told Caixin.

The 3:30 Problem

This is no small matter for Chinese parents. The after-school programs are expensive, with families paying thousands of dollars over the course of a school year to enrich their kids. They worry that if they don't spring for these programs, their children will fall behind their peers in China's hypercompetitive education system.

Children get after-school and sometimes weekend instruction in English, math, literature, and the arts, including music and dance. These centers also serve as child care for the typical family where both parents work full-time.

The impetus for Beijing's effort to provide these services free came from remarks by Chinese Education Minister Chen Baosheng during a press conference in March at the National People's Congress. Chen blasted the "barbaric" growth of private education centers, which he called the "3:30 problem." That referred to the time most kids get out of school, and he called for legislation against the centers.

Parents' initial delight at the free program in Beijing, which just began for the current fall term, very quickly turned sour, however. Wang Ming enrolled his son in the program but pulled him out after just one week, Caixin reported. Wang complained that teachers nagged him to pick up his son earlier than the official pick-up time of 5:30 p.m. for flimsy reasons.

Wei Xiaorong, who has spent years teaching at a student center in the southern city of Nanning, says the learning environment can vary according to the teacher.

"A couple of my colleagues will let their students watch TV or cartoons from time to time in classes," she said via the WeChat messaging app. "Some other teachers never do that. Our management thinks it is OK to play a movie once in a semester. They are not very happy if teachers play movies a lot."

Wei said that Nanning's city government banned after-school classes in schools many years ago, so many private centers sprang up to fill the demand.

Lego in the Classroom

China's infamously competitive school environment has resulted in a mushrooming of private education centers in cities all over the country. Some are operated by foreign companies, which are increasing their presence. Regional domestic companies tend to dominate.

One leading foreign presence is Lego, known for its plastic toys. At one center in Beijing's Dongcheng District, children watch videos of submarines while the teacher instructs them on basic physics. Then they build their own submarines – out of Legos, of course.

Parents love the creativity. Chen, whose 6-year-old daughter attends the Lego center, praised how Lego "stimulates creativity," according to the official Xinhua news agency.

In China's largest city, a survey done by the Shanghai Association for Quality found that 70 percent of children aged 4 to 6 attend extracurricular classes, Xinhua said. Children are enrolled in an average of two classes, it said, and average annual family spending comes to about 18,000 yuan – nearly $2,700.


Lego got an early start in China, entering the country in 2000 to provide innovative education programs in some Chinese kindergartens and schools. It promotes learning through play – something Chinese parents are increasingly embracing.

They seek more hands-on experiences for their kids, not just the rote learning that takes place in the schools to prepare students for the gaokao – the make-or-break national college entrance exam. The more innovative centers are teaching a STEAM program (science, technology, engineering, arts, and math) that's being embraced by a younger generation of parents.

That's a far cry from what's apparently taking place at the free government-run centers new to Beijing. The entire episode can serve as something of a case study in how the private sector responds to the market while state-owned companies fall flat.

Numbers bring a stark reality to the picture of public vs. private performance. At the end of 2017, individually owned businesses and private enterprises employed 340 million people – far less than half of all workers in China.

Yet some 60 percent of China's GDP growth was attributable to private firms, according to government numbers as reported by Xinhua.

Even more telling: Last year, while bloated, state-owned enterprises were shedding employees, 90 percent of new jobs in China were created by private businesses.