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Fragmented agent market “more work” for unis

The Chinese agency landscape is shifting, with 242.48% more agencies established in 2023 than 2021, a report by Chinese education experts Sunrise International has found.

Overseas universities will "feel more pressure" to resume recruitment travel to Tier 2-3 cities in China, the report suggests. Photo: pexels

The new entrants to the market are likely to be small independent consultants, according to Sunrise

The Trends in Chinese International Education and Student Mobility in 2024 paper said that new entrants to the country’s agency market will “accelerate decentralization in the Chinese recruitment agency landscape”.

“The fate of larger incumbent agents is diverging, as some record healthy profits and others declare bankruptcy,” it added.

The growth in newly established agencies comes after the number of newly established private education companies decreased by 65.6% between 2021 and 2023 as the broader industry faced regulatory tightening, economic pullback and Covid-19 restrictions, Sunrise acknowledged.

It also said that a more fragmented agency space will “raise the stakes for vetting trustworthy agencies”.

“Some universities will be tempted to adapt how they screen agents, incorporating agency certifications, novel approaches to systematic vetting, and ad-hoc vetting by university personnel,” the report noted.

The paper also says universities are expected to engage in more on-site visits in China to identify and individually vet newly founded agencies. Smaller agencies “vary more widely in their professionalism and reliability”, and less scrupulous companies might lack training, established service norms and ethical counselling systems.

It might be difficult to vet new organisations as certifications such as AIRC, ICEF Agency Status, British Council and BOSSA/COSSA membership, require companies to have been in operation for at least two years.

Costs of certification may also price out new, smaller agents.

The number of newly established companies with the term “study overseas” ( 留 学 liúxué) in the company’s name grew “substantially” in 2023, averaging eight new agencies founded every day, the report said. Photo: Sunrise

Sunrise acknowledged that some entities are being formed as part of spinoffs and restructuring, out of duress with counsellors starting their own companies after a layoff or as others formally dissolve or become inactive.

Bonard’s China Agent Market 2023 Annual Update found that 62% of agencies in China that were active in 2022 remained active in 2023.

The report clarifies four types of players in China’s counselling sector.

Traditional commission-based agencies offer other services beyond university counseling, including academic tutoring and test prep.

Independent educational consultants do not receive commissions from universities and charge families for guidance, while solo practitioners offer similar services.

Tech platforms also operate counselling services by acting as aggregators of sub-agents, engaging directly in counselling or facilitating “direct admissions” for students.

The new entrants to the market are likely to be small independent consultants, Sunrise said, as “commission partnerships take time to develop”.

The fragmentation of the market “probably means more work for universities” as market share of existing partners is expected to shrink.

“Smaller scale independent educational consultant outfits tend to focus on one or a handful of cities, so replacing a defunct national agency might require a patchwork of several local agents. New agents may not fully understand commission-based models, so it may take more effort to identify the best mode of partnership and onboard their counselors,” the report said.

It urges universities to survey existing agent partners to confirm they remain active in the space as recruitment cycles conclude.

Recent analysis by The PIE identified 11 agents in China that have at least 30 university partners in Australia. However, it did not find which send the most students or are most active.

The bonus for recruiting universities in the market fragmentation is that they have the chance to diversify internally in China, reassess non-performing partnerships and identify more valuable partners in smaller scale agents, the paper proposes.

“Fragmentation might be better for students and families in the long run”

“Fragmentation might be better for students and families in the long run, as competitive markets tend to deliver better products at lower costs compared to oligopolies,” it added.

The wide-ranging report also highlights how China’s agencies have responded to new government regulation.

With the Double Reduction Policy in 2021 aiming to reduce the academic burden on student, agencies that had no academic tutoring service divisions – such as JJL – were able to avoid government rules limiting the amount of homework children are permitted to do.

Others, like New Oriental, were forced to close their K9 tutoring operations.

Tiandao – one of China’s largest agents which had vertically integrated both its academic tutoring and study overseas businesses – declared bankruptcy in late November 2022, the report highlighted.

With the ban on academic tutoring until Grade 9, agencies are now more likely to engage students starting in Grade 10.

“Strictures on the marketing of academic tutoring and the broader fragmentation of the agency industry has leveled the playing field between large and small agencies,” the report said.

“The Chinese agency industry is recovering after a difficult three years”

Other large agencies “appear to be holding steady”, with employees reporting to Sunrise that they are “seeking to expand their sub-agent networks, both inside China and overseas in regions where there are large numbers of Chinese expatriates” this year.

The outlook for the private education market serving domestically-oriented students in China is “more pessimistic”, while the study overseas market is proving more resilient, the paper suggested. New Oriental’s study overseas division reported an 8.9% increase in net revenues in the year to May 2023, reaching $354.8 million.

The growth in new agencies and the sector’s resilience is due to study overseas being “more complicated than it used to be” due to visa challenges and a heightened interest in studying in non-traditional destinations, the report says.

“The Chinese agency industry is recovering after a difficult three years,” it concludes.

“New agency establishment is on the rise, especially in Tier 2+ cities, which offers room for cautious optimism…

“Universities would do well to diversify their modes of engaging China’s evolving ecosystem of agents, combining regular communication and in-person visits in China to cultivate partnerships that deliver well-qualified students.”

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