IDP Education’s investor call today touched on their move to administering the IELTS test in China.  That’s a topic that has garnered quite a lot of interest over the past few months.  As you know, IDP administered IELTS tests there in November and December… and then stopped.

Around  the 26:00 mark, CEO Tennealle O’Shannessy said:

“We made good progress in positioning ourselves in the China market with IELTS.  IDP has established a strong cooperative relationship with a respected professional examination service provider in China.  And in half-one we conducted IELTS pilot tests in November and December which performed strongly and received positive customer feedback and endorsement.  We will continue with preparations for scaling the offering from an operations, technology and regulatory perspective.  Currently, the Chinese Ministry of Education is in the process of approving the official expanded entry of IDP IELTS into the Chinese market.”

During the Q and A section there was some related bafflegab starting around 37:00, and towards the end of it O’Shannessy noted that:

“We continue to engage with the Chinese government who are really pleasingly taking a very encouraging view of our expansion into China.”

And:

“The long term business case continues to be very attractive, however what we would say is the regulatory processes associated with the approval for an official launch have slowed our launch and ramp-up plans to some degree… but we remain confident in the long term market opportunity.”

Further discussion around 42:00, referred to some “short term delays” while waiting for approval from the Chinese authorities, though O’Shannessy again stated that the longer term plan still holds up.  She is hopeful that these issues will be “worked through” in the “the next couple of months.”

These comments line up with popular speculation that regulatory hurdles have impacted IDP’s entry into the market. But test takers and investors alike will be happy to hear that they may soon be handled.

(the transcriptions are my own… forgive any errors)

Does anyone know what’s up with IDP IELTS China?  Students seeking to book an IELTS test in China are still seeing the “Registration system maintenance in progress” error that has been displayed for several weeks.  And, as far as I can tell, test dates for 2025 have never been open for booking.  That means, I guess, that no one is currently taking the test through IDP in China;  their entry into the market appears to be paused for the time being.

Some have suggested that this could be due to regulatory hurdles.  If that is the case, I imagine that a plan-B exists, and we’ll hear about it sometime in 2025.  As has been reported by a few outlets, IDP recently canceled its lucrative agreement to collect royalties on administrations of the test done by the British Council.  I’m certain they wouldn’t have given up that source of income without a firm plan to permanently enter the market.

With that said, it is worth noting that the launch of IDP IELTS in China has been somewhat peculiar.  It happened without much fanfare. It was mentioned in the most recent shareholder’s call and I blogged about it at that time. The PIE News picked up the story a bit later, and that was about it.  Most Chinese students only learned about the development after the Chinese blogosphere reported on the PIE’s report.

Update:  This was touched on in IDP’s most recent financial report.  They are working on starting again.

Anyone know what’s going on with IDP IELTS China? Students attempting to register have gotten a “maintenance in progress” message for several days now. While all the 2024 slots quickly sold out, it seems like at no point have slots for 2025 been made available.

Growing pains, perhaps?  Not as smoothly integrated with NEEA as once thought?

IDP IELTS is open for business in China!  Test takers can now register for and take the IELTS through IDP Education. The British Council no longer has a monopoly on IELTS testing in this country.  Apparently all the test spots between now and the end of the year sold out in a matter of days.  Remember how I mentioned that it is hard to book seats to take the IELTS (and TOEFL) in China?

A few notes, culled from the Chinese blogosphere:

1. The fee is 2170 RMB, which is about $298 USD.  That’s the exact same price as taking the test through the British Council.
2. Testing is currently available in 14 cities across 10 provinces.
3. There is no interaction with the NEEA when it comes to registering for the test.
4. IDP apparently offers students one free reschedule.  People like that a lot.
5. Testing is done all in one day, for the most part.  People like that a lot as well.

The overall reaction seems extremely positive.  Tutoring center staff I’ve talked to report that they’ve already sent dozens of students to register for an IDP-administered IELTS.  Good for IDP. I think this is a big win for that firm. Just what they need after a challenging year (for the whole industry).

I haven’t been able to track down the name of the test center operator that IDP has partnered with.

Update:  IDP stopped offering IELTS in China at the end of 2024.  The latest news is here.

This PIE News article by Polly Nash has a ton of relevant details re: IDP’s move to begin direct testing in China.  It notes:

4. IELTS testing in China is valued at about $380 million, or about 40% of the global IELTS value.
5. Morgan Stanley estimates that about 850,000 IELTS tests are taken in China each year.
6. Morgan Stanley further estimates that IDP could grab 40% of the Chinese IELTS market by 2028.
7. IDP will outsource test center operation to an established third party.

If the 850,000 number is accurate, China represents about 50% of all IELTS testing done by the British Council, as their most recent annual report noted the delivery of 1.8 million tests.  This means that competition in this key market could have a significant impact on the British Council.

Outsourcing the test centers could be costly in the short term, but I’m sure IDP could supplement a third party network with “self-operated” centers.  That’s something ETS has pursued in China in recent years.

IDP Education shares are trading at $13.45 as I write this.  Shares are down 32% since the beginning of the year, and are down quite a lot more from their pandemic high of $38.88.

It isn’t necessary to describe once again the challenges that IDP faces, as they are already well known. That said, it is worth taking a moment to write about a potential bright spot that hasn’t been sufficiently covered elsewhere.

According to IDP’s most recent annual report, the company plans to begin “direct testing” of IELTS in China in the near future. That is, they plan to take registrations and operate IELTS test centers around the country.

It may come as a surprise to some readers to learn that IDP doesn’t do those things at the present time. Instead, the British Council has a monopoly on IELTS testing in China. Per an agreement between them and IDP, IDP is paid a flat-rate royalty for every administration of the IELTS that is carried out in the country.  I don’t know what that fee is.

In most other countries, IDP and British Council compete with each other when it comes to delivering IELTS (except for India, where IDP has enjoyed a monopoly since buying out the British Council’s operations in 2022).

What makes the move to direct testing particularly exciting is the fact that during peak testing periods, some students find it hard to book spots at IELTS test centers (and TOEFL test centers, for that matter).  According to anecdotal reports that have been shared with me, test takers sometimes resort to paying third parties to quickly to book spots at test centers as soon as they become available.  Other times they travel outside China to take tests.  You’ll recall reports in the Korean press a few months ago about “exam tourism” to that country.  Said the Chosun Daily at that time:

“The British Council, which administers IELTS, noted that they have observed a significant number of Chinese expeditionary candidates coming to Korea recently. Although they do not have statistics sorted by nationality, it is estimated that as many as half of the 30,000 people who take IELTS in Korea annually could be Chinese.”

I’ve been told that Malaysia is a popular destination for Chinese test takers as well.  Before the war, people went as far as Moscow to take tests.

This suggests to me that if IDP enters the market they won’t have any trouble filling seats at test centers.

Beyond that, a few other points are worth mentioning:

1. Official numbers are not available to me, but I think it’s safe to say that the IELTS is the most popular test of its type in China, having surpassed the TOEFL in total test volume some years ago.  This is mostly because of the rise of Canada and Australia as study destinations, but also because the IELTS is a very attractive test for individuals in China.  The option of taking the IELTS on paper remains quite popular in China, and that’s something that competing testmakers don’t offer.  Test takers are also drawn to the test because of the 19 prep books published by Cambridge Press.  Again, that’s something that competing tests can’t match. People like the IELTS. When IDP enters the market, they will have a customer base that already appreciates their product.
2. As discussed recently on the ICEF Monitor Podcast, the slowing of economic growth in China, coupled with high youth unemployment, may create opportunities for firms involved in the study abroad business.  Already, we’ve seen that young people in China are more likely than before to stay in school instead of entering the job market right after their undergraduate studies. This may translate into an uptick in individuals considering the option of studying abroad.  Of course, this could create more demand for the IELTS in China, even as demand shrinks in the key market of India. Because of the specific schools Canada-bound students often target, they may be less impacted by regulatory changes than students in other markets.  Again, this could keep demand for the IELTS high.
3. If done quickly, the establishment of a test center network across China would give IDP a truly global presence, and could cement their place as a frontrunner to win the second lot (delivery) for the new HOELT test.
4. The cost of taking the IELTS in China from the British Council is about $460 AUD.  According to IDP’s most recent annual report their worldwide average fee is currently $306. Direct testing will certainly increase their average fee.

Anyhow.  All of the above assumes that IDP Education has found a test center partner and have taken care of whatever obligations they might have to the NEEA.  Those two things could, of course, present challenges in the short term.

I urge everyone interested in testing to keep an eye on China.  It’s easy to miss key details since this particular social network isn’t allowed to operate in the country… but it remains critically important to the plans of all the testing firms.  More important than some people might realize!

Yesterday, IDP Education released its financial report for FY2024.  You can also read an annual report.

Regarding the IELTS test, a few things are worth mentioning here.  They are:

1. IELTS test volumes are down 18% worldwide.  They stand at 1.58 million tests for the year.
2. IELTS test volumes are down 42% in India.
3. Outside of India, things are rosier: IELTS test volumes are up 12%.
4. IDP says they “expect to record a decline in volumes in [their] key business lines in FY25.”
5. The annual report indicates that 3.98 million IELTS tests were taken in the year (including those administered by the British Council).

IDP Education seems pretty determined to convey that IELTS declines are due to regulatory changes in Canada, Australia and the UK.  And that competition from other tests is not a major factor.  I don’t know if I buy that.  I think competition from Pearson and Duolingo is having a serious impact. But I’m just a guy on the Internet.  What do I know?

I listened to the shareholder’s call and about 30 seconds of it really captured my attention.  CEO Tennealle O’Shannessy said:

“We completed a strategic review of the mainland China market. Off the back of that, we are exploring a direct testing model in China. We’re at the early stages of this process, but we believe that over time this will open up additional growth for us as we connect directly with a greater number of test takers and students in China.”

Currently in China, the British Council alone administers the IELTS test (in conjunction with the NEEA, which is part of the Ministry of Education). Based on an agreement between IDP and the British Council, the British Council pays IDP a fee for each IELTS test that is taken in the country. This arrangement dates back to 2001.

What O’Shannessy seems to be suggesting is the  sunsetting of this arrangement in favor of IDP Education directly administering IELTS tests themselves in China.

This could be advantageous for both IDP and test takers. But, as is well known, China can be a tricky place to do business.