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:
- 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.
- 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.
- 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.
- 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!