Since philosopher Confucius stressed learning as essential to self-transformation and the improvement of society as a whole, the Chinese have attached great importance to education. In the past three decades, China has come a long way educationally. At the end of the decade of social upheaval known as the Cultural Revolution in 1976, China’s literacy rate stood at only 60%. Today, it's 85%, with the rate for citizens between the ages of 12 and 40 at an impressive 96%.

Last week, Chinese Vice President Xi Jinping's met with Richard C. Levine, president of Yale University. The two officials discussed the possibility of educational exchanges and the need for increased cooperation between the two countries. During the meeting, Xi said the Chinese government will continue to make education a priority.

Beijing-based educational services provider ChinaEdu Corporation (Nasdaq:CEDU) hopes to play a significant role in continuing the trend toward increased education. ChinaEdu's primary business is providing online courses and interactive tutoring services, but it also operates private primary and secondary schools, and markets and supports international curriculum programs in the People's Republic of China. A domestic leader in the distance-learning sector in terms of student enrollment, the company has exclusive, long-term contracts to run online degree programs for 10 Chinese universities (and strong relationships with a total of 12 institutions of higher learning). The online learning segment generates nearly three-quarters of the company's revenues. 

International business experts believe that distance learning will help give Chinese companies and multinationals operating in China access to a much-needed labor pool of highly trained staff with global exposure, while the education czars in the Ministry of Education's Curriculum Development Center view distance learning as a means of reaching areas in China with teacher shortages (particularly in Western China's vast countryside, far from coastal population centers). 

ChinaEdu completed its IPO and listing on the Nasdaq Global Market on Dec.14, 2007. In March, the company reported fourth-quarter and fiscal 2007 financial results that included a 37% increase in net revenue for the quarter, to $10.9 million, and a 24% rise for the full year, to $36.3 million (revenues derived from online programs rose 54.5% in the quarter and 28.9% during the fiscal year). Quarterly net income surged 200% to $1.3 million, over the same period in 2006, but yearly net income plunged 90% to $0.3 million. Enrollments in online degree programs during the quarter rose 23% and 36% for the year, to over 192,000 students from 144,000.

Results from the first quarter ended March 31, released after the close Wednesday, indicated CEDU is continuing to grow its business. Total revenues in the three months increased 24% to $9.9 million with online degree programs rising 37% to $7.8 million. Net income rose 7096%  to $0.3 million, or $0.015 per ADS. Non-GAAP net income rose 101% to $0.7 million in the quarter. For the second quarter of 2008, ChinaEdu said it expects its total net revenue to be in the range of $10 million to $10.4 million.

CEO Julia Huang said profit growth was impacted by the company’s “ongoing investment in establishing a learning center network for our online degree programs.” However, Huang said, “We believe the long-term strategic benefit outweighs the (short-term) start-up costs.”

The company is gearing up to snare an increased amount of market share in the online education niche, as education spending in China continues to grow rapidly and Internet use skyrockets. ChinaEdu inked a deal in March to buy the remaining 20% interest in the 101 Online School, an online tutoring and test preparation service with a reputation for being one of the nation's best interactive learning programs (it initially acquired 80% equity interest in January).

China's education and training market is the largest in the world, with about 260 million students enrolled in primary, secondary and university-level schools and an additional 68 million individuals in various adult education and training programs. China now produces more science and engineering graduates than the United States, Europe and Japan combined. Even so, a shortage of highly-trained graduates with practical global and English-language skills could hinder the country from transitioning into a services and research hub from a manufacturing-based economy, according to management consultants McKinsey & Company. A poignant example can be seen in China's huge R&D institutes, which are near the cutting edge on the theoretical level, but have yet to cross the threshold into commercializing their breakthroughs.

Beijing has said that improvement of the country's education system is vital to continued economic growth. Considering China's increasing demand for more skilled labor to better compete in the global marketplace, ChinaEdu is well-positioned to capitalize on the fast-growing need for more educational options and to compete more effectively as the domestic educational services industry continues to transform itself.

Shares, which have traded between $6.04 and $8.45 in the past 52 weeks, closed at $7.22 on Wednesday. Before Wednesday’s results were released, analysts' one-year target estimate was $10.60.