A Few Young Foreigners Started a Mandarin School in China. How Did It Turn Into a Gamble?

“There was the Olympics in 2008, the World Expo in 2010 — China was a giant magnet.” Five years ago, Jan believed the country would keep opening up, and he placed a dangerous bet on it.

Irene, a 22-year-old Italian woman living in London, spends at least 10,000 euros a year learning Mandarin. Most of it goes out in the summer, starting the moment she boards a flight from London to Shanghai and ending after six straight weeks of intensive classes — four hours a day, five days a week.

Count in the fact that the school's service starts the moment she opens its webpage, and Irene thinks the money is well spent. Not long after she emailed in her application, a program manager — who doubles as the course's salesperson — began helping her apply for a visa and arrange housing. Before she left, Irene got an email walking her through how to install WeChat and a VPN, and was told she could have discounted tickets to tourist sites if she wanted them. Someone, she was told, would meet her at the airport, take her to register at the local police station, buy her a SIM card, and show her the way to her dormitory and the school — “to help her survive in a completely unfamiliar place.”

Only with these assurances did Irene's protective mother agree to let her travel alone so far from home. This was China, after all — “the other half of the world” to Europeans, a place you go almost as an adventure. But Irene believes that once she is back in Europe, employers will be won over by her unusual language skills and her nerve for living abroad. As long as she is “holding enough cards,” she will soon leave behind the dull, steady, English-only men and women in their 40s and 50s back at the office.

Three years ago, when this then-first-year politics student was first brought to the entrance of Lane 76, Wuyuan Road in Shanghai, she grew even more certain of it. Next to the school's plaque — “Hutong School” — ran a line that matched what was on her mind: Think Ahead, Learn Mandarin.

Shanghai has no hutongs. Hutong School is tucked into a two-story Western-style house in the former French Concession, one of the most expensive rental pockets in that part of the city. Past a dozen or so homes with laundry fluttering outside, all of China looks fashionable and interesting. Irene would soon drop the outdated vocabulary she had picked up in London — duixiang, say, for a boyfriend or girlfriend, a word no young person in Shanghai uses anymore.

The Giant Magnet

Jan Wostyn, one of Hutong School's founders, was an earlier adventurer. People once thought he had real foresight.

In 2005, this Belgian, together with the Frenchman Jeremie Rossignol, three Germans and one Chinese partner, founded Hutong School with 10,000 euros. That was four years after his first trip to China. In 2001, Jan finished a master's degree in economics in Belgium and came to Wuhan on a Chinese government scholarship to study Chinese. A year later he went back to Belgium and took an undergraduate degree in Chinese studies. After another year of Chinese in Xiamen, he started an internship at a translation company in Beijing.

This time, at 25, Jan Wostyn meant to stay. “Any foreigner who spends more than three months in China gets a little obsessed with it,” he said. Unlike placid Europe, this place was full of energy.

Foreigners curious about China had no trouble finding somewhere to learn the language; training outfits with “mandarin” or “panda” in their names were everywhere. It is not a complicated business. Register a small company, rent a space, find a few Chinese teachers, and it runs itself.

Jan Wostyn and Jeremie Rossignol went at it differently. They picked a name that stands for Beijing culture in foreign eyes — “Hutong School” — even though their first location, Tu'er Hutong near Andingmen in Beijing, was hemmed in by office towers and barely looked like a hutong at all. In 2012 they set up a separate campus in Shanghai. Because most of their students were in their early twenties — they might have been to other European countries or the United States, but nowhere as far away as China — Jan and his partners also offered an “all-inclusive” service, arranging housing, language classes and internships, 24 hours a day, seven days a week. Four program managers now work on this full time across Shanghai and Beijing; the Chinese teachers, as at most such schools, are part-time.

Students, Irene included, “all love” the program managers, who can fix the gas in Irene's apartment within 20 minutes. Their other main job is to help students make friends and to make sure “there is never a day they don't know what to do” — sometimes a trip to the Bund or the Great Wall, sometimes a lesson in mahjong or tai chi, sometimes a bar. To keep students who drink themselves senseless from losing their way, the managers record a voice memo giving the student's address on the student's own phone, in case a taxi driver needs it.

“Students treat it as an experience, not just a school,” said Laura, a language teacher at the Beijing campus. The draw is not only that “the teachers teach well — that's the basic part, there's more.” One of her students, a 16-year-old American boy, had been there barely a month and already had more than 20 friends; he was going to Xi'an for the weekend with foreign friends he had just met.

Laura came to Hutong School last year from another language school where she had worked for eight years. Set against her old employer, which did almost no marketing and has since gone under, she finds Hutong School's “business thinking unusually professional.” You can see it first in where the campuses are. The new Beijing campus moved into an office building in Sanlitun in 2010, and Laura has heard that everyone working in that building has studied Chinese at Hutong School, because the building is full of European companies' offices.

The founding team's business sense even drew a LinkedIn endorsement from Evan Osnos, the former New Yorker correspondent in China. In Hutong School's early days, Jeremie Rossignol was also renovating siheyuan courtyard houses. Osnos wrote: “He started a world-class property management business… I was impressed by his honesty, precision and thoroughness, and I have recommended him to many others.”

In the language business, Jan and Jeremie understood the value of an endorsement just as well. In 2009 they put forward their only Chinese partner as legal representative, applied for a school-operating license from the Ministry of Education, and began advertising themselves as “the first Chinese-language school recognized by China's Ministry of Education and run by a European team.” Under the rules, foreign entrepreneurs cannot obtain such a license. That signboard was probably one reason foreigners were persuaded to come and spend a few weeks in China, and it still sits in a prominent spot on the school's website.

From 2010 on, the founders took the business more seriously.

Jan and Jeremie resolved to put more into it, and to stop treating it as they once had — as a way to live easy and turn up to work in shorts and flip-flops. “There was the Olympics in 2008, the World Expo in 2010 — China was a giant magnet.” Jan, who had just turned 30, was sure of it. He could see the long-term trend for this business in China: student numbers would climb fast, and China would very likely go on to loosen its rules on running schools and issuing visas, perhaps even create a one-month visa-free tourist visa — all of which would pull language students from around the world into the country.

In 2010 they rented several classrooms in Sanlitun, one of Beijing's most expensive commercial districts, and built out a second campus.

Interference

The school — which has accounts on Facebook, LinkedIn, Twitter, Instagram, Google+ and WeChat — grew far more slowly than Jan had imagined.

The “giant magnet” judgment was not wrong. Jan's impression is that there are now more than 10 times as many foreigners around him as when he arrived. But plenty of things he had not counted on interfered with the magnetic field. By Hutong School's own figures, 3,000 foreign students have taken language courses there over the past 11 years. Even setting aside the early years, when it barely amounted to anything, that is not a large number.

“We've spent 11 years to get this far, and compared with the time and energy we put in, I feel we got back too little.” When I met Jan two weeks ago in a Shanghai bar, he was not as confident as Laura had described. He stressed that he does not regret doing it — he did, after all, “meet wonderful colleagues, teachers and students” — but his “professional business thinking” had clearly wavered too. “Maybe five years ago I should have opened a restaurant or something, got people to eat more instead of learn more — though I was never a good cook either,” Jan said. That was around the time he quit Ernst & Young, one of the Big Four accounting firms, and came back to China.

The modest scale probably has something to do with what Hutong School charges. It does not serve the mass market for Chinese lessons.

Its fees used to be much lower. Ten years ago the internship program was priced at 480 euros a month, about 4,800 yuan at the time. As late as 2009, the school's most popular course, “General Chinese,” split into two-hour speaking and character classes, cost only 50 yuan a session.

After that, Hutong School aimed higher. The Shanghai campus, opened in 2012, feels more like a café: in the common lounge students help themselves to tea in mugs printed with the school logo, leaf through magazines and film DVDs, or go up to the third-floor roof terrace for activities. Apart from the open-plan office on the second floor, the school has 10 classrooms, each small, with an IKEA-style long table that seats only seven or eight students.

Because the classes are small, a two-week Chinese course without housing costs US$812, about 5,200 yuan — that is 130 yuan an hour, 20 hours a week. At Global Village School in Wudaokou, which draws crowds of international students, a course runs about 40 yuan an hour, and as little as 12 yuan an hour in classes of 10 or more.

But newly arrived foreigners are less sensitive to these prices than you might think. They still count costs by the standards of home. Irene says 10,000 euros a trip is still cheaper than studying Chinese abroad. In London this kind of Chinese class costs 40 pounds an hour, and that is before a month and more of living expenses. Rent in London is higher, and on food, a day in Shanghai might cost a fifth of what it costs in London.

But the financial crisis, which brought more foreigners to China to try their luck, also ended up eating into what foreigners in China could spend. A large share of Hutong School's customers used to be multinationals buying language courses for staff at negotiated rates. Now those corporate partners, squeezed by the downturn, have cut budgets and turned less generous about language training. They used to give a student 100 class hours; now it is 50. They used to be willing to pay 200 to 300 yuan an hour; now it might be 150.

Students hoping to add a line to a résumé are starting to consider India instead: cheaper, and no smog. Laura has heard that last April and May, the Beijing campus may have had only half as many students as in past years.

Jan confirmed the bleak picture. Over the past two or three years, Hutong School's student numbers have not grown. “Stuck, maybe down a little.”

What troubles him most about attracting new students is that “the government hasn't opened the market the way we hoped — in fact it's gotten harder in the past few years for foreigners to stay in China ‘flexibly’ for a while.” Figures from the National Tourism Administration support him: from 2006 to 2015, the number of inbound foreign visitors — tourism, work and family visits combined — peaked in 2007 and 2008, fell back after 2009, and since 2011 has stayed roughly flat, edging down.

The Gamble

The language business depends heavily on how open the country is, and on how much confidence people have in its future.

Hutong School began as an internship program. Jan and Jeremie each noticed the same thing — foreign interns wanted to come to China and see the world, and Chinese companies liked new faces — so they started helping these students apply for F-category visas. Interns could stay six months and take language training from Hutong School.

Then, in September 2013, the visa rules changed. Foreigners had been able to use an F visa to come to China for visits, inspections, lectures, business, scientific and cultural exchange, advanced study and internships, for up to six months. Internships were dropped from that list, and applying to come to China as an intern stopped working.

Most language schools found ways to skirt the rules. They sought out partnerships with official institutions, which can usually issue foreign students the invitation letters they need for a visa application; the training school pays the institution a fee to buy invitation letters for prospective students. Some outfits whose main business was internship programs, including IN TO CHINA, simply shut down over the visa problem.

Jan says 20 to 30 percent of Hutong School's prospective students ran into trouble with their visa applications. They would call the program managers for help and find out that these managers, whom friends had described as able to handle anything, were not all-powerful. Jan thinks some students, faced with the paperwork, dropped the idea of a few weeks in China altogether, and others began to suspect Hutong School was an unreliable outfit.

If we are being honest, Hutong School's own credentials are not entirely clean.

Ever since 2009, when Jan, Jeremie and the Chinese partner in the founding team fell out over money and went their separate ways, this all-foreign management team has had no legitimate school-operating license at all. They moved out of the hutong at the same time and left the original address to their Chinese partner. Yet for some reason the website they built in 2010 still carries that seemingly one-of-a-kind signboard.

Students are in on this gamble over visas and licenses too. Irene has not lived through any of the dangerous moments herself, but she passed on what a roommate who did an internship program last year told her: police came to inspect the office once, and he and some colleagues fled and spent the whole day at home, making sure the police would not find them. It did not put Irene off coming back to Hutong School to study Chinese this year.

So how to understand why Jan has never called a halt to this “dangerous thing”? Largely, he explains, because he has always believed that “China will go on to loosen its rules on running schools and issuing visas,” and that “there might even be a one-month visa-free tourist visa.” The risk in that bet runs far past the several hundred square meters these young people rented in the most expensive parts of Beijing and Shanghai so they could run the business in comfort.

As Laura sees it, Jan and Jeremie's team still has a long-term plan and mature business thinking. They have just made a textbook for absolute beginners, with illustrations commissioned specially: “it feels like a big investment.”

Jan and Jeremie do keep saying, in one setting after another, that they mean to turn Hutong School into a global school for learning Chinese. Enthusiasm for the language is not about to fade. According to a 2012 report in The Wall Street Journal, some American parents, calculating their children's prospects, have gone so far as to move to China or to Singapore and other Chinese-speaking countries. Figures from Hanban, China's national office for teaching Chinese abroad, show that as of September 2015 more than 100 million people outside China were studying the language; in 2009 the estimate was 40 million.

Since 2014, Hutong School has either opened branches or partnered with schools teaching in a similar way in London, Paris, Brussels, Milan and Sydney, putting the Hutong School name on all of them. The next overseas branch will be in New York, where a colleague is getting ready to move.

What seems nearly certain, though, is that the method no longer works in the place that produced it.

Jan and Jeremie are both weighing carefully whether to keep going down this road. Doing business in China, Jan says, “we do dangerous things.” The lack of safety and certainty was bearable at first, but 11 years in, the feeling of seeing no way forward troubles him badly.

Jan is 36 now, and has a child. Fifteen years ago he was full of curiosity about this country's culture. Now he thinks he needs to think hard about what to do next.

Images courtesy of Hutong School.