An exam today determines 10 million Chinese students' futures. It's fueling a more than $120 billion market

Nearly 10 million Chinese students have been preparing for this Thursday and Friday since kindergarten.

Gaokao, China's university entrance exam, directly determines which universities students can go to. To some extent, it determines whether they will become blue-collar or white-collar workers later in their lives.

"Even though delivery guys can make 8,000 yuan to 10,000 yuan (about $1,250 to $1,565) per month while white-collar workers may only make 3,000 yuan to 5,000 yuan (roughly $470 to $780), Chinese parents still wish their children to become the latter," said Bangxin Zhang, co-founder and CEO of TAL Education, during a phone interview with CNBC in Mandarin.

Beijing-headquartered TAL, the biggest after-school tutoring services provider in China, has teaching centers in 36 cities across China with nearly 4 million offline students and over 35 million online registered users. With a market capitalization of approximately $22 billion, shares of the NYSE-listed education firm have surged by more than 50 percent year-to-date and more than doubled during the past 12 months.

It is widely believed among Chinese parents that starting earlier than others is the key to succeed in China. Those ranks include 8-year-old Mingzhe Ma's father.

Ten years from now, Ma, a second-grade student in Beijing, will also join the Gaokao crowd. For today, he is spending no less time than a high school student on after-school tutoring classes.

Each week, Ma spends approximately four hours practicing the piano, four hours training in badminton, two hours learning English and at least six hours studying mathematics and other subjects at TAL.

"My son started studying with TAL since first grade," Yunhui Ma, the father, told CNBC in Mandarin. "At least half of his classmates are attending such programs, many of whom even started one or two years prior to elementary schools."

Most after-school tutoring classes follow curriculum similar to public schools' — except that they aim to make students at least half a year more advanced than their peers, according Yunhui Ma.

"The peer pressure will naturally result in parents worrying about their children falling behind," he said.

It was that kind of pressure that made a mother decide to leave mainland China.

"If life is like a marathon, we Chinese always try to win at the starting line," 45-year-old Milanie Shi, who moved to Hong Kong with her 14-year-old daughter last year, said in Mandarin. "We are forced to leave due to the school pressure."

Education pressures are not only faced by students — price-insensitive households and a limited number of well-reputed teachers have created an equivalently intense competition among Chinese parents.

"It's like China's property market — demand does not end with surging prices," said Shi. "For tutoring classes, although they aren't cheap for many, the price is never the top concern for a lot of parents. If a tutoring center charges too little, they will doubt its teaching quality."

Expenditure growth in China's education sector has fueled the after-school tutoring industry to be a more than $120 billion market, with 93 percent of parents sending their children to private enrichment sessions, according to a report published by HSBC in 2017.

With such demand, supply becomes a major challenge.

"Every parent wants classes taught by the best teachers," Shi told CNBC. "I once had to set up three alarms and use different accounts in order to register certain teachers' classes. It's very hard."

Shi's efforts paid off. She said that tutoring classes at TAL were effective, helping her daughter jump to a ranking of 7th from 47th (out of 170 students) in her school within just a few months. However, exhaustion brought by intensified competition among students and parents led Shi to rethink the future of her daughter.

"I felt very upset when I saw even kindergarten kids were sitting in those tutoring classrooms," said Shi. "I want my daughter to spend more time with us, with the family. After she grows older, you would no longer be able to spend that much time with her."

Chinese authorities have been trying for years to crack down on unregulated and expensive private tutoring centers, arguing that those centers bring extra stresses to students. But those measures have proven ineffective.

Beijing sent a remarkably strong signal in March, however, with Chinese Premier Li Keqiang promising to strengthen oversight of the education sector and ease the financial and academic burden on students and parents.

That new crackdown round comes amid rising public concerns over a widening gap in education between rich families and those who can't afford private tutors. Meanwhile, a significant number of public school teachers are said to moonlight as part-time instructors at after-school tutoring centers or even set up their own private classes at home, potentially neglecting their responsibilities at school.

Such regulatory changes led TAL to shutdown several centers that didn't meet qualification standards. The company also removed some classes that were aimed at preparing students for national competitions instead of regular coursework. TAL initiated comprehensive reviews of its local teaching centers and cancelled its classes that went late into the night.

However, stricter regulation may further boost TAL's profitability, according to a market analyst.

"We expect that over 90 percent of the (after-school tutoring) market is not controlled by institutions and they are actually owned by those individual teachers at mom-and-pop workshops who don't pay taxes and don't register with local governments," said Edwin Chen, executive director and co-head of Asia Small/Mid Caps Research of UBS Securities

"Now, the government is trying to better regulate the market so entrance barriers are getting higher. (Leading institutions) are in a position to take more market share because bigger companies have bigger platforms, (and) they have the capability to invest in technology. They actually gain more competitive advantages over smaller competitors," Chen told CNBC.