China’s largest education firm continues dismantling its business
An online tutoring subsidiary of New Oriental, China’s most famous education company, is closing its elementary and middle school courses in the wake of new bans on for-profit classes.
Ever since China ordered after-school tutoring companies to go nonprofit or cease operations, it’s been a matter of time before firms complied:
- Koolearn, owned by New Oriental Education, will end K-9 tutoring for core academic subjects, accounting for some 40% of the company’s revenue, by December.
- High school tutoring was untouched by the announcement, but is likely to follow close behind, as are closures of other New Oriental departments.
- The parent company last month warned of 40,000 layoffs and a gradual end to primary and middle school operations this fall.
The context: Founded by the rags-to-riches son of illiterate parents, New Oriental was once the poster child for Chinese self-made success, even inspiring a movie called American Dreams in China.
- Now, all that is doomed. The next challenge is to rebuild as the company and competitors study up on the kind of educational services Beijing wants.
- Vocational education and language training are two possibilities. But can firms manage the pivot, or make enough profit in a much smaller market?
What’s next: Other firms, including U.S.-listed TAL Education Group and Gaotu Techedu, will likely make similar announcements soon. OneSmart Education’s bankruptcy earlier this month shows what could happen if they fail to adapt.
