China’s private tutoring firms can’t catch a break
A new set of rules for education and tutoring companies brings no respite for the once-booming sector, which has been suffering since a government crackdown began in 2021.
New regulations published by China’s Ministry of Education (MOE) last week impose new restrictions on already-battered private tutoring firms, which had enjoyed a decades-long boom until a government crackdown in 2021 nearly destroyed the industry.
The latest set of rules, drafted by the Ministry of Education and 13 other government and Party organs, contain further restrictions on the behavior of private education firms, including ending in-person class sessions by 8:30 p.m. and online classes by 9 p.m., while also limiting onetime fees to 5,000 yuan ($725). Reflecting efforts to make education in China more holistic and less focused on test results, the rules also reiterate that private firms must not provide tutoring in compulsory subjects taught in China’s public education system.
The new rules also require prices for educational services to be in accordance with “reasonable market signals,” and to be transparent. In addition, the regulations empower local governments to implement price controls, and tutoring firms will be required to meet certain security standards, such as audio and video surveillance systems for offline educational sites, increasing the costs of running private education operations.
The already-suffering share prices of prominent Chinese private education firms dropped in response to the news, with U.S.-listed TAL 好未来 and New Oriental Education 新东方 shares losing more than 30% and 12% respectively over a single day last week.
Public school service providers also targeted
The new rules also regulate public educational institutions, and push them to continue reducing the “two burdens” as outlined in the original 2021 policy, which kicked off the sweeping crackdown on private tutoring firms.
In addition to the new rules regulating private education firms, the Ministry of Education published industry standards in December that govern the use of online platforms for educational purposes in China’s public school system. The regulations aim to ensure companies comply with data security standards. While the rules don’t exclusively apply to private tutoring firms, companies that provide online services for China’s public school system could still fall under the purview of the regulations. Companies involved in software used by educational institutions, including Tencent Cloud Computing, Ali Cloud Computing, and Beijing Yiyou Education, cooperated with the government in drafting the rules.
China’s education technology firms were at one point global industry leaders, but have been severely hobbled since Beijing began restricting their activity in September 2021 as part of its common prosperity campaign aimed at alleviating severe inequalities. While many of the private education firms have tried to begin pivoting into other lines of business, such as selling products via livestream ecommerce or providing government employees with training, none have come close to restoring themselves to their former glory.
Still, not all of the signals to private education firms emerging from Beijing recently have been negative. In recent months, officials have unveiled new efforts to support vocational education, resulting in a sharp increase in share prices for certain educational and occupational training software firms.
