The recent announcement of sweeping new restrictions on China’s over $100 billion private tutoring industry has sent education stocks tumbling and investors reeling, led private tutoring schools to curtail expansion and lay off teachers, and left many families wondering how to obtain the extracurricular tutoring necessary for their children to succeed in China’s hyper-competitive, exam-driven educational system. Bloomberg offered an overview of the broad crackdown on an industry that has been criticized for being “severely hijacked by capital,” including a bullet-point summary of the new measures:
• Require private companies that teach compulsory school subjects to go non-profit.
• Ban them from going public or raising foreign capital.
• Ban all tutoring related to the core school syllabus during vacations and weekends — the prime hours for such companies.
• Forbid outright acquisitions.
• Banned foreign firms from acquiring or holding shares in school curriculum tutoring institutions, or using VIEs (variable interest entities) to do so.
• Those already in violation need to rectify the situation
• Forbid online tutoring and school-curriculum teaching for children under 6 years old.
• Ban teaching of foreign curriculums or hiring foreigners outside China to teach. [Source]
Although the regulatory changes were long rumored, their scale and severity dismayed many observers. A Shanghai-based private equity (PE) investor whose firm invests in online education apps for children commented that “Every company is going to take a hit with large layoffs coming. There is zero VC (venture capital) and PE investors can do at the moment. We are all waiting for death.” CDT Chinese editors quoted an anonymous industry employee’s lament on Weibo: “I just thought I was going to work. I never imagined I’d be joining up with a ‘criminal gang.’”
There has been much speculation about the underlying motives for these restrictive new policies, which emerged against a backdrop of increasingly assertive central government regulatory authority including a campaign to rein in tech companies; rising public concern about academic competition and inequality; and government attempts to encourage citizens to have more children.
A July 31 piece in The Economist linked new restrictions on the online-education business to the broader antitrust crackdown on tech giants such as Alibaba and Tencent:
[…] But in the months since then the scope of the regulatory crackdown has grown ever wider. China’s two internet giants, Alibaba and Tencent, are being worked over by the antitrust authorities. Earlier this month Didi Global, a ride-hailing service, was caught in the net just days after it listed in New York. And in the past week the education-technology industry has become a target. New regulations bar any company that teaches subjects on the school curriculum from listing abroad, having foreign investors or making profits. When it comes to teaching schoolchildren, no one should get rich. [Source]
James Palmer, writing for Foreign Policy, placed more emphasis on the social impetus and implications of the decision, as well as rising xenophobia:
It’s tempting to relate the regulations of private education to Beijing’s war on technology companies and monopolies—and regulators are certainly empowered by the government push against private business. But these new measures also reflect a widespread belief in China that the private tutoring sector has bad effects for urban upper-middle-class parents and children, both in costs for the parents and the psychological impact on children.
[…] The measures are also part of growing xenophobia in China. The Chinese Communist Party (CCP) spends a lot of time worrying about ideological education. Measures restricting the study of U.S. and world history, for example, were put in place years ago. As the CCP sees it, banning foreign curricula and foreign teachers could prevent the creeping influence of foreign ideas and discourage Chinese students from applying to overseas universities. [Source]
Commentator Chang Ping, writing for Deutsche Welle, framed the crackdown on both private schools and after-school tutoring companies as an attempt by the CCP to impose greater ideological control on the curriculum by monopolizing the educational system and reducing diversity within the educational sphere:
Social media summaries [of these new policies] have stressed the fact that students no longer need to take an English-language exam in the final year of primary school, and that “A Student Primer on Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” has become a required part of the curriculum. So which is it: is studying English putting too great a burden on students, or studying “Xi Jinping Thought”?
[…] In the absence of underlying concepts such as democracy and freedom, a system of “moral education” that purports to reduce the burden on students is groundless, a tree without roots. Beneath its pleasant guise, the government’s high-profile crackdown on off-campus tutoring institutions and private education is essentially a pretense to monopolize education and centralize brainwashing. If “Xi Jinping Thought” becomes a compulsory part of the school curriculum, then extracurricular English tutoring can be viewed as a kind of private-sector remedy. In these circumstances, cracking down on off-campus tutoring institutions and private education deprives people of their right to receive a diverse education. [Chinese]
In China Business Review, Hannah Feldshuh associated the crackdown on the education industry with the government’s ongoing efforts to increase China’s lagging birth rate:
Rising costs of living, a winner-takes-all college entrance system, and largely entrenched gender roles that place the burden on women to juggle work and family all play into Chinese millennials’ apathy toward having bigger families. In response to these multipronged factors, the government has recently turned its focus to the industries that it sees as adding to the pressures and expenses of raising children.
The education industry stands to lose the most from the government’s current approach, through impacts on personnel, direct restrictions on certain services, and potentially permanent limitations on consumption that could cripple the industry, especially foreign players.
[…] China’s after-school tutoring and extracurricular market is a large and growing sector, viewed by many as crucial to ensuring children’s long-term educational and career success. A study of China’s tutoring market estimates that the sector had more than doubled from 2011 to 2021, from RMB 203.2 billion to a projected RMB 564 billion by the end of the year. As of 2017, over 50 percent of middle and high school students enroll in after school tutoring, with 21.9 percent of elementary schoolers and 12.7 percent of kindergarten students enrolled.
In recent months, regulators have focused on means of restricting educational expenses, viewing them as key contributors to citizens’ hesitancy toward having more children. China’s after-school tutoring and extracurricular market is a large and growing sector, viewed as crucial to ensuring children’s long-term educational and career success. [Source]
Apart from the inevitable dislocations that this long list of new restrictions will bring, it remains to be seen whether they will achieve the desired policy goals or tamp down any of the economic and educational inequalities that contribute to public anger and social instability. Writing for Bloomberg, Adam Minter opined:
In late July, the Chinese government decreed that companies in the after-school tutoring industry could no longer make a profit, raise capital or go public. The goal was to reduce pressure on parents and children consumed by a fear of falling behind in China’s ultra-competitive education system. In time, officials hope, a more equitable system will encourage couples to have larger families and boost the country’s lagging population.
These are worthy goals. But the government has misdiagnosed the problem. “Cram schools” are a rational response to a system that lacks the resources to meet the needs of an ambitious middle class. A ban will in all likelihood force the private industry underground, where wealthy parents will have the means to hire tutors. That will leave middle-class parents, already anxious about the future, priced out of one of the few services that they think will boost their children’s chances of success. [Source]
The Guardian’s Helen Davidson quoted Dr. Liu Ye, a sociologist and senior lecturer in international development at King’s College London, who pointed out that the reforms do not address a state education system that remains deeply unequal and highly competitive:
The [private education] supply catered to the demand from urban families. […] Because of the one-child policy, urban families used education as an investment channel, to reproduce the privileges of cultural capital – good universities, studying abroad. They need the private tutoring [because] it’s so competitive.
[…] It’s no good isolating private tutoring if we don’t address the uneven distribution of education provision [across China] … The crackdown hasn’t been accompanied by more policy proposals to reduce unequal distribution of education provisions, resources and opportunities. [Source]
For months, China has been increasing restrictions on private companies operating in the country. Here are the industries facing new measures:
In education, measures began on Saturday barring private, for-profit tutoring companies from raising investments outside the country.
The new rules also said tutoring centers must operate as non-profit organizations. They also cannot offer subjects already taught in public day schools or hold classes on weekends or holidays.
China’s competitive higher education system has made tutoring services very popular with parents. Private tutoring is a $120 billion industry in the country and includes several companies based overseas. But to increase the nation’s slow birthrate, the government has been trying to lower the cost of raising children.
In November, China’s banking regulators put out draft rules calling for stronger controls for online lending. The company Ant Group is a major lender. Ant Group is a part of the larger Alibaba Group, a Chinese company specializing in technology, finance and online product sales.
The rules set limits for online loans between provinces and put a limit on loan amounts for individuals.
In April, the regulator demanded that Ant Group separate its payment business from its personal finance business.
Regulators have also cracked down on traditional online commerce, or product sales.
In April, the State Administration of Market Regulation fined Alibaba Group $2.75 billion. It was the company’s highest fine yet. The regulator says Alibaba had been preventing its product sellers from selling their goods on other websites.
The regulator has also fined smaller companies for their practices related to consumer rights and labor.
In May, it fined the company JD.com 300,000 yuan for publishing false information about its food products. JD.com is a major competitor of Alibaba.
This week, the regulator ordered China’s food drop-off companies to provide better protection for workers.
In June, the Cyberspace Administration of China, or CAC, told top ride-sharing company Didi Chuxing to stop taking new users.
At first, the regulator named violations of consumer privacy as a reason for barring new riders. Later it put out separate draft rules for other Chinese companies to run a security check before listing stocks overseas.
A CAC investigation led to a fine of 500,000 yuan for Didi and other companies for not reporting their takeovers of smaller companies.
In May, three financial regulators widened rules on China’s cryptocurrency industry. They barred banks and online payment companies from use of cryptocurrency for payment or legal settlement.
They also barred companies from providing exchange services between cryptocurrencies and national moneys, among other rules.
In the following weeks came measures from provincial governments to prevent bitcoin mining.
Those measures caused a series of mining closures around the country. Chinese newspaper Global Times predicts that 90 percent of mining operations will soon close.
On Friday, China’s housing ministry and seven other regulators told the property management industry to “improve order.”
China’s economy has improved after a drop in 2020 due to the coronavirus pandemic. Officials have increased efforts to stop real estate companies from borrowing too much money this year.
Other regulatory measures include borrowing limits for property developers and limits on property loans from banks.
So, what might come next?
Some experts say the gaming industry is next to face tough regulations. China’s central government has continued to express concern about gaming addiction among young people.
The government will likely target the many games being published without official permissions, or ones that misuse user information. That prediction comes from Rich Bishop. He is a chief executive of the Beijing-based app publisher AppInChina.
In healthcare, last month the State Council urged a reduction in medicine prices for 2021. It also demanded changes to the country’s complex healthcare system.
I’m Alice Bryant.
Reuters news agency reported this story. Alice Bryant adapted it for Learning English. Susan Shand was the editor.
Words in This Story
tutoring – n. the act of teaching a single student
draft – n. a version of something (such as a document) that you make before you make the final version
province – n. any one of the large parts that some countries are divided into
fine – v. to make someone pay an amount of money as punishment for breaking the law
consumer – n. a person who buys goods and services
cyberspace – n. the online world of computer networks and the Internet
stock – n. a share of the value of a company which can be bought, sold, or traded as an investment
cryptocurrency – n. a form of digital money that is not regulated by a central bank and whose records are stored in an encrypted computer database
bitcoin mining – n. the process of creating new bitcoin by solving a complex mathematical puzzle
real estate – n. property consisting of buildings and land
addiction – n. a strong and harmful need to regularly have something (such as a drug) or do something (such as gamble)
app – n. a computer program that performs a special function