China's private education firms are the latest targets of Beijing's crackdown

[NorthernVike 2,080]

Chinese officials are turning their crackdown on private business to yet another industry: education.

A slew of big Chinese education and private tutoring companies are reeling from new rules barring them from turning a profit or raising funding on stock markets, with some warning that the regulations will hurt their business.

 

The new rules, published over the weekend by China's Ministry of Education, apply to what the agency calls "online training institutions."

"Capitalized operations are strictly prohibited," the ministry wrote in its order, adding that such institutions cannot obtain financing through public markets, nor can they seek foreign capital through mergers and acquisitions. "Those who have violated regulations shall be cleaned up and rectified," it added.

The education ministry's announcement roiled Chinese markets and wiped billions of dollars off the market value of several of the country's major, publicly traded education firms in Hong Kong and New York.

China's education system is heavily competitive and exam-focused, and there have been concerns for years about student overwork. Private tutoring has flourished as families have tried to give a head-start to their children by preparing them intensively for exams. The government has in the past called for a reconsideration of the country's approach to education.

The ministry called the new rules a "comprehensive move to lower the workload and learning hours of students," and added that it wanted to "improve the quality of after-school services."

"Driven by utilitarianism and bound by capital, a large number of out-of-school training institutions in primary and secondary schools, especially those with a wide range of unqualified training institutions, have deviated from the purpose of non-profit education," said Dong Shengzu, director and researcher at the Shanghai Academy of Educational Sciences, in remarks published on the education ministry's official website.

New Oriental Education and Technology plunged nearly 50% in Hong Kong on Monday. Combined with similar losses on Friday — when reports of a crackdown on the sector first emerged — the company has lost roughly $7.7 billion dollars in market value in Hong Kong. (The stock also trades in New York, where it has suffered similarly heavy losses.)

"When the company provides educational services again, it will follow the principles and the guidelines of the order and comply with relevant rules and regulations," New Oriental said in a statement, adding that it expects the new rules "will have a significant adverse impact" on out-of-school tutoring services.

Education firm Koolearn Technology plummeted more than 30% in Hong Kong on Friday, and has lost roughly $250 million in market value since late last week.

The news shook Chinese markets more broadly on Monday, too. The Hang Seng Index fell more than 4%, its worst day in more than a year as it was dragged down by big losses for major Chinese tech stocks. The Shanghai Composite slumped more than 2%.

New York-listed stocks for Chinese education companies have also cratered. TAL Education crashed some 70% in the United States on Friday, losing more than $9 billion. Gaotu dropped more than 60% that day, erasing $1.5 billion in value.

All of those companies said they would comply with the new regulations.

Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, wrote in a Monday research note that the crackdown on education threatens to "wipe out billions of dollars by overseas investors," calling it "another ratchet higher in the regulatory risk landscape in China."

The "high level of tightening policy" had not been anticipated by markets, wrote Jenny Tsai, senior equity analyst at Morningstar, in a Monday research note.

Tsai added that education giants New Oriental and TAL would likely have to spin off some businesses to meet the non-profit requirements. She added that both education providers would also likely invest in non-academic tutoring such as art, sports and music so they could remain listed.

The education ministry's latest announcement comes as Beijing clamps down on other private industries — most notably tech, which has been rocked in recent month by fines and tough new regulations.

Foreign investors have been rattled by the pressures on Chinese tech, including moves that regulators made to investigate ride-hailing firm Didi just after its US IPO last month. The stock plunged after Chinese authorities banned the company's apps from app stores after it of violating laws around collecting and using personal information.

"While we see social merit in [the education news], we do think it has the potential to further dent foreign investors' confidence in China stocks," wrote analysts at Nomura in a Monday note. "Bruised and shaken investors are now likely to ponder which other areas could potentially become the next target of expanded state control."

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hopefully they don't come after the little guys next.  

 

[TimmySmith 2,782]

The dumbing down of China.  It's worked great for communists here in the U.S.

[titans&bucs&bearsohmy! 2,745]

24 minutes ago, TimmySmith said:

The dumbing down of China.  It's worked great for communists here in the U.S.

Not at all. This is a good move.

You have no idea how focked it is for these kids.

My students started coming to our boarding school when they were six years old. Most of them spent three years in preschool first. There are three of these schools in my building alone.

So they come to school, where they go to school from 730 am to about noon, then 200pm to about six. Then they eat dinner and go to study hall, where they have several hours of homework.

Then on the weekend they go to cram schools 8 hours each day. Same thing on all school holidays.

It's sad. The kids never get to play. There isn't a playground at school or miles in any direction. They are horribly socialized, as they never get to just hang out. Ever.

These big education companies are the worst. I used to work for one as a side gig. It's a complete joke.

And all of this is largely pointless. All they are doing is copying stuff, and memorizing things. They can't think. Their teachers can't think. And there are no standards whatsoever. The only thing that matters is keeping the parents happy. Period. 

I rarely applaud moves of the government, but this one I do. 

[TimmySmith 2,782]

18 minutes ago, titans&bucs&bearsohmy! said:

I rarely applaud moves of the government, but this one I do. 

It might be a good move, but it's not being done for the welfare of kids.  Communists see kids as useful tools and nothing more. 

[titans&bucs&bearsohmy! 2,745]

11 minutes ago, TimmySmith said:

It might be a good move, but it's not being done for the welfare of kids.  Communists see kids as useful tools and nothing more. 

What they are saying here is that they want to address concerns that poor students cannot hang because they cannot afford the extra classroom.

But yeah, you'll get no argument from me on the altruism of Beijing. 

[Voltaire 4,558]

3 hours ago, NorthernVike said:

 

Hopefully they don't come after the little guys next.  

 

You can say that again,seeing as this is how I make my living. Weekends and holidays are how I make a living, It's why I've not been terribly active here lately,, I'm drowning in work. Boy this move is surprising. Also surprising is this made enough of a splash in US news such that you'd noticed.

Looks like the big cookie cutter schools are focked. Since I don't teach the curriculum but instead focus on oral English and reading/writing, I'm hopeful that my teaching won't be affected. if we slide under the radar while the competition gets focked over, great, but I don't know that for sure, and it's not like we're strugling to grow and need the help. This is potentially disasterous. I always thought that if China focked with me too much, I'd just leave, but I just plowed my life savings into this and am finally making decent money for the first time in my life. Since I'm one of the very few foreigners in this fourth tier city, a lot of local CCP officials have their kids in my school, so we know some people, another reason that I may catch a break. I'm not counting on it though and am going to have to hold my breathe.

My wife says that this is starting in the big cities, so we won't be immediately affected with the first wave. Hopefully the plan blows up in their face. 

 

[TimmySmith 2,782]

3 minutes ago, Voltaire said:

My wife says that this is starting in the big cities, so we won't be immediately affected with the first wave. Hopefully the plan blows up in their face. 

Do you actually think rich Chinese will stop the tutoring?  This is clearly targeted at the Middle class and poor Chinese to keep them in line. Just like the libs here in the US love taxing the middle class while claiming the right doesn't want to tax the rich. 

[Voltaire 4,558]

1 minute ago, TimmySmith said:

Do you actually think rich Chinese will stop the tutoring?  This is clearly targeted at the Middle class and poor Chinese to keep them in line. Just like the libs here in the US love taxing the middle class while claiming the right doesn't want to tax the rich. 

I dislike 1:1 teaching. I'd as soon go back to doing sh*t on the downlow, as we'd done for years or, if not, leave the country. China was ever only supposed to be a place to make money. I found a nice cozy niche here doing this, but I may get pried out of it.

[JustinCharge 2,397]

3 hours ago, titans&bucs&bearsohmy! said:

Not at all. This is a good move.

You have no idea how focked it is for these kids.

My students started coming to our boarding school when they were six years old. Most of them spent three years in preschool first. There are three of these schools in my building alone.

So they come to school, where they go to school from 730 am to about noon, then 200pm to about six. Then they eat dinner and go to study hall, where they have several hours of homework.

Then on the weekend they go to cram schools 8 hours each day. Same thing on all school holidays.

It's sad. The kids never get to play. There isn't a playground at school or miles in any direction. They are horribly socialized, as they never get to just hang out. Ever.

These big education companies are the worst. I used to work for one as a side gig. It's a complete joke.

And all of this is largely pointless. All they are doing is copying stuff, and memorizing things. They can't think. Their teachers can't think. And there are no standards whatsoever. The only thing that matters is keeping the parents happy. Period. 

I rarely applaud moves of the government, but this one I do. 

idle hands are the devil's plaything.  if you socialize these kids and give them a bunch of free time, many turn into criminals.  then you get crime waves, massive sprawling slums, urban decay, etc.  keep them locked down into heavy workloads and that doesn't happen to nearly the same degree as the west.

[IGotWorms 3,313]

Darn some folks might have to try to make it here after all.

Yes I know I’m a d1ck, but they’re so fockin critical it’s hard not to get a little schadenfreude.

But really, I wish them well and hope this won’t affect them.

[TimmySmith 2,782]

The loser globalist is trying to convince everyone that what happens in China doesn't affect us when his hero and son have been bought and paid for.  And we all saw it.

[fandandy 3,311]

9 hours ago, titans&bucs&bearsohmy! said:

Not at all. This is a good move.

You have no idea how focked it is for these kids.

My students started coming to our boarding school when they were six years old. Most of them spent three years in preschool first. There are three of these schools in my building alone.

So they come to school, where they go to school from 730 am to about noon, then 200pm to about six. Then they eat dinner and go to study hall, where they have several hours of homework.

Then on the weekend they go to cram schools 8 hours each day. Same thing on all school holidays.

It's sad. The kids never get to play. There isn't a playground at school or miles in any direction. They are horribly socialized, as they never get to just hang out. Ever.

These big education companies are the worst. I used to work for one as a side gig. It's a complete joke.

And all of this is largely pointless. All they are doing is copying stuff, and memorizing things. They can't think. Their teachers can't think. And there are no standards whatsoever. The only thing that matters is keeping the parents happy. Period. 

I rarely applaud moves of the government, but this one I do. 

Thanks for sharing.  The first person I thought of when I read about this was Voltaire, as he is going legit with that school.  Hopefully, this doesn't negatively affect him.  

[titans&bucs&bearsohmy! 2,745]

1 hour ago, fandandy said:

Thanks for sharing.  The first person I thought of when I read about this was Voltaire, as he is going legit with that school.  Hopefully, this doesn't negatively affect him.  

I imagine one way or another volty will be fine. There is usually a gap between the law as written and the law as enforced that you can drive am aircraft carrier through, especially in small towns like where he is. And as he said, most of the people responsible for enforcement are his customers.