Here's Why Private Tutoring in China Could See Some Big Changes

By Joshua Cawthorpe, June 18, 2021

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An article published Thursday morning by Reuters alleges that a proposal to reform China’s private tutoring industry could turn the sector on its head. 

According to the article, a source close to government regulators told Reuters that, “The industry should be preparing for the worst.”

Among the changes on the table, possibly the most groundbreaking is a trial period suspending ‘vacation’ classes. This refers to both online and offline classes offered during the weekend, which account for the vast majority of tutoring revenue. Sources suggest the trial is being considered for nine regions, including Beijing and Shanghai.

The Shandong Provincial Department of Education announced Thursday that schools would be forbidden from organizing summer courses this year or renting out classrooms and facilities for ‘cram schools.’

The reason for the decision is stated as “enriching holiday life, promoting healthy growth, enhancing practical ability, and cultivating innovative spirit” as well as epidemic prevention and control.

On June 15, the Ministry of Education established a new department tasked with regulating the USD120 billion industry, as reported by China Daily. The department will evaluate and regulate off-campus teaching hours, teacher qualifications and appropriate fees in an attempt to reduce the burden of homework and stress on Chinese students and families.

A senior researcher from the National Institute of Educational Sciences told China Daily that he believes the exam-oriented education system will need to be reformed if the demand for off-campus tutoring is to be reduced.

The push for strict regulation surfaced at the Two Sessions in March, when the private tutoring industry was described by lawmakers as “chaotic” and Chinese President Xi Jinping calling it a “social problem.” 

There are an estimated one million off-campus training companies in China, according to South China Morning Post.

The ensuing crackdown comes just months after publicly traded education firms peaked in value at the beginning of this year. Surging demand for off-campus tutoring has led authorities to take notice and, as a recent China Daily editorial stated, prevent it from becoming just a profit-making system.

The cost of raising a child in China has grown substantially in the past decade and lawmakers believe this contributes to the low birth rate. 

Following the announcement of the three-child-policy, a disappointing 3% of eligible couples applied for permission to have an additional child at the end of May, as per South China Morning Post.

Xi emphasized the need for schools to shoulder the burden of education rather than tutoring centers, according to an article released by the Xining City People’s Government. 

During an inspection tour in Qinghai earlier this month, Xi said, “The teachers in the school should take care of the basic learning of the students. Pushing education out of the school to training centers is putting the cart before the horse. The Ministry of Education is correcting this phenomenon.”

Chinese President Xi Jinping visited Qinghai in early June. Image via @People’s Daily/Weibo

Fifteen private education companies were fined RMB36.5 million on June 1 by government market regulators. The punishment cited false advertising and fraudulent pricing. Among the companies fined were New Oriental Education, Zuoyebang and TAL Education Group, China Daily reports.

Forbes asserted that the three most successful entrepreneurs in the industry had lost a combined USD27 billion in just a few months. Since peaking from late January to mid-February, Chinese education companies listed on the New York Stock Exchange have seen significant losses

According to Yahoo Finance, Gaotu (formerly GSX Techedu) saw a devastating fall of more than 90%. TAL Education shrunk by over 75% and New Oriental closed Friday 61% lower than its February 16 stock price.

Stock values of major private tutoring firms have steadily declined in recent months. Screengrab via Yahoo Finance

Previously, regulators hit four companies, including TAL, with smaller fines in April along with some preliminary rules and heavy scrutiny of marketing practices. Tutoring firms were forbidden from providing online courses and activities at night as it would interfere with students’ sleep.

In March, advertisements for a number of prominent online tutoring companies were pulled by China’s national broadcaster CCTV, Caixin reports.

The revised Private Education Promotional Law, announced in May, also sought to ban public schools and schools offering Chinese compulsory education from turning private or offering private for-profit programs.

[Cover image via @凤凰网财经/Weibo]

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