Head of Chinese school operator Yuhua demands reversal of ban on M&A deals that has crippled stock prices and ‘threatens growth’
- Li Guangyu, chairman of Hong Kong-listed Yuhua Education, calls for the removal of a clause in a new draft law that restricts schools’ expansion through M&A deals
- In a rare move, he addressed his concerns directly at lawmakers at Beijing’s annual National People’s Congress
The chairman of one of China’s largest private school operators has slammed a controversial new law that is likely to crimp the expansion of schools, and has already battered their stock prices, during his speech to legislators at the country’s main political event of the year.
Li Guangyu, chairman and founder of Yuhua Education – which runs 29 schools from kindergartens to colleges across China – called for the removal of a clause in a draft law that would ban private schools from expanding by acquiring not-for-profit schools.
The release of the draft legislation in August, along with a ban on kindergartens raising funds in capital markets announced a few months later, has pushed Chinese education stocks off a cliff, as investors panicked over the prospect of stunted growth under the tightened regulation.
Beijing has not explained the reasoning behind the clause but it may stem from concerns that fast-expanding schools are putting profit before teaching, according to a report by Guosen Securities released in August. Companies could also take on too much debt to acquire schools and compromise the teaching quality, which would lead to social unrest.
It provides a clear demonstration of how a sudden policy change by Beijing can upend an industry overnight, as has previously happened in sectors like online gaming and pharmaceuticals.