Why China’s cram school crackdown is a welcome and needed reform
- Wall Street investors surprised by Beijing’s regulatory changes have only themselves to blame for not heeding the years of complaints and discussion around the sector
- China is no democracy, but its policymaking process is transparent and follows a clear pattern, and its policies largely benefit the people
One morning five years ago, Shenzhen-based businessman Zhang Hua took his 11-year-old daughter Emma to school. Emma was sleep-deprived and grumpy. “I know you have lots of unfinished homework. Let’s get it done during the weekend. Just be happy,” he said.
“How can I be happy without top scores? They are the only thing that matters at school!” Emma replied.
Wall Street should take note that the ban has been warmly received by the public. If their beef is with Beijing’s regulatory opacity, they only have themselves to blame.
As early as 2018, President Xi Jinping had warned about regulatory intervention. In his book The Governance of China, he said excessive after-school tuition was causing too much distress to students, parents and the formal school system.
Additionally, the off-campus training sector is heavily commoditised. The way they have to operate – via heavy marketing and fee cuts – means they will never make a profit.
China is no democracy, but its policymaking is transparent and follows a clear pattern. First, there are noisy discussions in the media that might last several years. Then, some noteworthy academic or official will propose a regulatory change. Finally, one day a discussion paper or set of official guidelines will be released.
Is the regulatory overhaul an assault on free enterprise? I think not. Big Tech as a whole has long engaged in monopolistic behaviour in China. One only has to browse the media to get a taste of popular disenchantment and anger.
Some Western observers attribute the high approval rating of the Chinese government to propaganda and brainwashing. There might be elements of truth to that claim, but the dominant reason is that Beijing’s policymaking, by and large, benefits the public. As Ray Dalio of Bridgewater noted in a blog post on July 30, capital markets are just not at the centre of China’s policymaking.
Joe Zhang is co-chairman of SBI China Capital