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Beijing’s overhaul of the off-campus education market – long considered essential for students to succeed in Chinese school examinations – has sent dozens of publicly listed education technology stocks tumbling in Shanghai, Hong Kong and New York. Photo: Shutterstock

Chinese provinces roll out specific measures targeting off-campus tutoring providers amid Beijing’s crackdown

  • The provincial governments of Shaanxi and Guangdong have initiated specific regulations for the off-campus education market, following the State Council’s lead
  • Local authorities in those two provinces said they will supervise how off-campus tutoring providers refund customers for unused courses
Local governments across China have started to roll out measures targeting off-campus tutoring providers in their jurisdiction, moving on the back of Beijing’s sweeping crackdown on the sector.
Northwest China’s Shaanxi province and the southern coastal province of Guangdong recently initiated specific regulations covering the off-campus education market, following the new policy promulgated by the State Council.

Off-campus tutoring providers in Shaanxi were directed to immediately stop offering K-12 – referring to kindergarten to 12th grade – training courses on subjects in the official school curriculum during the summer holiday, according to a statement published on the local government’s website on Wednesday. Shaanxi has set up a hotline to report violations.

In addition, the local government has launched a rectification campaign to investigate and punish those violating its specific regulations on this sector.

In Guangdong, the provincial government issued regulations that forbid off-campus tutoring providers from disclosing the personal information of students and parents, and prevent marketing of their services via phone calls and text messages, according to a statement on Monday.

Before Bejing’s crackdown, China’s K-12 off-campus tutoring market was forecast to reach 730 billion yuan in 2021.

Local authorities in those two provinces said they will supervise how those institutions refund customers for unused courses and handle any disputes during that process. Both provincial governments also vowed to help affected off-campus education institutions during this transition to “maintain social stability”.

Those moves have come amid a clampdown on a sector that was forecast to be worth 730 billion yuan (US$112.9 billion) this year, up from 400 billion yuan in 2020, according to estimates by the National Institute for Education Sciences, consultancy Oliver Wyman and TAL Education Group.

The State Council’s policy, which was formally released on July 24, indicated that companies operating education technology platforms, or services that provide online education, will no longer be allowed to raise capital through initial public offerings. Listed companies and overseas entities are also barred from investing, or acquiring stakes, in off-campus education firms that offer courses covering school curriculum.

That overhaul of the sector – long considered essential for students to succeed in Chinese school examinations – has sent dozens of publicly listed stocks tumbling in Shanghai, Hong Kong and New York. It also resulted in the collapse of 76 per cent of China’s off-campus tutoring market, according to analysts at Goldman Sachs.

China’s private education industry scrambles for pivot after crackdown

Beijing’s new policy has put some prominent companies in the sector on edge. New York-listed Gaotu Group, formerly known as GSX Techedu, plans to close 10 out of its 13 education centres across the mainland, one source said.

The Beijing-based company is also laying off around one-third of its employees, estimated to be more than 10,000 people, according to a report by Chinese daily newspaper 21st Century Business Herald.

The company “can’t do anything to change what is being changed externally”, Gaotu founder and chief executive Larry Chen Xiangdong, told 21st Century Business Herald. Chen also indicated that off-campus tutoring providers will have 70 per cent less time to schedule courses when they are banned from operating on the weekends and during holidays.

China’s Big Tech sector has been making large bets on off-campus education services for many years. Tencent Holdings has invested in start-ups like Yuanfudao, Baijiayun and Huohua, while Alibaba Group Holding, owner of the South China Morning Post, joined a US$1.6 billion funding round for Zuoyebang, an online education firm incubated by search giant Baidu.

Chinese parents are hanging on to after-school tutoring amid crackdown

“The pressure [to give children better education] is likely to become a major factor … in the country’s efforts to rectify the education sector,” said Chen Liteng, an analyst at private consultancy China E-Commerce Research Centre.

Still, Chen suggested that the affected off-campus education providers consider a change in their operations. He said vocational education, education information services and intelligent education hardware are some of the options available for them.

TikTok owner ByteDance, for example, formed its Dali Education subsidiary last October and introduced a smart lamp for parents to make video calls via the device when their children do their school assignments at home.

Additional reporting by Coco Feng.