The private education sector is the latest sector affected by China’s massive crackdown on private industries.
The Chinese government has been cracking down on various sectors of its industry, including technology, cryptocurrency, property, and gaming. The most recent sector they have gone after is the private education sector, following the official announcement of the “double reduction” policy in July 2021. The policy aims to reduce the burden on students by cutting their amount of homework and drastically reducing the number of after-school tutoring classes through heavy restrictions and regulations. Specifically, the policy states that private tutoring companies will only be able to provide classes on weekdays with a limited number of hours. After its announcement, many local authorities ordered private tutoring classes offline and online to be suspended.
The industry is most likely to suffer given its potential and massive scale. In a 2020 report by Oliver Wyman, a management consulting firm, the market size for China’s after-school tutoring from kindergarten to 12th grade reached 800 billion yuan (approximately $123.7 billion) in 2019. It is predicted that the market would break 1 trillion yuan by 2025, with Covid-19 further accelerating the growth through the progress of online tutoring. In addition, according to a 2021 report by Beijing Normal University and Tal Education, this industry provided around 10 million jobs in the nation. However, all has changed after the announcement. Alan Wang, an analyst covering education from Harvest Fund Management, says that these regulations make the sector “not investable”, and expressed concern for its future, saying that companies were bracing for some regulations, but not on such scale. Millions of jobs hang at risk, as most businesses will be forced to shut down as they struggle to comply with the new policies: even the industry giants are reportedly preparing a labor cut of 30%-70%.
Parents, on the other hand, worry for their children’s future. In China, a good education plays an extremely important role in the student’s future success. Their system is known for being very competitive and tutoring outside of classrooms is a common occurrence in Chinese households. The education from kindergarten to high school leads to the infamous university entrance exam, which plays an oversized role in determining the student’s future opportunities. Wanting their children to succeed, they are willing to pay whatever price. One parent stated in an interview with CNBC that she is willing to do anything to invest in her two children’s opportunity at competing for a “very limited” high quality education in China.