China to unveil tough rules to regulate $120b private tutoring industry

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China is poised to unveil a much tougher than anticipated crackdown on the country’s $120 billion private tutoring industry, four sources told Reuters, including trial bans on vacation tutoring and restrictions on advertising.

The new rules, which aim to both to ease pressure on school children and boost the country’s birth rate by lowering family living costs, could be announced as early as next week and take effect next month, two of the people with knowledge of the plans said.

The imposition of a trial ban on both online and offline tutoring over the summer and winter holidays in Beijing, Shanghai and other major cities, cited by the sources, goes much further than the planned measures first reported by Reuters last month.

“The new rules would be stricter than expected,” said one of the sources, a person close to regulators drafting the new rules. “The industry should be preparing for the worst.”

The trial vacation ban, which adds to plans to bar online and offline tutoring on weekends during term time, could deprive tutoring companies of as much as 70-80% of their annual revenue, two of the sources said.

The changes being drafted by the Ministry of Education and other authorities target the cutthroat tutoring market for school students from kindergarten through to the 12th grade, or K-12 pupils, an industry that has grown rapidly in recent years.

More than 75% of K-12 students – roughly aged from 6 to 18 – in China attended after-school tutoring classes in 2016, according to the most recent figures from the Chinese Society of Education, and anecdotal evidence suggests that percentage has risen.

The planned industry crackdown, which Reuters last month reported had already forced at least one major company providing tutoring services to put a billion-dollar fundraising round on ice, is being driven from the top, said three of the sources.

President Xi Jinping last week said schools should be responsible for student learning, rather than tutoring companies.

“The education departments are correcting this phenomenon,” Xinhua quoted Xi as saying.

The State Council Information Office and the Ministry of Education did not immediately respond to requests for comment.

The ban on vacation and weekend tutoring would be implemented in nine municipalities and provinces, including Beijing, Shanghai and Jiangsu, for twelve months before being rolled out across the country, one of the sources said.

“While the rules are to be adopted on a trial basis, you would be surprised if other areas don’t follow the lead and even launch tougher regulations to be politically correct,” the source said.

Weekday tutoring, which currently runs until 8-9 pm, would be restricted in the trial areas, two of the sources said.

“Excessive” online and offline advertising, in particular in the mainstream media and public places, will be banned, said two of the sources, adding that tuition fees would be tightly controlled.

All four sources declined to be named as they were not authorised to speak to the media.

New York-listed shares of Chinese private tutoring companies New Oriental Education & Technology Group, TAL Education Group and Gaotu Techedu Inc fell between 4.4% and 6.5% in pre-market trading on Wednesday.

‘CHICKEN BABY’

As incomes rise in China, well-off families are eager to see children succeed in an increasingly competitive society.

Competition is so fierce it has given rise to a popular term in parenting circles. Jiwa, or “chicken baby”, refers to anxious parents pumping energy-boosting “chicken blood” into their children by loading them up with extracurricular classes.

As well as protecting stressed students, Beijing sees the changes as a financial incentive for couples to have more children as it seeks to shore up a rapidly declining birth rate, the sources said.

The cost of raising a child in urban China, with education accounting for a big chunk of that, has deterred many would-be parents.

China‘s population grew over the 10 years to 2020 at the slowest pace in decades, the country’s latest census showed last month, raising fears its dwindling workforce will be unable to support an increasingly elderly population.

Reuters

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.