China’s ballooning edtech market is suddenly deflating thanks to new government restrictions on lucrative private tutoring companies that serve millions of the country’s children.
In mid-July, China’s government issued new regulations that drastically limit for-profit tutoring services and prohibit foreign investment in Chinese private education companies, reports Reuters.
The new rules restrict both tutoring services and the profits they generate. They limit online lessons to 30-minute sessions; impose a tutoring curfew of 9 p.m; and prohibit instruction during weekends, holidays and school breaks. Companies that offer private instruction in core subjects will have to register as nonprofits and will no longer be able to raise investment capital through IPOs or advertise their programs.
There seem to be multiple motivations for the policy shift. State-sponsored news sources describe the moves as a way to ease the pressures children feel and the financial burdens parents face in a society that prizes intense pursuit of academic achievement. That rationale fits with a suite of new policies the Chinese government has recently issued to encourage couples to have more children and therefore reverse the country’s declining birth rate.
But the crackdown on edtech also seems in line with another recent pattern in China—of a government seeking to “exert more direct influence over the private sector,” according to New York Times coverage from earlier this summer. This “clampdown on tech” has coincided with the resignation, detention and even disappearance of leaders of some leading Chinese internet companies.
Repercussions are already being felt by China’s private tutoring industry, worth an estimated $120 billion, per Reuters. Hong Kong stocks have fallen as investors sell off edtech holdings, reports South China Morning Post, and Chinese stocks listed in the U.S. have also taken hits.
The market had swollen so significantly because millions of middle-class Chinese families have been willing to invest large shares of their incomes to prepare their children to perform well on the National College Entrance Examination, known as the Gaokao, and the Senior High School Entrance Examination, known as the Zhongkao, according to a 2019 report published by RTI International and the Omidyar Network. The report pegged the average parental spending on education over the course of a child’s K-12 school experience at more than $40,000.
“Anything the parents can do to give their kids an edge, they’re going to do,” Mike Michalec, one of the report authors who works as managing director of advising firm EdTech Asia, told EdSurge in an interview.
Some successful tutoring companies started out offering instruction in person, but lately have focused on growing their online offerings, according to Michalec. That has made them more accessible and affordable to more families.
Online tutoring tools have also made it possible for companies to hire tutors from outside of China who are native English speakers. But the new government rules prohibit “overseas education courses” and also ban hiring foreign teachers who live overseas, reports JMDEDU, a Chinese education technology news outlet.
Major tutoring companies have pledged to adhere to the new policies, reports Bloomberg.