Daily Management Review

China stages crackdown on private education industry


Chinese authorities have staged a collapse of the multi-billion-dollar online education industry. The bans have affected major companies that have created a private tutoring "empire" in the country over several years, Forbes writes.

Regulators have decided to take down Chinese online education services. The industry lost about $27 billion in a matter of months. Three national companies were hit the hardest: Gaotu, TAL Education and New Oriental Education & Technology.

The former lost 90 per cent of its value due to sanctions by the authorities. The capital of Gaotu owner Larry Xiandong Chen, has fallen from $16.5 billion to $1.6 billion since the beginning of 2021. TAL Education, a holding company that provides tutoring services to primary and secondary school students, lost more than 60 percent of its value over the same period. New Oriental Education & Technology owner Minhong Yu lost $2.1 billion because of the Chinese authorities' decision.

The ruling party's action followed calls by Chinese President Xi Jinping to ease the burden on schoolchildren outside of school hours. Analysts at research firm Blue Lotus Capital Advisors in Shenzhen stress that by restricting private tutoring, the authorities are fighting fraud and abusive pricing by internet businesses.

Technology giants Gaotu, TAL Education and New Oriental Education & Technology each received maximum fines of $76,900 in April for cheating on online course prices. In early June, 15 private tutoring firms, including Alibaba-backed Zuoyebang and Tencent-sponsored Yuanfudao, were fined a combined $5.73 million.

The Chinese government's crackdown on internet businesses has been going on for months. Controversy between the authorities and entrepreneurs has intensified over Alibaba owner Jack Ma's conflict with the national IT regulator. This was followed by the disruption of the IPO of Alibaba's subsidiary, bans for hundreds of apps and services that allegedly threaten the personal data of residents. Because of pressure from the authorities, Jack Ma announced in late May that he was stepping down as president of the elite business academy he founded several years ago.

source: forbes.com