Shares of the Chinese online teaching companies have drastically fallen after Beijing deprived them of the ability to make a profit by teaching core subjects.
Beijing’s new notice also aims to strongly limit foreign investment in the ed-tech industry.
Why The Shakeup?
A major policy change has been brought in place as authorities plan to reduce the financial pressures of raising a child in China after the country recorded a low birth rate.
It is one of the largest shake-up in the country’s private education sector worth $ 120bn (£ 87bn).
Under the guidelines, issued jointly by the General Office of the Communist Party of China Central Committee and the General Office of the National Council, all educational institutions in schools will be registered as non-profit organizations.
New Rule
The new rules state: “Curriculum subject-tutoring institutions are not allowed to go public for financing; listed companies should not invest in the institutions, and foreign capital is barred from such institutions.”
The statement said the move was aimed at “to ease the burden of excessive homework and off-campus tutoring for students undergoing compulsory education.”
News of this shake-up have sent the prices of Chinese private ed-tech companies in a free-fall.
In Hong Kong trade, education companies such New Oriental Education & Technology, Koolear Technology Holding Scholar Education and China Beststudy Education dropped by 47% on Monday.
Stocks Of Ed-Tech Companies Plunge
On Friday in New York, shares of TAL Education Group fell more than 70%, while Gaotu Techedu lost 63% of its market value.
The announcement that ed-tech platforms will be barred from making a profit comes at a time when Chinese authorities are already cracking down on various companies including the Didi ride sharing app and Tencent’s music streaming platforms.
Last week, China’s Internet service provider, Cyberspace Administration of China (CAC), ordered some of the country’s largest online forums to remove child pornography and penalized them as well.
