China bans tutoring institutions in core school subjects from IPO, foreign M&A
Updated 23:10, 24-Jul-2021
Students after school in Guangzhou, September 25, 2020. /CFP

Students after school in Guangzhou, September 25, 2020. /CFP

China will ban all tutoring institutions in core school subjects from listing and capital operation, an official document revealed on Saturday. 

The document, jointly issued by the General Office of the Communist Party of China Central Committee and the General Office of the State Council, is the latest move the Chinese government takes to regulate its after-school tutoring industry. Concerns over the escalated scrutiny sent overseas-listed Chinese education stocks plunging on Friday.

The new regulations aim to further improve schools' educational and teaching quality, with homework assigned more reasonably and after-school services satisfying students' needs, and to comprehensively regulate tutoring businesses in after-school tutoring institutions, the document said.

It added that the government expects to effectively reduce students' burden from excessive homework and after-school tutoring, family education expenditures and the energy that education costs parents, within one year.

Relevant departments from all regions in China will no longer approve the establishment of tutoring institutions in core school subjects for students in the phase of the compulsory education, and existing institutions will be registered as non-profit institutions, the paper said. Tutoring institutions for non-core subjects will also follow strict new rules.

Under the new policy, listed companies will not be allowed to invest in tutoring institutions in core school subjects and foreign capital is not allowed to control or participate in such institutions via mergers and acquisitions, entrusted operations, franchise chains and other methods.

The document said the government will rectify those that have violated the regulations. 

To regulate the tutoring industry, the government has also banned institutions from providing tutoring on weekends, summer, winter or statutory holidays, or providing foreign curricula. It also forbade institutions from hiring foreign personnel outside China to carry out tutoring activities, according to the document.

China now has 24 listed education companies on different stock markets on the Chinese mainland, Hong Kong and the U.S. with latest capitalization in total topping 150 billion yuan ($23.14 billion) as of Friday. 

The leading tutoring services providers in the sector, New Oriental Education & Technology Group Inc. and TAL Education Group saw their U.S. shares both drop by over 50 percent on Friday, while shares of China Online Education Group, known as 51Talk, also plunged by over 40 percent. The latter focuses on one-on-one online English training with foreign teachers and has hired over 20,000 foreign teachers, according to its advertising.

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