Education Billionaires Wiped Out as China Curbs Tutoring to Cut Kids Some Slack

The Chinese government has announced a sweeping ban on afterschool classes in order to ease the burden on students, wiping out billions of dollars from one of the country’s fastest-growing industries. 

In a Friday announcement, the government said it would ban for-profit tutoring on academic subjects such as mathematics, English, and science. Classes on these subjects will no longer be offered to children younger than six years old. Tutoring institutes will also be banned from offering classes on public holidays and during semester breaks.

The policy has threatened to upend one of the most lucrative sectors in China, where affluent families are willing to spend big money to help their children get ahead in preparing for a grueling college entrance exam and acquiring the skills they may need in the future job market.

While most students attend public schools, the intense competition has fueled a boom in private, off-campus tutoring. In big cities, children often spend their weekends attending extracurricular classes, and the tutoring companies are able to make massive profits and turn their bosses into billionaires. 

But the authorities are now accusing the industry of adding to the anxiety among parents and harming children’s development. “In recent years, a large amount of capital has flooded into the tutoring industry and started a money-burning war,” the education ministry said in a statement. “It’s against the non-profit nature of education.” 

According to the latest announcement, tutoring institutions that focus on academic subjects will be banned from going public, raising foreign capital or poaching school teachers with high salaries. Online tutoring companies are told to limit their classes to 30 minutes per session and stop their classes at 9 p.m. 

Shares of tutoring companies tanked on the news. The founders of Gaotu Techedu and New Oriental lost their billionaire statuses, according to Bloomberg, after their shares plunged by 63 percent and 54 percent in New York trading on Friday respectively. On Monday, the crackdown sparked a broader stock sell-off across different sectors in China, as global investors were again reminded of the regulatory uncertainties that have recently hit the country’s tech giants. 

Chinese parents have been complaining about growing competition in child-rearing that has caused them great financial burden and mental stress. Children are dubbed “chicken babies” for being made to go from class to class by their helicopter parents. The announcement of a three-child policy this year prompted a wave of ridicule, with many saying they are struggling to raise even one child. 

Analysts say the government expects the crackdown on off-campus tutoring to ease the childcare burden and close the education gap between the rich and the poor. 

It’s unclear how the new rules will be enforced, but many internet users have predicted that well-off parents would continue looking for alternatives, given that the competition in society is here to stay. A widely-circulated joke on social media says that with academic tutoring banned in the summer, companies will switch to offering “sports classes.” 

“But our sports teachers are all top graduates in mathematics,” the joke says. 

A 31-year-old partner at an English tutoring company in the eastern province of Zhejiang, who spoke on condition of anonymity for fear of hampering his job, said he was not concerned about losing his business, since parents still have strong demand for after-school classes. 

He said private schools might be forced to go underground, such as holding group home classes or offering one-on-one tutoring, which could even drive up tuition fees. “Policies will not work out if they go against the supply and demand in the market,” he said. 

Joe Yang, a 34-year-old parent in the eastern city of Hangzhou, said the family paid more than $3,000 a year for English lessons for his four-year-old daughter. The girl is also learning swimming and violin. 

Yang said it was good for children to start learning languages from an early age, but he did not worry about an upcoming ban on preschool English tutoring, as long as the ban applied to all the other children at the same time. 

“To some extent, the classes are to make sure she is on the same page as everyone else,” he said. “We don’t want her to be different.”