Author： EnglishTeacher 2021-07-26
China unveiled a sweeping overhaul of its $100 billion education tech sector, banning companies that teach the school curriculum from making profits, raising capital or going public.
Beijing on Saturday published a plethora of regulations that together threaten to up-end the sector and jeopardize billions of dollars in foreign investment. Companies that teach school subjects can no longer accept overseas investment, which could include capital from the offshore registered entities of Chinese firms.
In addition, listed firms will no longer be allowed to raise capital via stock markets to invest in businesses that teach classroom subjects. Outright acquisitions are forbidden. And all vacation and weekend tutoring related to the school syllabus is now off-limits.
Devised and overseen by a dedicated branch set up just last month to regulate the industry, the rules unveiled Saturday were couched in general terms that could be applied broadly to common practices throughout the industry. The new regulations are focused on compulsory subjects, meaning critical material like math, science and history. Classes for art or music mostly would not fall under the new restrictions.
Among other things, they also ban the teaching of foreign curriculums, tighten scrutiny over the import of textbooks and forbid the hiring of foreign teachers outside of China -- a curb that could have severe consequences for startups like VIPKid and 51Talk that specialize in overseas tutors. The government also ordered local authorities to tighten approvals for companies providing training on extra-curriculum subjects.
New Regulations for China’s Education Sector:
·Companies and institutions that teach the school curriculum must go non-profit
·Such institutions cannot pursue IPOs, or take foreign capital
·Listed companies will be prohibited from issuing stock or raising money in capital markets to invest in school-subject tutoring institutions, or acquiring their assets via stock or cash
·Foreign firms are banned from acquiring or holding shares in school curriculum tutoring institutions, or using VIEs (variable interest entities) to do so. Those already in violation need to rectify the situation
·All vacation and holiday cirriculum tutoring is off-limits
·Online tutoring and school-curriculum teaching for kids below six years of age is forbidden
·Agencies cannot teach foreign curriculums or hire foreigners outside of China to teach
It’s ultimately unclear how the government clampdown will turn out -- many believe Beijing won’t seek to annihilate an industry that still plays an essential role in grooming its future workforce.
For now, many investors may choose to err on the side of caution. The government’s desire to assert control over the economy and one of its most valuable resources lies at the heart of recent regulatory clampdowns on online industries. Companies that operate as internet platforms have come increasingly under scrutiny because of the reams of data they collect, stirring government concern over issues of privacy and security.
Online tutoring agencies will also be forbidden from accepting pupils under the age of six. To make up for the shortfall, China will improve the quality of state-run online education services and make them free of charge, the State Council said.
“All regions can no longer approve new subject-based off-campus training institutions for students in the compulsory education stage, and existing subject-based training institutions are uniformly registered as non-profit institutions,” according to the State Council notice.