Tutoring Companies Impacted By China’s Latest Crackdown On Private Tutoring

China is going hard on the private tutoring industry, which for years has been booming and has been a darling for investors from Shanghai to New York. The private tutoring companies have a $100 billion industry in one of the world’s largest and most competitive tutoring systems.

Tutoring companies affected by new rules on private tutoring

According to sources, the clampdown will include banning trials on vacation tutoring as well as advertising restrictions. Trial vacation, alongside a bar of offline and online tutoring during weekends on term time, will severely affect tutoring companies’ revenues up to 70-80%. Some of the affected companies include Tal Education Group (NYSE: TAL), Bright Scholar Education Holdings Ltd. (NYSE: BEDU), New Oriental Education & Tech Grp (NYSE: EDU), LAIX Inc. (NYSE: LAIX), and Gaotu Techedu Inc. (NYSE: GOTU).

The crackdown will also cool China’s competitive tutoring market for kindergarten through 12th-grade students or K-12 students. According to three different sources, at least one large tutoring provider has suspended private financing round because of increased scrutiny.

New guidelines to kick in by the end of June

Sources familiar with the matter who sought anonymity told Reuters that the reforms being developed by the Ministry of Education and other agencies are aimed at before- and after-school K-12 tutoring. One source indicated that the draft guidelines might be released as early as the end of this month. On-campus academic tutoring programs, including on-campus tutoring on weekends, will be prohibited under the proposed guidelines. Equally, regulators plan to restrict off-campus tutoring, particularly for English and math, and limiting class periods on weekdays.

Last week, President Xi Jinping stated that schools should be entrusted with the learning of students and not tutoring corporations. Aside from shielding students from unfair competition, the new guidelines will provide a financial incentive for couples with more children to boost the country’s rapidly dropping birth rate.

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