China Cracks Down On $120 Billion Private Tutoring Industry

Chinese authorities are introducing new regulations for the nation’s $120 billion private tutoring industry.

In the interest of reducing costs for families, the Chinese Communist Party banned for-profit tutoring. Previously, parents solicited tutoring services throughout a child’s primary and secondary education to prepare them for the National College Entrance Examination — also known as gaokao — which determines whether a Chinese student is eligible for undergraduate education. 

Reuters reports:

The news sent shockwaves through the sector and parents struggled to understand how exactly the move would impact their children in a highly competitive education system. Under the new rules, all institutions offering tutoring on the school curriculum will be registered as non-profit organisations, and no new licences will be granted, according to an official document.

The new rules will result in existing online tutoring firms being subjected to extra scrutiny and after-school tutoring will be prohibited during weekends, public holidays and school vacations, the document said.

China’s for-profit education sector has been under scrutiny as part of Beijing’s push to ease pressure on school children and reduce a cost burden on parents that has contributed to a drop in birth rates.

Two months ago, the Chinese government revealed that it would allow parents to have up to three children — an increase from the previous two-child policy, which superseded the decades-long one-child policy.

The New York Times explained:

The announcement by the ruling Communist Party represents an acknowledgment that its limits on reproduction, the world’s toughest, have jeopardized the country’s future. The labor pool is shrinking and the population is graying, threatening the industrial strategy that China has used for decades to emerge from poverty to become an economic powerhouse.

After Chinese authorities announced the new tutoring regulations, private education businesses were sent reeling. Reuters reports that China’s education industry subindex plummeted by 14%. Meanwhile, shares for TAL Education group — which are available on American exchanges — plummeted from $20.52 on July 22 to $4.69 on July 26.

Studies indicate that some Chinese parents may spend between $17,400 and $43,500 per year on extracurricular tutoring — three times the nation’s median income. In Beijing and Shanghai, roughly 70% of primary school students receive tutoring.

Other surveys reveal that the average Chinese student spends three hours per day completing homework assignments — three times as much as their counterparts in France, four times their counterparts in Japan, and twice the global average.

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