Beijing’s crackdown on for-profit tutoring online has expanded to high-school education and will lead to further capital losses in the private education tech sector. The 100 billion-dollar industry has suffered significant damage from last year’s purge.
According to BloombergQuint, ed-tech companies will have to postpone their services to high school students at least until the second half of February.
A source said that the firms would have to earn approvals from related authorities to continue operations. However, there is no guarantee on how long the delay will remain. The new semester in China will begin around Feb. 21.
On Feb. 8, China’s Ministry of Education said it would instruct local governments to regulate high-school tutoring using the same regulatory system applied to K-9 education.
Businesses that teach the national curriculum for students from grades 1 to 9 have been barred from making profits, raising capital, or going public since July last year.
Beijing Business Today reported that on the online tutoring platforms managed by TAL, Gaotu Techedu Inc., Youdao Inc., and Alibaba-backed Zuoyebang, high-school classes vanished from Feb. 11.
The Zuoyebang Company, on Jan. 26, announced that all live-streaming classes on school subjects would discontinue for the winter break and that the company would issue refunds.
The new regulations could potentially wipe out more foreign investments from the online tutoring sector, which has already experienced major losses after regulations were tapped on K-9 education in 2021.
Before Beijing’s crackdown, consultancy firm Macquarie Research anticipated the sector to record $183 billion by 2023. Major names such as Alibaba, Tencent Holdings Ltd., and ByteDance Ltd. have poured money into this lucrative sector which could have produced $76 billion by 2024.
According to iResearch, online education platforms attracted approximately $16.2 billion in investments in 2020. ByteDance alone invested $625 million in ed-tech in 2020.
The sweeping overhaul, however, jeopardized the prospects. The stock of New Oriental Education and Technology Group (NYSE: EDU) dropped 86% in 2021, while that of rival TAL Education Group (NYSE: TAL) experienced an over 93% wipeout in its value since it’s all-time peak in February. Like other education firms, these two companies have managed to survive via certain temporary solutions, including expanding non-academic curriculum and offering several free-of-charge classes, laying off thousands of teaching staff and employees in the process.