Insight: China's private tutoring firms emerge from the shadows after crackdown

New Oriental Education & Technology

28/10/2024 02:00

* 
      China eases pressure on private tutoring following 2021
crackdown, industry sources say
    

        * 
      China has not formally acknowledged any change in policy
    

        * 
      Tutoring companies expanding, hiring thousands of
positions
    

        * 
      Shift comes as China looks to shore up struggling economy
    

  
    By Casey Hall, Laurie Chen
       SHANGHAI/BEIJING, Oct 28 (Reuters) - China is quietly
easing regulatory pressure on private tutoring operators as it
looks to revive a flagging economy, spurring a nascent revival
of a sector hit hard by a government crackdown three years ago,
according to industry figures, analysts and data reviewed by
Reuters.
    There has been no formal acknowledgement of a change in
policy. But there is now tacit consent from policymakers to
allow the tutoring industry to grow, in a pivot by Beijing to
support job creation, eight industry figures and two analysts
familiar with the developments told Reuters.
    The shift is evident in new growth among tutoring businesses
and moves by Beijing to clarify its approach, as well as in
Reuters interviews with five Chinese parents who described a
gradual liberalisation in recent months. 
    Details in this story about the relaxation of policy
enforcement and the increasing openness of tutoring
organisations' operations have not been previously reported.
Starting in 2021, a government crackdown known as the "double
reduction" policy prohibited for-profit tutoring in core school
subjects, with the aim of easing educational and financial
pressure on parents and students.
    The move wiped billions of dollars off the market value of
providers such as New Oriental Education & Technology Group
 9901.HK  and TAL Education Group  TAL.N , and led to tens of
thousands of job losses. Before the crackdown, China's
for-profit tutoring industry was valued at some $100 billion and
its three biggest players employed over 170,000 people.
    Still, the industry proved resilient, as parents like
Michelle Lee, 36, continued to seek tutoring services to give
their children a leg-up in China's ultracompetitive education
system.
    Lee, who is based in southern China, spends 3,000 yuan a
month, or about $420, on after-school classes for her son and
daughter, including one-on-one mathematics tutoring and online
lessons in English. She told Reuters that in recent months
tutoring schools had been operating more openly than they have
since 2021.
"When the policy first came out, I think those tutoring
organisations were a little bit scared, so they kind of hid,
like they would close the curtains during class," she said. "But
it seems like they don't do that anymore."
    In China's high-pressure educational environment, parents
have little choice but to rely on outside tutoring just so their
children can keep pace, Lee said, adding that she had "felt a
huge sense of failure" as she tried to support her children's
education.
    China's education ministry did not respond to questions
about its evolving approach to the tutoring industry.
    At a ministry press conference in March, Liu Xiya, a
delegate of China's legislature and president of a
Chongqing-based education group, told local media that "pain
points" in education policy were gradually being addressed.
    Lynn Song, chief economist for Greater China at ING, said
China was unlikely to admit that the crackdown "was a little too
forceful". Rather, there would be a "tacit easing back toward a
looser regulatory stance", he said.
    "The overall policy environment has shifted from restrictive
to supportive as the main goal now is stabilisation," Song said,
adding that the tutoring industry should benefit from the
broader shift.  
           
    EVOLVING ENVIRONMENT
    Two executives at large tutoring companies who deal with
regulatory issues told Reuters that government moves to ease the
crackdown had accelerated in recent months.
    Most notable was a decision in August by the State Council,
China's cabinet, to include education services in a 20-point
plan to boost consumption - a key aspect of Beijing's efforts to
fire up the economy. The move boosted stocks of listed education
companies, and came as more than 11 million university graduates
entered China's employment market.
    That announcement followed draft guidelines from China's
education ministry in February, which clarified the kinds of
off-campus tutoring that would be permitted, and its
introduction last year of an online "white list" of companies
approved to provide tutoring in non-core subjects.
In addition, inspections by local authorities of tutoring
schools have lessened considerably of late from their peak early
in the crackdown, one of the executives said.
    Both executives said the message they have received from
Chinese officials since August is that the tutoring industry
will remain tightly regulated, but with a wider pathway to
operate successfully and above-board, provided operators do not
flout restrictions on teaching core academic curriculum. They
spoke on the condition of anonymity because they weren't
authorised to talk to the media. 
Claudia Wang, who leads the Asia Education Practice at
consultancy Oliver Wyman, said that having eliminated some
low-quality players, the government was pinning hope on the
education sector to help address "super high" youth
unemployment.
    "I think that's very, very fundamental to the shift," Wang
said.
    Hiring patterns and other moves by listed education firms
point to an expansion of the industry this year.
    Active licenses for extracurricular for-profit tutoring
centres rose 11.4% between January and June, according to
research firm Plenum China.
    TAL and New Oriental have been hiring for thousands of
positions this year, according to data from their annual reports
and a Reuters review of job listings on major Chinese employment
platforms. The number of schools and learning centres operated
by New Oriental and TAL has also rebounded, according to data
from the companies and Plenum China.
    The companies' shares have traded this year at their highest
on average since 2021, though still far below pre-crackdown
levels.
    New Oriental declined to comment to Reuters about how it was
responding to the changing regulatory landscape, while TAL did
not reply to a similar request. In its annual report in
September, New Oriental noted continuing "significant risks"
from the ways in which regulations and policies related to
private education are interpreted and implemented.
    "We have been closely monitoring the evolving regulatory
environment and are making efforts to seek guidance from and
cooperate with the government authorities to comply," the report
said.
     
    CREATIVE CURRICULUM
    Another reason for the industry's revival is that it proved
impossible to eliminate. 
In practice, private tutoring operators, while diminished,
continued to exist in various forms, often redesigning courses
to skirt restrictions or advertising them under code words.
Mathematics-related courses, for example, are commonly marketed
as "logical thinking". 
    Lisa ran an English tutoring school in the eastern province
of Zhejiang that shifted its curriculum to comply with rules
that prohibit the teaching of core subjects such as mathematics
and English.
    Lisa, who declined to give her full name for fear of
official retribution, said she laid off 60% of her staff
following the crackdown. But the school maintained classes by
pivoting to teaching science-related courses in English, without
calling them English classes.
    One-on-one tutoring, meanwhile, flourished as parents who
could afford the higher prices hired tutors to come to their
homes.
    That worried parents like Yang Zengdong, a Shanghai-based
mother of two, who said the policy presented families with the
unenviable choice of paying up to 800 yuan per class for a
private tutor or investing hours each day themselves in helping
their children keep up.
    "If double reduction continues, the academic gap between
rich people and everyone else will get worse," she said. 
    "That wasn't what the policy was meant to do but that's the
reality, so of course it needs to change."

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
China's new private tutoring rules put billions of dollars at
stake    https://www.reuters.com/world/china/chinas-tal-education-expects-hit-new-private-tutoring-rules-2021-07-25/
China's rising youth unemployment breeds new working class:
'Rotten-tail kids'    https://www.reuters.com/world/china/rotten-tail-kids-chinas-rising-youth-unemployment-breeds-new-working-class-2024-08-21/
Chinese tutoring firms adapt to core subject ban with hands-on
courses    https://www.reuters.com/world/china/chinese-tutoring-firms-adapt-core-subject-ban-with-hands-on-courses-2021-08-24/
China's private tutors are back in business, gradually    https://reut.rs/4hm5KQH
Policy shift fuels slow comeback for tutoring schools    https://reut.rs/4ffnxHo
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Casey Hall, Laurie Chen and the Beijing newsroom,
with additional reporting by Ellen Zhang and the Shanghai
newsroom. Editing by David Crawshaw.)
((mailto:Casey.Hall@thomsonreuters.com;))