China unveiled a sweeping overhaul of its US$100 billion education tech sector, banning companies that teach the school curriculum from earning profit, raising capital or going public.
Beijing on Saturday published an array of regulations that together threaten to overturn 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, according to a notice released by the Chinese State Council.
Those in violation of that rule must take steps to rectify the situation, the country’s most powerful administrative authority said, without elaborating.
Additionally, 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 banned.
The regulations threaten to obliterate the outsized growth that made stock market darlings of TAL Education Group (好未來教育集團), New Oriental Education & Technology Group (新東方教育科技集團) and Gaotu Techedu Inc (高途在線). The new rules could also put the market largely out of reach of global investors.
Education technology had emerged as one of the hottest investment plays in China in recent years, attracting billions from the likes of Tiger Global Management, Temasek Holdings Pte and Softbank Group Corp.
In a series of statements over the weekend, all the major education companies said that they would comply with the rules and support the decisions of the Chinese Communist Party.
In a post on its official Sina Weibo (新浪微博) account, TAL said it would “fully implement the party’s education policy” and “strive to cultivate people’s talents with all-around development of morality, intelligence and physical health.”
The regulatory assault mirrors Beijing’s broader campaign against the growing heft of Chinese Internet companies from Didi Global Inc (滴滴) to Alibaba Group Holding Ltd (阿里巴巴). It stems from a deeper backlash against the industry, as excessive tutoring torments young students, burdens parents with expensive fees and exacerbates inequalities in society.
The out-of-school education industry has been “severely hijacked by capital,” according to a separate article posted on the site of the Ministry of Education. “That broke the nature of education as welfare.”
Once regarded as a surefire way for aspiring children to get ahead, after-school tutoring is now viewed as an impediment to one of Chinese President Xi Jinping’s (習近平) top priorities: halting a declining birth rate.
It is a stunning reversal of fortune for an industry that once boasted some of the fastest growth rates in the country. Alibaba, Tencent Holdings Ltd (騰訊) and ByteDance Ltd (字節跳動) were among the big names that have invested in a sector that had been expected to generate 491 billion yuan (US$76 billion) in revenue by 2024.
Those lofty expectations groomed a generation of giant start-ups like Yuanfudao (猿輔導) and Zuoyebang (作業幫). Online education platforms attracted about 103 billion yuan of capital last year alone, according to iResearch Consulting Group.
Devised and overseen by a dedicated branch set up last month to regulate the industry, the rules unveiled on 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 such as math, science and history. Classes for art or music mostly would not fall under the new restrictions.
The regulations also ban teaching foreign curricula, tighten scrutiny over imported textbooks and forbid the hiring of foreign teachers outside of China — a curb that could have severe consequences for start-ups like VIPKid that specialize in overseas tutors. The government also ordered local authorities to tighten approvals for companies providing training on extra-curricular subjects.
It is ultimately unclear how the government clampdown will turn out. Many believe that Beijing will not seek to annihilate an industry that still plays an essential role in grooming its future workforce.
For now, many investors might 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 Chinese State Council said.
Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under pressure yesterday after a report that Apple Inc is looking to shift some orders from the Taiwanese company to Intel Corp. TSMC shares fell NT$55, or 2.4 percent, to close at NT$2,235 on the local main board, Taiwan Stock Exchange data showed. Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said. “The selling was a knee-jerk reaction to an Intel-Apple report over the weekend,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to remain Apple Inc’s primary chip manufacturing partner despite reports that Apple could shift some orders to Intel Corp, industry experts said yesterday. The comments came after The Wall Street Journal reported on Friday that Apple and Intel had reached a preliminary agreement following more than a year of negotiations for Intel to manufacture some chips for Apple devices. Taiwan Institute of Economic Research (台灣經濟研究院) economist Arisa Liu (劉佩真) said TSMC’s advanced packaging technologies, including integrated fan-out and chip-on-wafer-on-substrate, remain critical to the performance of Apple’s A-series and M-series chips. She said Intel and Samsung
POWER BUILDUP: Powered by Nvidia’s B200 Blackwell chips, the data center would support MediaTek’s computing power demand and business growth, the company said Smartphone chip designer MediaTek Inc (聯發科) yesterday launched a new artificial intelligence (AI) data center with a maximum capacity of 45 megawatts to meet its rising demand for computing power required to develop new advanced chips for AI applications. The company has completed the first-phase computing power buildup at the data center in Miaoli County’s Tongluo Township (銅鑼), providing 15 megawatts of capacity to support its research and development (R&D) capabilities, despite an industrywide shortage of key components, MediaTek said. Supply constraints have plagued a wide range of key components, including memory chips, solid-state drives, power supply units and central
TRANSITION: With the closure, the company would reorganize its Taiwanese unit to a sales and service-focused model, Bridgestone said Bridgestone Corp yesterday announced it would cease manufacturing operations at its tire plant in Hsinchu County’s Hukou Township (湖口), affecting more than 500 workers. Bridgestone Taiwan Co (台灣普利司通) said in a statement that the decision was based on the Tokyo-based tire maker’s adjustments to its global operational strategy and long-term market development considerations. The Taiwanese unit would be reorganized as part of the closure, effective yesterday, and all related production activities would be concluded, the statement said. Under the plan, Bridgestone would continue to deepen its presence in the Taiwanese market, while transitioning to a sales and service-focused business model, it added. The Hsinchu
RSS