Located in close proximity to some of the best schools in Beijing, the Huangzhuang area in Haidian district bustles with activity on any normal day. Home to at least 500 tutorial centres and crammers, it was known for its traffic congestion as a steady stream of students turned up at classes designed to groom them for prestigious schools in the capital city. Parents saw the place as “the Mecca for education”, while businessmen scrambled to cash in on a Chinese culture obsessed with academic success.
However, a mandate from the Beijing municipal government on March 10 seemed to stymie some of Huangzhuang’s appeal. Off-campus lessons, which have been suspended since the onset of the Covid-19 outbreak last year, were told to remain so until further notice. In addition, their operators were told to prepare for ambush-style inspections, with the local authorities ramping up the largest crackdown on the after-school education sector since 2018.
AI Caijing, an online media outlet, suggested that the latest clampdown is set to target companies without certificates of registration and those which misappropriate funds.
“All off-campus education providers will have to sign a contract with banks, such that their tuition fees [held in an escrow account] cannot be withdrawn in advance,” proclaimed a government notice seen by an industry insider.
At first glance the rationale was the need to plug a loophole that makes it difficult for consumers to retrieve payments in the event of a dispute. But industry commentators believe the scope of the campaign will be much wider and deeper.
Potential actions range from banning private classes in some subjects for six year-olds (or under) and barring commercial education providers from placing advertisements in state media. The underlying philosophy is to work towards the goal of easing excessive pressures on school-aged children that sees them studying around the clock (see WiC524).
The news roiled the shares of a number of off-campus education providers. Since last Friday GSX Techedu’s New York-listed shares have lost 52% in value (though this was partly due to the current sell-off relating to hedge fund Archegos), while New Oriental and TAL Education dropped 11% and 14% respectively during the same period.
Speculation over regulatory tightening in the sector has been gaining traction since last month’s Two Sessions, the annual gathering of Chinese lawmakers, during which President Xi Jinping highlighted the need to weed out undesirable behaviour. “The disorder among tutorial centres is an entrenched malady,” warned Xi, noting that parental fixation on helping their kids get a head start on their peers needs resolving.
The following weeks saw the People’s Daily publish four op-eds slamming the industry. A widespread problem that commentators called attention to was the practice of pushing K-12 students (kindergarten to age 18) to cram ahead of the curriculum, along with intense examination drills. Six year-old grade-one students, for instance, are being coached on their essay writing skills. Higher graders were given reductive courses that repackaged the study of mathematics into 985 learning points. “I am worried that all my kids will acquire is simply examination skills but not the ability to think critically,” was the view of a parent surnamed Jiang, who sat in on a tutorial lesson at one such centre.
Worse, the heavily concertinaed courses guided by these off-campus schools – be it bringing forward advanced materials or compressing the body of knowledge – risks killing student interest in learning, noted Sun Dongliang, a teacher at the publicly-funded Shenzhen Experimental School.
Another issue at these centres is underqualified teachers. It is not unusual for crammers to advertise their courses as being taught by “celebrity tutors”, referring to those graduating from top universities. However, in some cases the teachers are less qualified than claimed. In fact, a lot of them are assessed mostly on their ability to retain students. As a result, more importance has been attached to their sales and marketing skills than teaching ability.
More alarming is that the off-campus education sector has increasingly appeared to be a breeding ground for fraud and financial woes.
Yousheng Education Technology, a major tutorial chain with 1,200 teaching centres, sparked a storm of protest in October after its unanticipated shuttering left many parents financially burned. One family reportedly lost as much as Rmb400,000 ($61,138) that it had prepaid for classes. Yousheng, facing a mountain of debt, failed to provide compensation.
Two months later Xuebajun, a long established one-on-one tutorial provider, also experienced a cash crunch, despite having reported tens of millions of yuan in monthly revenue. Some parents suffered major losses as they were often incentivised to bulk-purchase tutoring classes in the hundreds through credits and instalment programmes.
In an article headlined “For education, or for profit?” an online commentator traced the ills of off-campus education back to its nakedly commercial nature. Last year the sector attracted Rmb50 billion in financing, topping the total tally for the prior 10 years, thanks to a surge in interest from venture capitalists and corporate investors (see WiC517). In their chase for growth, many tutorial school operators raced to acquire students through aggressive advertising, with some of the new entrants offering classes at a loss in the hope of gaining market share.
So, what are the potential policy responses? One industry observer suggests establishing a dedicated watchdog and enacting clear rules to govern the operations of the off-campus education providers, including their curriculum, tutor qualifications, promotional material and finances.
Hu Wei, a delegate of the Chinese People’s Political Consultative Conference, proposed at the Two Sessions that the government itself purchase services from the off-campus providers for state schools so that the crammers can in turn provide more complementary lessons and shift their focus away from examination instruction.
There are also calls for reform of the country’s heavily exam-oriented education system, giving a greater emphasis in awarding final grades to progressive assessments and class work. The aim would be to strike at the root of the problem: cut-throat competition among pupils and grade obsession among their parents.
The policy headwinds have had a dampening effect across all the listed companies in China’s education sector. First High-School Education Group, the country’s third-largest private high school operator by student enrolment, saw its recent debut on the New York Stock Exchange end with a 12% share price decline. This is despite the Kunming-based company – with a market capitalisation of $260 million as of early last month – logging steady growth since 2017. For the first nine months in 2020, it recorded a 3.5 times increment in net profit to Rmb34 million on a 31% jump in revenue to Rmb216 million. It operates 19 schools in various Chinese provinces.
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