Education

A new field

New Oriental pivots to agricultural e-commerce

Yu Minhong-w

Yu: now contemplating rivers

During a public event in 2016, two of China’s most outspoken businessmen challenged each other on a stage. “I am sure Alibaba will still be around in 10 years. But I am not so sure about 100 years,” warned Yu Minhong, founder of the country’s leading provider of private education, New Oriental.

Yu was questioning whether Alibaba’s e-commerce empire would endure for the 102 years envisaged in Alibaba’s mission statement’.

“I am sure we will still need education in 100 years. But I am not so sure about New Oriental,” Alibaba boss Jack Ma countered sharply.

Since then both tycoons have suffered setbacks, following a government crackdown on a variety of internet-related sectors, although Ma’s remark about New Oriental’s longevity looks the more accurate of the predictions right now.

As we reported in WiC551, the authorities have banned a wide range of after-school tutoring services, seeing the likes of New Oriental as detrimental to the domestic education system. The abrupt changes have been devastating for a high-growth sector that has attracted billions of yuan in investment in recent years. New Oriental has seen its market value dive by more than 80% since July to less than $4 billion and last week it announced that it would drop all ‘K-9’ tutoring services for academic subjects (K-9 covers the years of compulsory education in China) by the end of this month, an area that was its bread-and-butter business.

“The era of private tutoring has ended,” Yu acknowledged on his WeChat account.

As part of the revamp he also announced that New Oriental would close more than 1,500 branches, although he is promising to refund tuition fees to customers and pay compensation to staff.

In another announcement that drew appreciative comment online, Yu said his firm would donate 80,000 of its desks and chairs to schools in rural areas.

The gentlemanly ‘goodbye’ could be part of a strategy to get back into regulators’ good books, in the hope that the policy headwinds change direction. According to the Wall Street Journal, the government plans to issue 12 new licences for after-school tutoring firms, although the companies will be required to run as non-profits.

Born in 1962 in rural Jiangsu province, Yu launched New Oriental in 1993 as way of preparing students to sit entrance exams like GRE and TOEFL for foreign colleges. The cramming centres were at the forefront of an era when studying abroad was seen as a path to a prosperous career.

Yu’s story even inspired the 2012 movie American Dreams in China.

Now the tycoon seems prepared to go back to his rural roots, literally, in a bid to remake his company. The plan is to reinvent New Oriental as a “major agricultural platform” that helps China’s farmers to sell more of their goods. “My life was spent in the countryside until I was 18 and I have grown every single one of the farm products that can be grown in my hometown,” Yu explained of the new business idea. Hundreds of his employees will switch career path from teaching to e-commerce sales as part of the changes, which Yu presented as an effort to support President Xi Jinping’s strategy of rural revitalisation.

Livestreaming – as readers of WiC will know – is regarded as a lucrative channel for companies to do business with huge followings of customers. Plenty of movie stars and high-profile entrepreneurs have also joined the fray in recent years.

“Some tend to equate livestreaming e-commerce as a route to making quick money,” ThePaper.cn noted of Yu’s strategic shift. “But as long as it is legal, outsiders should not be overly harsh on which path New Oriental has decided to take next.”

Critics have questioned whether Yu can lead such a radical reinvention of his 28 year-old firm. But Yu himself sounds undaunted, posting video online of a visit to a picturesque river. “Just listen to the sound of the [flowing] water. My heart is calm,” he claimed of the riverside scene. The bucolic setting didn’t convince some of the more sceptical netizens, however. “Take care,” one of his fans responded. “Please don’t jump into the water,” another added.


© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.