New Regulations on After-School Tutoring in China – $86 Billion in Market Value Lost since February
China Tightened Regulation on After-School Tutoring Institutes with A New Supervision Department
Around two weeks after fining 19 educational organizations for deceptive marketing, China’s Ministry of Education announced the establishment of a special department to monitor after-school tutoring institutions on June 15, 2021.
According to the Ministry, the new department will supervise after-school tutoring institutions that provide training for preschool kids and K12 students, focussing on the following aspects:
- Setting up standards for the content of after-school tutoring classes
- Limiting the duration of both online and offline after-school tutoring classes
- Verifying the qualifications of tutors in after-school tutoring institutions
- Setting up measurements of fees charged by after-school tutoring institutions
- Regulating advertisements of after-school tutoring institutions
Following the news, stocks of leading education companies plunged and over $86 billion market cap of top 5 companies have been wiped out since February 2021. Here is an overview of the price and market cap between February and June 2021.
Price
| Company | Feb 15, 2021 | June 15, 2021 | June 17, 2021 | Drop rate* |
| New Oriental Education & Technology Group Inc. (EDU) | $19.28 | $9.55 | $7.39 | -22.6% |
| TAL Education Group (TAL) | $90.15 | $28.61 | $21.03 | -26.5% |
| GSX Techedu Inc. (GOTU) | $103.27 | $15.63 | $12.43 | -20.5% |
| Youdao, Inc. (DAO) | $32.5 | $25.62 | $21.78 | -15.0% |
| China Online Education Group (COE) | $24.35 | $10.12 | $9.15 | -9.6% |
* Drop rate is calculated from June 15, 2021 to June 17, 2021
Market Cap
| Company | Feb 16, 2021 | June 15, 2021 | June 17, 2021 | Lost* |
| New Oriental Education & Technology Group Inc. (EDU) | $33.49B | $16.23B | $12.98B | -$20.51B |
| TAL Education Group (TAL) | $52.54B | $18.60B | $13.30B | -$39.24B |
| GSX Techedu Inc. (GOTU) | $27.67B | $4.01B | $3.21B | -$24.46B |
| Youdao, Inc. (DAO) | $4.25B | $3.24B | $2.75B | -$1.50B |
| China Online Education Group (COE) | $0.55B | $0.22B | $0.19B | -$0.36B |
| Total | $118.5B | $42.3B | $32.4B | -$86.1B |
* Lost of market cap is calculated from Feb 16, 2021 to June 17, 2021
After-school tutoring institutes in China
Until the end of 2018, there were over 400k after-school tutoring institutions in China. And over 75% of K12 students have attended tutoring centers (also called after-school training institutions/off-campus training institutions) after school or in winter/summer vacations. In Beijing and Shanghai, this figure is greater.
Concerned parents send their children to after-school tutoring institutions to get extra training in the same subjects as in school, including Math, Chinese and English to improve the children’s exam performances, especially in the National College Entrance Examination (or Gaokao in Chinese) and Senior High School Entrance Examination (or Zhongkao in Chinese) in the test-driven system.
According to some reports, the average family expenditure on tutoring for a child in 2016 was around 120,000 Chinese Yuan (US$17,400). K12 students typically spent an average of 50 minutes per day on weekdays and 120 minutes on weekends at after-school tutoring centers in 2015. And the figures are believed to have continued to rise over the past six years.
Detailed regulations on after-school tutoring institutions
Many provincial ministries of education have introduced detailed regulations to the central government since March 2021. We will update this article once more detailed regulations are released. Although many similar regulations have been introduced for after-school tutoring institutes since 2018, the market has grown rapidly during these years.
About after-school tutoring fees
Beijing Municipal Education Commission, in cooperation with the People’s Bank of China and the Beijing Office of the China Banking and Insurance Regulatory Commission, announced on May 21, 2021, the measures on the collection of fees by after-school tutoring institutes. According to the measures, fees should be managed and supervised by a designated bank together with financial supervisory institutions. Companies should not charge for tutoring of more than 3 months or 60 credit hours in advance.
About after-school tutoring time duration
The Minister of Education restricted the end time of after-school tutoring, which is no later than 8:30 pm. Regulations of protecting minors in schools indicate that schools are not allowed to provide after-school tutoring during public holidays and in some cities, after-school tutoring is not allowed during this summer holiday.
About after-school tutoring content
After-school tutoring institutes are not allowed to provide subject-related tutoring for preschoolers. Any kind of assignment is not allowed in after-school tutoring institutes.
About after-school tutoring advertisements
Cities such as Beijing and Shanghai have announced regulations of advertisements for private educational institutions. Phrases such as “elite schools/universities”, “top-tier teachers”, “enrollment rate” are not allowed to appear in advertisements. Images of “teachers” should not be in ads. Companies should not make promises about teaching effects.
