Beijing will allow educational companies to resume paid tutoring for schoolchildren - WSJ

Beijing plans to ease its policy on the country's online education sector: EdTech companies will again be able to provide paid tutoring services, but in return, industry giants will have to provide free extracurricular classes for schoolchildren, the WSJ learned .

Tutoring companies, including giants Gaotu Techedu and Tencent-backed Yuanfudao, have been discussing terms with Chinese regulators in recent weeks that would allow them to resume providing supplemental educational services to schoolchildren, WSJ sources say. Negotiations have yielded results: under the new licensing agreement, industry giants will have the opportunity to earn on other services, including tutoring for adults who are preparing for professional exams. For this, tutoring companies will be required to provide free extracurricular activities for students up to the ninth grade. Several sources said the government has also set limits on the prices companies can charge for services outside of schools.

Each licensed EdTech company will be required to set up a non-profit fund to collect extracurricular income. At the same time, the WSJ notes that it is not yet possible to determine how many companies will be licensed by the Chinese authorities.

• In the summer of 2021, Beijing published new rules for the operation of companies in the continuing education sector, which effectively destroyed the industry. Companies in the sector were prohibited from conducting IPOs and attracting foreign investment, including from foreign subsidiaries of Chinese companies. In addition, the authorities completely banned extracurricular activities on weekends and holidays, as well as classes with preschoolers. The restrictions have shocked the markets, devaluing the shares of Chinese educational companies by tens of billions of dollars, recalls the WSJ. American depositary receipts of Gaotu and other Chinese educational companies lost about 90% of their value after the publication of new rules.
• The main reason Beijing is wary of the booming market for commercial education for schoolchildren is that it interferes with one of Xi Jinping's main strategic goals: increasing the birth rate . Middle-class Chinese parents, who themselves emerged from poverty in the first or, at best, second generation, spend all their free money on the education of their children - and in 2021 the size of the Chinese market for commercial education will exceed $125 billion. The authorities are worried that this affects incomes and the debt burden of the population, and also contributes to the growth of inequality.

Updated

on news of Beijing's easing of requirements for the EdTech sector Shares of Chinese educational companies soared :

• Tal Education peaked at 32.9%;
• Gaotu Techedu — at 48%;
• New Oriental Education & Technology — на 37%.