A year of living dangerously: timeline of Beijing’s crackdown on China’s once high-flying edtech sector
- In 2020, US$10.5 billion of venture capital money poured into the sector, with many investors seeking an exit after the IPOs of edtech unicorns Zuoyebang and Yuanfudao
- Beijing sharpened its focus on off-campus tutoring after President Xi Jinping described K-12 after-school training services as a ‘social problem’ in need of fixing
The contrast could not have been more stark. This year’s crackdown on China’s US$70 billion edtech sector followed a jubilant 2020, when firms that developed online courses, homework assistant apps and offline training centres were reaping huge gains during the Covid-19 pandemic that forced students to stay at home and study in front of a screen.
In 2020, roughly US$10.5 billion of venture capital money poured into the sector, with many investors looking for a fruitful exit after the IPO of edtech unicorns like Zuoyebang and Yuanfudao.
In March last year, Chinese entertainment giant ByteDance called education as “a strategic new business direction”, but a little over a year later it was firing thousands of employees and taking down its two main education apps.
Last December, e-commerce leader Alibaba Group Holding, owner of the South China Morning Post, participated in a US$1.6 billion fundraising round for Zuoyebang.
It all came crashing down in mid-2021, but the warning bells had been sounding for some time. Criticism of the sector had been voiced by the nation’s top leaders since at least 2018.
Beijing sharpened its focus on off-campus tutoring after President Xi Jinping described K-12 after-school training services as a “social problem” in need of fixing during a meeting of the Chinese People’s Political Consultative Conference in March.
The crackdown also ended the careers of foreigners living overseas who wanted to teach English to Chinese students online – with one government estimate putting their numbers at 400,000 in 2017.
Here is a timeline of Beijing’s regulatory crackdown on edtech, the first in a series that will also cover antitrust, games and cybersecurity.
The Communist Party’s Central Commission for Discipline Inspection criticises the overexpansion of off-campus online tutoring, highlighting problems like false advertising and arbitrary charges, calling for strict supervision of the industry.
Beijing sharpens its focus on off-campus tutoring after President Xi Jinping described the domestic market for K-12 – referring to kindergarten to 12th grade – after-school training services as a “social problem” that must be fixed.
Representatives of several after-school tutoring giants are called in for a meeting with China’s Ministry of Education. They are told that their teaching materials and content would be treated as publications – subject to advanced censorship.
Four online education firms, including TAL Group and Hong Kong-listed Koolearn Technology Holding, are fined by the Beijing Municipal Bureau of Market Supervision for misleading consumers with false advertising.
Education unicorns Zuoyebang and Yuanfudao are charged by the same regulator with false advertising and fined 2.5 million yuan (US$390,000) each, the legal maximum.
The Ministry of Education announces a new department to oversee the country’s off-campus tutoring market, and to bring regulatory oversight to private teachers and curricula.
Zuoyebang and Gaotu both cut preschool tutoring services, Caixin reports, the result of the updated Minors Protection Law that bans teaching a primary school curriculum to preschoolers.
Several subsidiaries of industry giants New Oriental Education and Technology Group and TAL Education broaden their businesses to include student care services, art and sports.
The General Office of the Chinese Communist Party and the State Council ban tutoring firms from making a profit by teaching core subjects after school. Listed companies and overseas entities are also barred from investing, or acquiring stakes, in off-campus education firms that offer courses covering school curricula. Stock prices of the affected firms tumble.
Zhang Xinbang, co-founder and chairman of US-listed education services firm TAL Education, tells employees that lay-offs are “unavoidable”.
Following the State Council’s lead, the municipal government of Beijing bans all summer courses for compulsory school subjects in the after-school tutoring sector.
Local governments encourage residents to report any in-person tutorial services being offered for profit. Authorities in Nantong, Jiangsu province, offer whistle-blowers a reward of 200 yuan (US$31) for reporting offline tutorial classes.
Off-campus tutoring providers in Shaanxi province are directed to immediately stop offering K-12 training courses during the summer holiday. Shaanxi also sets up a hotline to report violations.
In Guangdong, the provincial government forbids off-campus tutoring providers from disclosing the personal information of students and parents, and prevents marketing of their services via phone calls and text messages.
Education authorities terminate 286 cooperative programmes between Chinese and foreign universities as part of a routine assessment. Affected institutions included City, University London, New York University and the University of Hong Kong.
Juren Education, one of China’s oldest tutoring companies, announces it will close for good, after 27 years of providing courses in mathematics, English and examination preparation. The company claims to have taught 5 million primary and middle school students since its establishment in 1994.
New York-listed Gaotu Group, formerly known as GSX Techedu, lays off one-third of its staff, estimated at more than 10,000 people.
ByteDance fires staff working for its new education business, and takes down at least two education apps.
Zuoyebang and Yuanfudao let go of tens of thousands of employees, according to the Chinese technology media LatePost.
At the end of the month, the education ministry reiterates its policy banning small-scale private tutoring under different names such as “one-on-one teaching, high-end domestic helper service, crowdfunding private tutoring, and live-in teaching.”
The education authority in Anhui punishes a middle schoolteacher for tutoring students in his villa during the summer holiday.
New legislation passed by the National People’s Congress Standing Committee requires parents and guardians to reduce the “twin pressures” of homework and private tutoring on children.
Beijing widens its July ban, with an order to prohibit all online and offline advertising by off-campus education programmes that target students in kindergarten, primary and middle schools.
New Oriental Education & Technology Group announces it will cease offering tutoring services at all its learning centres in China by the end of the year, shifting its focus instead towards educational products and services not related to K-9.