China’s private tutoring guru closes 1,500 of New Oriental schools amid Beijing crackdown

  • Yu Minhong, founder of New Oriental, announced that the company will start selling farm produce after closing its after-school tutoring business
  • The State Council issued sweeping new regulations in July that banned private tutoring centres from making profits by teaching school subjects

Yu Minhong, a cram school pioneer in China who grew his shabby one-classroom business in Beijing into the New York-listed off-campus tutoring firm New Oriental Education & Technology Group, plans to shut down a large part of his business amid Chinese authorities’ crackdown on the industry.

In a live broadcast on Sunday via his personal account on short video-sharing app Douyin, the Chinese version of TikTok, Yu said New Oriental will close nearly 1,500 training centres and donate some 80,000 sets of desk and chair to rural public schools.

New Oriental will close its K-9 education business by the end of November, said the company’s Hong Kong-listed subsidiary Koolearn Technology last month. The business contributed 40 per cent of Koolearn’s revenue in last financial year ended May. New Oriental will continue to provide adult training services, which include language classes, test-prep courses and overseas study consultation.

As part of a business transformation plan, Yu said New Oriental will set up a “big agricultural platform” through which he will sell farm products with the help of hundreds of employees, who have been temporarily reassigned from their teaching jobs to become e-commerce live streamers.

The company will refund tuition fees to customers and pay all wages owed to employees with its cash reserve, which is enough to cover all those expenses, he said.

Yu, 59, is best known as the face of China’s once-thriving after-school tutoring sector, which caters to parents and their children who strive to get ahead in the country’s highly competitive education system.

Yu’s personal story of emerging from poverty after gaining admission to the prestigious Peking University and then ditching a stable teaching job to start his own school has earned him wide admiration in the country.

But the State Council’s surprise decision in late July to limit profit-making in the private education industry swiftly upended Yu’s sprawling business empire. Under sweeping new regulations, cram schools from grade one to nine are banned from making profits by teaching school curriculum subjects. Teaching at weekends and during public or school holidays are also prohibited.

While Yu’s announcement on Sunday has drawn widespread sympathy online, New Oriental’s stock price is currently down 90 per cent from its peak in February.

The New Oriental app used to feature elementary school summer packages.

 

Many social media users praised the entrepreneur for his business integrity in the face of a sudden reversal of fortune. Yu’s promise to fulfil his company’s financial obligation is seen as a rare example in China’s private tutoring industry, where plenty of founders are known to have absconded with clients’ money and left debts unpaid.

“Yu Minhong has proved himself a true man,” read one social media headline. “He is standing in the rain, but he is still trying to hold an umbrella for others,” said another, referring to Yu’s decision to donate school furniture to rural schools.

Despite New Oriental’s setback, Yu still has a personal net worth of US$1.1 billion, according to real-time estimates by Forbes.

Author: Coco Feng, SCMP

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