Strict regulation places brake on China’s $75b on-line training sector

A student at the Jinyuan School in Beijing puts his cell phone in the safe installed in the classroom on March 1, the first day of the new semester. Photo: Li Hao / GT

Some of China’s K-12 online education providers have stopped hiring, and others have reportedly even cut headcount as tightened regulation slows the country’s burgeoning and lucrative private tuition market, valued at over $ 75 billion.

The tightening of government controls on online education platforms is part of China’s national drive to tackle what has been described as chaotic market operations and to relieve students. According to analysts, the efforts will have an immediate impact on the industry, but will ensure healthy development over the long term.

“There are still skilled jobs in the online education sector, but vacancies are down from the first quarter and much of last year,” said a Beijing-based headhunter who has long-term contracts with some of the leading online education platforms . said the Global Times on Monday on condition of anonymity.

A Shenzhen-based private teacher for an online education platform who prefers not to be identified told the Global Times on Monday that the school is restricting teachers’ teaching hours, likely due to stricter government scrutiny.

The K-12 education platform Gaotu will reportedly lay off 30 percent of its employees, meaning hundreds or even 1,000 jobs, beginning this week as part of a “strategic adjustment.”

According to the news website, the programs to be curtailed include elementary education for children ages 3 to 8.

The adjustment is in response to China’s new law on the protection of minors, which will go into effect on Tuesday. Under the new law, kindergartens and private schools are prohibited from offering primary school education to preschool children.

Last week, China’s top leadership called for relief for elementary and middle school students as well as comprehensive regulation of private tutoring facilities.

The news freed the stocks of US-listed Chinese online education providers, with some falling over 20 percent. It also raised concerns about the fate of planned IPOs for some tutoring companies.

Another leading online education company, Alibaba-backed Zuoyebang, reportedly stopped hiring sales and tutors as of Wednesday.

On China’s social media platforms, some new college graduates complained that their contracts with online educational institutions such as Yuanfudao and Zuoyebang, which are backed by Tencent, have been canceled by employers as hiring plans are canceled.

A college graduate surnamed Ji in Tianjin Township in northern China received an offer from Yuanfudao to go to work on Monday. However, Ji told the Global Times that a staff from the company suddenly informed her at 6:00 p.m. Thursday that the offer had been canceled due to a lack of training resources for new hires.

“Yuanfudao has not yet given me any compensation for her mistake,” Ji said, noting that she was waiting for another notification from the company.

Some industry insiders also fear that capital cities will be taken out of online education and poured into other sectors.

“The tightened supervision will help clear the chaos and is conducive to the long-term development of the industry. It forces online education providers to return to the substance of education,” a spokesman for the Chinese tutoring platform VIPThink told the Global Times and on Monday dismissed lay-off concerns.

The regulatory changes will create a healthier growth environment for students and reduce parenting anxiety, the spokesman added.

China’s online education sector has grown rapidly as middle-class parents use their children’s private education to ensure they outperform their peers on exams.

The COVID-19 epidemic, which caused classroom lessons to go online, has also fueled the boom. According to a report by iiMedia Research, China’s online education industry was worth 480 billion yuan ($ 75.41 billion) in 2020 and a user base of 351 million people.

Analysts said the overhaul will also help the industry address the persistent problems of misleading advertising and overvaluation.

In early May, the Beijing City Market Inspection and Administration Bureau fined Zuoyebang and Yuanfudao for unfair competition and misleading advertising.

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