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'Out-of-school education hijacked by capital': All you need to know about China's crackdown on tutoring firms

The "overhaul" of China's online private education sector, which comes days after the crackdown on tech majors, has "the potential to further dent foreign investors' confidence in China stocks", analysts at Nomura said.

July 28, 2021 / 08:11 AM IST
The education technology sector in China is estimated to have grown above $100 million (Representative image: Shutterstock)

The education technology sector in China is estimated to have grown above $100 million (Representative image: Shutterstock)

The Chinese Ministry of Education has unveiled new rules aimed at regulating the online tutoring sector. The regulations, which have a far-reaching impact on the market, are aimed at overhauling the out-of-school education sector that has been "severely hijacked by capital", the ministry said.

The norms effectively bar tutoring institutes teaching the school curriculum to raise money through the market in form of initial public offerings. Furthermore, the private tutoring firms are also required to operate as not-for-profit entities.

As the market opened this week, some of the big names in China's private tutoring sector, including TAL Education Group, New Oriental Education & Technology Group and Gaotu Techedu Inc, suffered significant losses.

The losses translated into one of the worst days of the year for the market on July 26, Hang Seng Index (HSI) fell more than four percent. The Shanghai Composite (SHCOMP) dropped by over two percent.