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by Steve Zhou, CFA, Senior Analyst, JK Capital Management Ltd., a La Française group-member company
China’s after-school tutoring sector has been under increased scrutiny from regulators recently. On 27th March, China's Ministry of Education commented that regulating after-school tutoring activities and reducing students' heavy burden resulting from after-school tutoring will be their top priority. The comment followed the release of China's 14th Five-Year Plan (2021-25) which included regulating the after-school tutoring sector, and, perhaps more importantly it came after President Xi specifically mentioned during the Two Sessions meeting in early March the need to reduce the burden imposed on students by excessive after-school tutoring.
More specific policies came in early March as local governments in Chaoyang and Changping, two districts of Beijing, asked after-school tutoring companies operating there to temporarily suspend offline activities. Local authorities also conducted compliance checks of after-school tutoring institutions including teacher certificates. Currently, most of the after-school tutoring institutions have resumed operations but new requirements were imposed on them including having a custodian bank as a third party to hold the advanced payments of students. Tuition fees will only be transferred to the after-school tutoring institutions when students confirm their attendance.
The after-school tutoring sector last saw major tightening of regulations in 2018 which focused on the overall quality of the teachings by strictly imposing that teachers be properly qualified, by imposing rules about the design of facilities, by regulating working hours etc… The current ongoing tightening, even though at this stage lacking specifics, focuses more on reducing the excess academic burden on students. More detailed policies are likely to come out in the near future.
Such policies are likely welcome as the burden on students has been increasing over the years to get into the country’s top schools and universities. One of the reasons is the system itself which is purely exam-based. Succeeding on the day of the exams conditions the pupils’ future. A recent survey of 4,000 parents by the state-backed newspaper China Education Paper found that 92% enrol their children in extracurricular classes and that half of families spend more than RMB 10,000 (USD1500) each year on such classes. The pressure on children seems to be constantly mounting. Regulating the after-school tutoring sector is certainly one answer but one cannot help to wonder if the reform should not also be focused on the availability of good schools and universities or on the entire selection process that is extraordinarily selective.