,Education technology firms are scrambling to restructure and adjust to new regulation for the industry in China, after the government launched a sweeping crackdown. — Bloomberg
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China’s largest private education firms are moving swiftly to overhaul their businesses to adjust to a harsh new reality after Beijing launched a sweeping crackdown on the US$100bil (RM422.3bil) sector.
Two of the sector’s biggest names have in past days reached out to reassure investors and managers their businesses remain viable and won’t abruptly collapse, according to people familiar with the matter.
Yuanfudao, the $15.5 bil (RM65.46bil) startup backed by Tencent Holdings Ltd. and DST Global, plans to yank all advertising after already curtailing part of its marketing earlier this year, one of its largest expenses, the people said, asking not to be identified talking about a sensitive matter. But the startup also said it has ample cash on hand to sustain its business, one of the people said.
TAL Education Group President Bai Yunfeng told his lieutenants during an internal meeting it’s in no danger of failing but will have to adjust course. It’s considering providing certain after-class courses for free while creating more self-study online resources, a person familiar with the proceedings said. Fresh layoffs are possible, the person added.
And Rise Education Cayman Ltd., controlled by Bain Capital, is expanding its non-academic curriculum — such as science or drama courses — to offset declines in its specialty of English-language teaching, a person with knowledge said.
Those represent just the opening moves in an industry-wide restructuring as its biggest players from leader TAL to New Oriental Education & Technology Group Inc. and Gaotu Techedu Inc. come to grips with new regulations that threaten to annihilate much of the private tutoring arena.
A Yuanfudao representative declined to comment, while TAL’s Bai reiterated in a text message that the company will comply with regulations. Representatives for Rise didn’t respond to calls and messages seeking comment.
The regulations unveiled last week target after-school tutoring for kindergarten through ninth grade and marked the culmination of a months-long campaign to rein in the ad spending wars and cut-throat competition that’s come to define a sector critical to China’s future workforce. But the growing cost of tuition, along with a relentless stream of ads that play on parents’ paranoia, has triggered widespread outrage over how the industry is enriching entrepreneurs and their financiers while fomenting social inequality.
The three biggest listed firms — TAL, Gaotu and New Oriental — soared Wednesday after shedding at least 60% of their market value since Friday. TAL leapt 16%, Gaotu surged 25% and New Oriental climbed 7.8%, extending the previous session’s bounce-back.