Education Industry

[winston]

Testing times for China's private tutors

Listed firms will no longer be allowed to raise capital via stock markets to invest in businesses that teach classroom subjects, which could include capital from the offshore registered entities of Chinese firms

Outright acquisitions are forbidden.

All vacation and weekend tutoring related to the school syllabus is now off-limits.

The new regulations are focused on compulsory subjects, meaning critical material like math, science and history. Classes for art or music mostly would not fall under the new restrictions.

The rules also ban the teaching of foreign curriculums, tighten scrutiny over the import of textbooks and forbid the hiring of foreign teachers outside of China.

Source: The Standard

https://www.thestandard.com.hk/section- ... ate-tutors

[winston]

China Education Tech Sector - New regulatory guidance for after-school tutoring

ADR share prices of the two largest providers of private educational services in China - New Oriental Education & Technology Group (EDU U.S.) and TAL Education Group (TAL US) – had a sharp plunge falling 54% and 71% respectively in U.S. trading last Friday (23rd July), triggered by market speculation over increased risks from a potentially broadening regulatory crackdown.

On 24th July, “Opinions on Reducing Homework Burden and After-school Tutoring Burden of Students in the Compulsory Education Stage” was officially released.

Major surprises for the market include:
i) mandatory conversion of K-12 subject-tutoring firms to non-profit institutions;
ii) limitations on foreign capital involvement; and
iii) application of all these rules for after-school tutoring institutions servicing students in primary and middle school (G1-9) and high school students (G10-12).

Market size of after-school tutoring segment is estimated to shrink substantially. As such, after-school tutoring institutions are expected to go through a lengthy restructuring process.

The net cash value of listed after-school tutoring institutions would suggest a rough sense of the floor valuation.

Given the elevated volatility amid policy uncertainties, we do not advocate any bottom fishing and refer investors looking to trim on bounce to the research team’s focus list for switch ideas. Both EDU US and TAL US are due to report results in first week of August.

Source: OCBC

[winston]

China Education Tech Sector - Tough restructuring path ahead

As highlighted in our sector report published on 26 July 2021 (China Education Tech Sector:-

New regulatory guidance for after-school tutoring), the education tech industry clearly faces a difficult and uncertain restructuring path ahead as business models will be substantially impacted as a result of the latest regulatory directives.

Within this report, we provide key highlights of our webinar with Morningstar this afternoon which addresses key questions from our clients.

Morningstar believes the greatest impact of the government’s plans will be felt by the after-school tutoring industry, which will drive utilization rates down in offline education.

As a result of the latest policy developments, Morningstar has placed the ratings of both companies (TAL & EDU US) under review pending companies’ updates on their potential new structure at their upcoming 1H results release in early August (scheduled on 3 August – EDU, 5 August – TAL).

Due to ongoing uncertainties over policy details, we do not advise bottom fishing in the education sector.

Source: OCBC

[winston]

PRC Ministry of Education Further Specifies AST Scopes at Compulsory Education

China's Ministry of Education issued a notice, specifying the scopes of academic and non-academic subjects in after-school training (AST) for compulsory education.

Based on relevant rules in conducting AST, morality and rule of law, Chinese language, history, geography, mathematics, foreign languages (English, Japanese and Russian), physics, chemistry and biology, will be regulated within scope of academic subjects.

Meanwhile, AST involving physical education (or sports and health), arts (or music, fine arts), and comprehensive practical activities (including IT education, labor and technology education), will be monitored within scope of non-academic subjects.

Source: AAStocks Financial News

[winston]

China Education – Addressing key investor questions.

In this note, we address several key investor questions, including
1) companies’ future plans,
2) a recap of the 2018 regulation,
3) implications for other education sub-segments,
4) VIE structure,
5) long-term AST demand,
6) updates on implementation of the Double Reduction policy so far, and
7) rules applied to high school AST.

Within our China AST coverage, we are Neutral rated on New Oriental Education & Technology and TAL Education Group, and Sell-rated on Gaotu Techedu Inc. (GOTU) and Koolearn Technology (1797.HK).

We prefer China’s higher education (HE) leaders like China Education Group and China Yuhua, both Buy rated, as we believe Implementation Rules for the Law for Promoting Private Education, announced on May 14, 2021, provides a clear policy support to private schools providing HE, senior secondary education and vocational education.

Source: GS

[behappyalways]

Why China cracked down on education and upended a US$70 billion tutoring industry, with millions of jobs and students affected
https://www.scmp.com/economy/china-econ ... 70-billion

[winston]

China’s education crackdown ‘only scratched the surface’ of what’s to come, former ministry spokesman says

Beijing is taking drastic steps to upend the for-profit tutoring industry, but schools and parents are struggling to grasp how new policies will be implemented

Some local-level authorities are already offering cash rewards for whistle-blowers who report after-school tutorial classes

by Cissy Zhou

Given that high school education is considered the non-compulsory education stage in China, “courses for high school students have not been impacted yet, and we are continuing to offer those classes online”, the executive said.

Source: SCMP

https://www.scmp.com/economy/china-econ ... e6339e1990

[winston]

China: Crackdown on private tutoring leaves industry, students and parents drawing a blank

https://www.youtube.com/watch?v=djsU9lM7V1E

[winston]

Chinese education firms to end most classes with foreign teachers

Classes sold to overseas Chinese students won’t be impacted.

On Friday, VIPKid sales called up users to encourage them to pay for new classes, hinting they won’t be able to do so after this weekend due to the new regulations.

Source: Bloomberg

https://www.theedgemarkets.com/article/ ... n-teachers

[winston]

Chinese tutoring schools scramble for loopholes as top-tier firm Wall Street English collapses amid crackdown

Wall Street English, one of China’s wealthiest English tutoring companies, is expected to file for bankruptcy next week

Private institutions are scrambling to offer services that comply with new regulations

by Phoebe Zhang

Source: SCMP

https://www.scmp.com/news/people-cultur ... 16126b39af