Bloomberg recently published an interesting article about a “crackdown” on private education in China.  According to Bloomberg’s report “the country’s education ministry plans to create a dedicated division to oversee all private education platforms for the first time, according to people familiar with the matter.”  As a result, the “mega-IPOs” of several private education firms have been delayed.

The move “centers not just on reckless pricing or advertising but also on the widening divide between the haves and have-nots — those who can afford to load up on extra lessons. To that end, officials laid out a plethora of restrictions this month including limiting the after-school tuition fees companies can charge.”

Bloomberg also suggests that this is part of a larger effort to curb the power and influence of large tech companies, noting that the “government in general is keen to curtail the growing influence of internet giants like Tencent and Alibaba, among the industry’s biggest backers, through a series of regulatory probes and record fines.”

I spoke to a teacher at one of the these large education firms, who noted that the restrictions mostly focus on tutoring centered on domestic education, and that preparation for tests like the TOEFL, SAT and GRE has not been affected to date.   

Echoing the comments from Bloomberg, this teacher noted:

“like 40% of all students are taking extracurricular courses to stay ahead, while the other 60% are busting their balls trying to catch up… [and] have complained about this since god knows when.” 

The changes, he said, will “drastically impact the income” of his employer.

I also spoke to the owner of a small private tutoring center with just a handful of employees.  He noted:

“I don’t really know how it could be enforced though. Some people feel it’s just not realistic, but the government tends to get what it wants here, so people are definitely nervous.”

This nervousness has encouraged him to accelerate efforts to bring more of his work online.

That said, he noted that the government’s move

“might mean everyone is fair game, no matter what kind of program they offer. It’s such a huge part of the economy though, so I am still struggling to see why they would target this industry at a time when the global economy is still shaky.”

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