CHINA Strict regulation puts brake on China's $75b online education sector

CHINA

Strict regulation puts brake on China's $75b online education sector

Global Times

21:19, May 31, 2021

A student in Beijing Jinyuan School puts his mobile phone into the safe deposit box installed in the classroom on March 1, the first day of the new semester. (Photo: Li Hao/GT)

Some of China's K-12 online education providers have stopped hiring and some have even been reportedly cutting staff, as tightened regulation puts the brakes on the country's burgeoning and lucrative private tutoring market valued at over $75 billion.

Tightening regulatory scrutiny of online education platforms is part of China's national push to tackle what have been described as chaotic market operations as well as to ease burden on students. While causing immediate effects on the industry, the efforts will ensure long-term healthy development, analysts said.

"There are still jobs for experienced workers in the online education sector, but vacancies have plunged in comparison with the first quarter and much of last year," a Beijing-based headhunter, who has long-term contracts with some leading online education platforms, told the Global Times on Monday on condition of anonymity.

A Shenzhen-based private tutor for an online education platform, who prefers not to be identified, told the Global Times on Monday that the school is limiting teachers' class hours likely due to tougher regulatory scrutiny.

K-12 education platform Gaotu reportedly will lay off 30 percent of its employees, which means several hundred or even 1,000 jobs, starting this week as part of a "strategic adjustment."

According to news website jiemian.com, the programs to be cut involve elementary education services for children aged from 3-8 years old.

The adjustment is in response to China's new law on the protection of minors, which will take effect on Tuesday. Under the new law, kindergartens and private schools are prohibited from providing primary school education to pre-school minors.

Last week, China's top leadership called for lightening the burden on primary and middle school students, as well as comprehensive regulation on private tutoring institutions.

The message sent the shares of US-listed Chinese online education operators into a free fall, with some tumbling by over 20 percent. It also sparked concerns about the fate of planned IPOs of some tutoring companies.

Another top online education company, Alibaba-backed Zuoyebang, also reportedly halted recruitment for sales and tutoring staff since Wednesday.

On China's social media platforms, some fresh college graduates complained that their contracts with online education institutions such as Tencent-backed Yuanfudao and Zuoyebang had been scrapped by the employers, as the recruitment plans are being called off.

A university graduate surnamed Ji in North China's Tianjin Municipality, has received offer from Yuanfudao, and was supposed to go to work on Monday. But Ji told the Global Times that a human resource personnel at the company suddenly informed her at 6:00 pm Thursday that the offer was canceled, citing lack of training resources for new employees.

"Yuanfudao didn't give me any compensation for their mistake by now," Ji said, noting that she's waiting for further notification from the company.

Some industry insiders also worry that capitals could be withdrawn from online education and flowing into other sectors.

"The tightened oversight will help clear away some chaos and is conducive for the industry's long-term development, forcing online education operators to return to the substance of education," a spokesperson of Chinese tutoring platform VIPThink told the Global Times on Monday, dismissing lay-off concerns.

The regulatory changes will create a healthier growth environment for students and reduce parents' anxiety, the spokesperson added.

China's online education sector has been expanding rapidly, as middle-class parents splurge on their children's private education to ensure that they outperform their peers in exams.

The COVID-19 epidemic, which prompted in-class teaching to move online, also fueled the boom. In 2020, China's online education industry was valued at 480 billion yuan ($75.41 billion), with a user scale of 351 million people, according to a report issued by iiMedia Research.

Analysts said that the overhaul will also help the industry address lingering issues of misleading advertising and overpricing.

In early May, the Beijing Municipal Bureau of Market Supervision and Administration imposed penalties on Zuoyebang and Yuanfudao for unfair competition and misleading advertising.

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