Reuters: China plans new wave of crackdown on after-school tutoring industry

China’s after-school tutoring industry is booming, but sources told Reuters that authorities are working on new, stricter rules to curb it, both to reduce pressure on students and to boost fertility rates by lowering the cost of living for families.

Students leave school after school in Shenzhen, April 20, 2021.

The crackdown will also help cool China’s fiercely competitive after-school tutoring industry, which has grown exponentially in recent years and has reached about $120 billion.

At least one major company offering tutoring services has suspended a $1 billion private funding round amid increased government oversight of the industry and ongoing uncertainty about it, according to three people familiar with the matter.

Three people familiar with the matter told Reuters that the proposed revisions by the Education Ministry and other authorities focus on before- and after-school tutoring, from kindergarten all the way through 12th grade (K12) education.

One of the sources said the draft could be published as early as by the end of June. All three sources requested anonymity because they were not authorized to speak publicly about the matter.

Two of the sources said academic tutoring sessions on school grounds and weekends would be banned under the proposed rules. They added that regulators would also crack down on off-campus tutoring sessions, especially in English and math, and limit the amount of time classes can be held outside of school on weekdays.

More than 75 percent of K12 students attended extracurricular classes in 2016, according to the latest data from the Chinese Education Association, and there is anecdotal evidence that the percentage has risen.

In addition to protecting sleep-deprived students, the Chinese government sees these adjustments as a financial incentive to encourage couples to have more children in an effort to boost a rapidly declining fertility rate, the sources said.

“Giving students a break and reducing the financial burden on their parents has become imminent, and couples are now increasingly reluctant to have more children,” one source said.

One of the sources told Reuters that the new rules would limit the level of fees charged by training companies.

China’s Ministry of Education did not immediately return a request for comment.

A source told Reuters that regulators last month notified a major state-owned broadcaster to pull TV ads for New Oriental and Good Future.

Shares of New Oriental and Good Future, which are listed in New York, have fallen 23 percent and 26 percent, respectively, so far this year. The two stocks closed 5.8 percent and 2.1 percent lower, respectively, on Wednesday.

New Oriental said it hasn’t run any TV ads in the past two months and didn’t comment on possible tighter rules. Good Future did not return a request for comment.