China’s Communist Party Cracks Down on Domestic Online Tutoring Sites to Undermine IPO Prospects and Curb Tencent Alibaba’s Influence

Aljazeera reported on May 31 that the Chinese Communist Party is escalating its crackdown on the online education sector, forcing once high-flying startups to abandon plans for multibillion-dollar initial public offerings this year.

Just a few months ago, education technology companies were among the hottest investments in China’s Internet industry in the post-epidemic era. The online tutoring industry, which received more than $10 billion in venture funding last year from Alibaba Division, Tencent and SoftBank Group.

Then the Chinese Communist government stepped in. Xi Jinping said in March that the surge in extracurricular tutoring was putting enormous pressure on China’s children. People familiar with the matter say the Communist Party’s Ministry of Education plans to set up a special agency for the first time to regulate all private education platforms.

The Communist government’s move has brought several potential mega-IPOs to a screeching halt. Tencent-backed Beijing Dami Technology Co Ltd (VIPKid) and SparkSense have postponed their U.S. listings. Alibaba’s investment in ZoyuBang will likely not meet its goal of going public this year. Tencent-backed rival Yuanfuduo will not start IPO preparations any time soon.

Al Jazeera believes the Communist government is generally keen, through a series of regulatory investigations and record fines, to curb the growing influence of Internet giants like Tencent and Alibaba in the online tutoring industry.