In Shocking Overhaul China Bans For-Profit Tutoring, Wiping Out Billions In Value

Call it the end of "capitalism with Chinese characteristics" and the beginning of "socialism with socialist characteristics."

One day after Chinese tutoring and techedu stocks cratered the most in history after a report that China was seeking to ban for-profit school tutoring companies in a sweeping overhaul of the education sector, Beijing has done just that and on Saturday China unveiled an unprecedented crackdown on its $100 billion education tech sector, banning companies that teach the school curriculum from making profits, raising capital or going public.

The reason: as we explained yesterday, Beijing is scapegoating the sector for its own failure to reverse the ongoing shrinkage of China's population, and is blaming declining birth rates on "financial burdens from raising a child" as a result of surging tutoring costs. Apparently it never occurred to Beijing that the local housing bubble for example - the biggest in Chinese history - may have a far greater role in making "discretionary" spending - such as more children for example - impossible as the simplest of staples cost an arm and a kidney and apparently a second (and first) child. But of course, Xi would have to take the blame for that particular bubble; in the case of rampant tutoring costs, it's easier just to blame someone else.

And that's precisely what Beijing is doing with the following list of new regulations on the education sector:

  • Companies and institutions that teach the school curriculum must go non-profit

  • Such institutions cannot pursue IPOs, or take foreign capital

  • Listed companies will be prohibited from issuing stock or raising money in capital markets to invest in school-subject tutoring institutions, or acquiring their assets via stock or cash

  • Foreign firms are banned from acquiring or holding shares in school curriculum tutoring institutions, or using VIEs (variable interest entities) to do so. Those already in violation need to rectify the situation

  • All vacation and holiday curriculum tutoring is off-limits

  • Online tutoring and school-curriculum teaching for kids below six years of age is forbidden

  • Agencies cannot teach foreign curriculums.

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