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China tech crackdown: at least 25 large online tutoring firms closed up shop in 2021

At least 25 large Chinese online education firms closed up shop in 2021 after the government banned for-profit private tutoring, according to data compiled by Chinese research firm 100EC.

Of the companies that disappeared - including firms that saw their founders disappear and those that filed for bankruptcy - nearly half were located in Beijing, according to a recent 100EC report.

27-year-old Juren Education, one of China's oldest tutoring companies, and 16-year-old Wall Street English, one of the world's largest English-language tutors with 3 million alumni and annual enrolments of 180,000 students, were among of the biggest names that closed for business in China last year, following the crackdown.

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Two of the tutors, ABC 360 and Landi English, were both owned by Hangzhou Danyue. The police bureau in Hangzhou, capital of eastern Zhejiang province, announced in late August that it had detained the founder of Hangzhou Danyue over "embezzlement" charges.

China off-campus tutoring icon now a live-streaming star

China's crackdown on for-profit tutoring for primary and middle school students led to massive lay-offs and closures in the sector in 2021. Those companies that have survived to carry on with other lines of business have suffered heavy losses in market value and revenue. Surviving operators are scrambling to pivot towards vocational training and non-curriculum classes, such as chess and music, or seeking ventures in new sectors, such as live-streaming.

For the Chinese government, parents' efforts to use training and tuition to differentiate their kids can only be affordable for some in a society of unequal wealth distribution. The growing necessity for private tutoring also represents a disruption to the country's state education system and a hurdle to overcome in China's efforts to create an egalitarian society, analysts say.

New Oriental Education & Technology Group suspended all its offline and online education classes for kindergarten to the 9th grade, while expanding investments in tuition for college students and the overseas Chinese language market, its founder, chairman and chief executive Michael Yu Minhong wrote in a WeChat post earlier this month. Separately, the company has launched a live-streaming e-commerce platform, focusing on farm products, with the goal of connecting farmers and consumers.

In 2021 the company's market value dropped by 90 per cent, revenue declined by 80 per cent and 60,000 people were dismissed, Yu wrote as he counted his losses. "We paid nearly 20 billion yuan (US$3.1 billion) for tuition refunds, employee dismissals, as well as teaching site lease cancellations."

China reiterates ban on online and offline adverts for off-campus tutoring

In 2020, 100EC data shows that 25 online tutoring firms went out of business, most of which were young start-ups, indicating the sector was very competitive even before the added challenge of increased regulatory scrutiny.

Funding to the sector also plunged last year as investors fled. The online tutoring industry raised 12.8 billion yuan in funding in 2021, 76 per cent down from 2020 when the pandemic gave a boost to the industry by pushing students to take lessons online.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.