Shares of Chinese education companies plummeted today following a report that the Chinese government is about to impose a variety of strict regulations on the sector. Fears and rumors have been swirling for months, rattling investors and weighing on Chinese education stocks. Additionally, Morgan Stanley downgraded some of the companies based on expectations of stringent rules.
China is planning a tough crackdown on the country's $120 billion private tutoring industry, Reuters reported. Sources told Reuters that the new rules would include trial bans on vacation tutoring and restrictions on advertising. The trial vacation ban, along with a bar of online and offline tutoring on weekends during term time, could severely affect tutoring companies' revenues to the tune of 70-80%. Gaotu Techedu Inc (NYSE: GOTU), New Oriental Education & Tech Grp (NYSE: EDU), TAL Education G