The Chinese Communist Party wants to control China’s private tutoring industry
Not just for ideology,
but also to control the money.
And it’s a big problem for parents.
Welcome to China Uncensored.
I’m Chris Chappell.
China has a problem.
Children are going to school, but they’re learning too many useless subjects.
And that’s why in 2018, Chinese leader Xi Jinping started putting emphasis on the important
stuff: following the path of socialist education with Chinese characteristics.
Now students can learn useful things, like
False historical narratives.
Class struggle.
And most important, loyalty to the Communist Party.
But there’s a wrench in Xi Jinping’s beautiful socialist education machine: Private tutoring
companies.
So this year—in the summer of 2021—the Chinese Communist Party banned for-profit
tutoring for core school subjects.
Since the coronavirus began spreading across China early last year, long-distance learning
became common.
That, in turn, was a huge boon to private tutoring companies—as well as to students
and their parents.
But the problem for the Chinese Communist Party is, they don’t have enough control
over the money these companies are making, or the content of what they’re teaching.
So the Chinese Communist Party enacted what they call a “double alleviation policy.”
You see, the proposed reason for the ban is to alleviate academic stress on students,
and financial costs for families, encouraging them to have more children.
Hmm.
That sounds like...not the whole reason.
I mean, if parents want to help their kids get a better education, why would you stop
them?
Well, private tutoring does give an advantage to the wealthy.
Wealthy families can afford it, poor families can’t.
This creates an education gap.
But it’s not like the Communist Party has stopped their wealthy elite from spending
loads of money on other things.
Like luxury apartments.
Or luxury helicopters
And it’s not like the CCP puts much money into rural education for the poor kids who
really need it.
So I don’t think closing the education gap is the reason.
Communism was never really about equality.
However, there might be another reason the Party is cracking down on private tutoring.
I’ll explain after the break.
Welcome back.
The private tutoring business in China has been wildly successful.
It’s been bringing in big sums of money.
And a lot of that has been from foreign investment.
Public disclosures show that prior to the crackdown this summer, seven after-school
tutoring companies, mostly listed in the U.S., had more than 250,000 full-time and contract
employees combined.
And that’s why China’s new “guidelines specifically ban foreign investment in such
firms via mergers and acquisitions, franchise development, and variable interest entities
(VIEs), which are investment vehicles frequently used by foreign investors to bypass restrictions
in China’s education sector.”
The Communist Party believes the increase of capital in the private tutoring industry
is excessive, and goes against Xi Jinping’s goal of achieving a “moderately prosperous
society.”
Essentially, the ban seeks to put an end to the foreign investment in private tutoring
companies.
The Chinese State Council thinks it can do this by forcing tutoring companies to register
as non-profit organizations.
Curriculum-based tutoring institutions are now barred from raising money through listings
or other capital-related activities.
Companies are taking a huge blow from this private tutoring ban.
So are workers.
“Education industry job postings dropped, with the capital city of Beijing seeing the
greatest decline, down 49% versus March.”
Companies had to retract job offers that were initially given to new candidates.
And that’s only the tip of the iceberg.
Some of the private tutoring companies have tried to adapt to the new regulations.
Like by offering non-core subject courses such as drama or even parental training—since
these subjects aren’t affected by the regulations.
But that’s not necessarily what Chinese parents want for their children.
Well, what they really want is to send their kids to the US to study.
Like the way Xi Jinping sent his daughter to Harvard.
But this sudden crackdown has created a massive problem in China.
Companies are going bankrupt.
Like OneSmart Education—one of China’s biggest private tutoring companies.
It’s even listed on the New York Stock Exchange.
It IPO’d back in 2018 at about $10 a share.
Now it’s down to just 40 cents a share.
Sorry, American investors.
OneSmart’s main revenue source—tuition—has slowed to a trickle.
Now families who pre-paid for tutoring are demanding repayment.
OneSmart Education is one of the many private tutoring companies that was funded in part
by pre-payments by student’s parents.
“Before Beijing stepped in, private education companies encouraged parents to pay months
of tuition in advance in order to fuel their expansions.
Now, with those plans prohibited, courses banned, and cash running dry, parents are
lining up to demand their money back.”
Here’s a photo of angry parents crowded in a rainy afternoon in front of OneSmart
Education’s headquarters in Shanghai.
OneSmart Education is going through a liquidity crisis.
Seemingly reliable pre-payment methods backed by foreign investment were abruptly turned
upside down due to arbitrary regulations by the Chinese regime.
What OneSmart is facing is a bit like Evergrande,but with tutoring instead of real estate.
And just like Evergrande’s downfall, we're now seeing OneSmart go bankrupt.
More and more parents are coming out to claim refunds for their pre-payments.
And that’s not going to go well for anyone.
OneSmart isn’t the first Chinese education company to go bankrupt because of the crackdown.
But it’s one of the biggest.
And more and more companies are going to follow.
And now it’s time for me to answer a question from a fan who supports China Uncensored on
Patreon or Locals.
This question comes from Logan on Patreon.
“Do you ever worry that the CCP will listen to your criticism and use it to improve their
propaganda?”
Well, Logan, one criticism I have of the CCP is that...they never listen to criticism.
So frankly, I’m not worried.
Besides, I don’t think anyone at a high level in the CCP watches China Uncensored.
But if you are watching—Xi Jinping, I’m still waiting for you to say yes to my exclusive
interview.
Thanks for your question, Logan.
And thank you to everyone else who supports China Uncensored through the subscription
platform Locals, and the crowdfunding platform Patreon.
The links to both of those are below.
Once again I’m Chris Chappell, thanks for watching China Uncensored.