Chinese government thinks online education is bad for students, parents and society

  • The Chinese government is forcing the $ 100 billion private tutoring and online education sector to become a nonprofit.
  • The move would also be in line with Chinese President Xi Jinping’s top priority at the moment – boosting China’s birth rate decline.
  • India could prove to be a possible beneficiary of China’s latest edtech regulation.

The Chinese government has pulled the rug out from under the edtech industry with its latest regulations. The country is now forcing its $ 100 billion private tutoring and online education sector to become a nonprofit.

To make matters worse, the Chinese government has also deprived edtech companies of going public, taking foreign capital, or issuing shares if they were already public. This closed all the doors for these companies to obtain any form of capital and for investors to obtain the desired exits.

Investors like Warburg Pincus, Temasek, General Insurance Corporation (GIC), Sequoia Capital, SoftBank, Tiger Global and many others have been affected by this decision, with the exception of edtech startups which are operational in the country.

Top Chinese edtech startups and their investors:

Chinese edtech companies Investors
Yuanfudao DST, CPE, Temasek, Trustbridge
Huohua siwei Trustbridge, GSR, GGV, Tencent, Carlyle, Sequoia China
Zuoyebang Sequoia China, SoftBank Vision Fund, FountainVest, Tiger Global
Zhangmen Shunwei Capital, Warburg Pincus, CMC Capital
Knowledge box TAL Education Group, Bertelsmann Asia Investments, Alibaba Group
iTutorGroup Alibaba Capital Partners, Qiming Venture Partners
Huike China Oceanwide, Qianhe Capital, Fosun RZ Capital
Hujiang Minsheng Investment Group, Baidu

According to a Bloomberg report, the nationwide crackdown on edtech actually stems from a deeper backlash against new age educational companies. Excessive tutoring not only torments young people but also imposes high fees on parents, the report adds. The edtech segment has also been accused of being the source of social inequalities.

Edtech is said to have triggered social inequality among urban and rural Chinese citizens by providing additional mentoring to those who can afford it. This especially has a bigger impact on tutoring students for the Chinese university entrance examination, the gaokao, according to media reports.

The nine-hour test actually determines whether a student will attend an undergraduate institution or not. The test results will also determine the college a student can attend. Since there are no other alternatives in China, Gaokao has turned out to be a very high stakes exam. It is therefore seen as one of the most brutal educational assessments in the world.

According to a report by the information and analysis platform Protocol, Chinese families are willing to spend an average of 11% of their annual family expenses for the future success of their children. This creates inequalities among those who cannot afford to pay for additional education systems.

On top of that, the policy would be in line with Chinese President Xi Jingping’s top priority at the moment – boosting China’s birth rate decline. Affordable education is likely to encourage people to have more than one child.

The latest Chinese edtech regulations:

Companies and institutions that teach the school curriculum must become non-profit
These institutions cannot pursue an IPO or raise foreign capital
Listed companies will not be able to issue shares or raise funds on the stock market.
Foreign companies cannot acquire or hold shares in school tutoring companies
Any tutoring on vacation and vacation courses is prohibited
Online program for children under six prohibited
Companies cannot teach foreign study programs or hire foreigners

This is not the first time that the Chinese government has taken an interest in the country’s edtech industry. On March 31 this year, Chinese Minister of Education Chen Baosheng announcement that the education department should limit online learning hours to ensure elementary and secondary students get enough sleep.

The ministry added that all live online streaming training activities are expected to end no later than 9 p.m.

Chinese repression, a boon for Indian edtech?

China is the world’s largest education market, which has attracted venture capital from around the world in recent years. Of the 28 edtech unicorns in the world, eight are from China, according to market intelligence firm Holon IQ report.

A unicorn, in startup parlance, is a private company valued at over $ 1 billion.

Online education has boomed around the world, especially during the global pandemic. From a forum report, about 1.2 billion students in 186 countries were out of school in 2020 due to COVID-19 and related restrictions. Global investment in edtech will grow from $ 18.66 billion in 2019 to $ 350 billion by 2025, the report adds.

If China closes its doors to global capital looking for opportunities in the edtech space, money may be looking for opportunities in countries like India with large populations of students and early-stage professionals. careers. 81.3% of Indian population is under 45, according to Indian census 2011.

Although India currently only has two edtech unicorns – BYJU and Unacademy – the industry has grown significantly over the past year.

BYJU is currently the world’s largest edtech startup by valuation, estimated at $ 16.5 billion. The Bengaluru-based company has raised $ 2.7 billion over the past decade, from renowned investors like Prosus, General Atlantic, Tencent, Qatar Investment Authority (QIA), Tiger Global, Silver Lake and more.

In addition to this, the Indian Government’s National Education Policy (NEP) of 2020 which promotes digital and distance learning will further strengthen the segment in India.

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