Strict regulations put the brakes on China’s $ 75 billion online education sector

A student from Beijing Jinyuan School puts his cell phone in the safe in the classroom on March 1, the first day of the new semester.Photo: Li Hao / GT

Some of China’s K-12 online education providers have stopped hiring, and some have even reportedly cut staff, as stricter regulations hold back the booming and lucrative private tutoring market, valued at over $ 75 billion.

Strengthening regulatory oversight of online education platforms is part of China’s national campaign to tackle what has been described as chaotic market operations as well as to ease the burden on students. While causing immediate effects on the industry, the efforts will ensure long-term healthy development, analysts said.

“There are still jobs for experienced workers in the online education industry, but vacancies have fallen from the first quarter and much of last year,” a headhunter said. Beijing-based, which has long-term contracts with some of the major online education platforms, told the Global Times on Monday on condition of anonymity.

A Shenzhen-based private tutor for an online education platform, who prefers not to be identified, told the Global Times on Monday that the school is limiting teachers’ class hours likely due to more regulatory control. strict.

The K-12 Gaotu education platform will lay off 30% of its employees, which means several hundred or even 1,000 jobs, starting this week as part of a “strategic adjustment”.

According to the news site, the programs to be cut relate to basic education services for children aged 3 to 8 years.

The adjustment follows China’s new law on the protection of minors, which comes into force on Tuesday. Under the new law, kindergartens and private schools are prohibited from providing primary education to preschool minors.

Last week, China’s top leaders called for easing the burden on primary and secondary school students, as well as comprehensive regulation of private tutoring institutions.

The message sent the shares of Chinese online education operators listed in the United States plummeting, some falling more than 20%. It has also raised concerns about the fate of planned IPOs of some tutoring companies.

Zuoyebang, another large online education company backed by Alibaba, is also said to have halted recruiting sales and tutoring staff since Wednesday.

On Chinese social media platforms, new college graduates complained that their contracts with Tencent-backed online educational institutions such as Yuanfudao and Zuoyebang were canceled by employers, as hiring plans were canceled.

A college graduate surnamed Ji in northern China’s Tianjin Municipality received an offer from Yuanfudao and was due to go to work on Monday. But Ji told the Global Times that a member of the company’s human resources staff suddenly informed her at 6:00 p.m. Thursday that the offer had been canceled, citing a lack of training resources for new employees.

“Yuanfudao hasn’t given me any compensation for their mistake yet,” Ji said, noting that she was awaiting further notification from the company.

Some industry insiders are also concerned that capital will be withdrawn from online education and flowing into other industries.

“The enhanced surveillance will help dispel some chaos and is conducive to the long-term development of the industry, forcing online education operators to return to the substance of education,” a door told The Global Times on Monday. – speech of the Chinese tutoring platform VIPThink, referring – excluding concerns.

The regulatory changes will create a healthier growth environment for students and reduce parental anxiety, the spokesperson added.

China’s online education sector has grown rapidly, with middle-class parents splurging on their children’s private education to ensure they outperform their peers on exams.

The COVID-19 outbreak, which prompted classroom education to move online, has also fueled the boom. In 2020, China’s online education industry was valued at 480 billion yuan ($ 75.41 billion), with a user scale of 351 million people, according to a report released by iiMedia Research.

Analysts said the overhaul would also help the industry tackle lingering issues of misleading advertising and overpricing.

In early May, the Beijing Municipal Market Administration and Surveillance Bureau imposed sanctions on Zuoyebang and Yuanfudao for unfair competition and misleading advertising.

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