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China Moves Against Education Companies, Causing Shares to Plunge

  • July 26, 2021

Chinese regulators on Monday banned tutoring companies from making profits, a move that sent their shares plummeting, erasing tens of billions of dollars from the value of the country’s once blistering education sector, as Beijing turns its focus to the growing financial burden that students — and their parents — face.

Some of China’s biggest publicly listed education companies lost significant chunks of their value as investors ditched them following the announcement of rules that require all companies that offer curriculum tutoring to register as nonprofits.

The rules will also restrict new foreign investment, once a key avenue for those companies to raise money. They are the latest in a series of moves by China to rein in its technology sector that has hit stocks of its biggest companies, in sectors as diverse as ride hailing and music licensing. Regulators say that they are tackling privacy, cybersecurity, and antitrust concerns, directing their crackdown at the country’s thriving internet industry.

Koolearn Technology, which provides online classes and test-preparation courses, said that it expected the rules to “have material adverse impact” on its business. Its stock lost 33 percent on Monday. A handful of other Hong Kong-listed education companies, including New Oriental Education Technology and Scholar Education Group, along with the U.S.-listed companies Gaotu Techedu and TAL, issued similar statements. TAL lost 71 percent of its value on Friday, while Gaotu lost 63 percent.

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