A fight for ideological control and concerns about social pressures underpin effort.
Since news of drastic new restrictions on tutoring companies leaked on Friday — and were confirmed at the weekend — the share prices of US-listed industry leaders TAL Education, New Oriental Education and Gaotu Techedu have collapsed by about 60 per cent on average. Goldman Sachs has estimated that the restrictions could reduce the industry’s annual earnings from $100bn to less than $25bn.
Under the new rules, issued by the general offices of both the party and the State Council, or Chinese cabinet, core parts of tutoring companies’ businesses can only be conducted on a “non-profit” basis. They also say that companies in the sector will no longer be allowed to use a corporate structure called a variable interest entity, or VIE, which is employed by many Chinese companies in sensitive sectors to sell shares to foreign investors.
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