The Strategist

EdTech companies in China plummet after new regulations

07/27/2021 - 08:31

Shares in Chinese education technology (EdTech) companies plummeted after the country's authorities announced new regulations for the sector.

Thus, quotations of Hong Kong market leader New Oriental Education & Technology fell by 66% in two days. Koolearn Technology lost almost 50% of its market capitalisation and Scholar Education shares plummeted 57.7%.

According to new requirements published by Xinhua news agency, local authorities must henceforth stop issuing new licences for establishing after-school education centres, and all companies operating in the country offering such services must re-register as non-profit organizations. In addition, companies are no longer allowed to go on the stock exchange to raise capital, nor are they allowed to receive funding from public companies or attract foreign investors. Education providers are now also banned from advertising their courses - both in the media and on billboards and the internet.

China's decision effectively is wiping out the $120 billion extra-curricular industry, while statistics from the Chinese Society of Education show that more than 75 per cent of 6- to 18-year-olds receive extracurricular tuition from such companies.