The Chinese government believes online education is bad for students, parents and the society

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The Chinese government believes online education is bad for students, parents and the society
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  • The Chinese government is forcing the $100 billion private tutoring and online education sector to go non-profit.
  • The move is also said to be in line with Chinese president’s Xi Jinping’s top priority at the moment — boosting the declining birth rate in China.
  • India may turn out to be a possible beneficiary of China’s latest regulation on the edtech industry.
The government of China has pulled the rug from the edtech industry, with its latest regulation. The country is now forcing its $100 billion private tutoring and online education sector to go non-profit.

To make matters worse, the Chinese government has also deprived the edtech companies from going public, taking foreign capital or issuing stocks if already public. This has shut all doors for these companies to make any form of capital and for investors to get their 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, apart from the edtech startups that are operational in the country.

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Top Chinese edtech startups and their investors:
Chinese edtech firmsInvestors
YuanfudaoDST, CPE, Temasek, Trustbridge
Huohua SiweiTrustbridge, GSR, GGV, Tencent, Carlyle, Sequoia China
ZuoyebangSequoia China, SoftBank Vision Fund, FountainVest, Tiger Global
ZhangmenShunwei Capital, Warburg Pincus, CMC Capital
KnowboxTAL Education Group, Bertelsmann Asia Investments, Alibaba Group
iTutorGroupAlibaba Capital Partners, Qiming Venture Partners
HuikeChina Oceanwide, Qianhe Capital, Fosun RZ Capital
HujiangMinsheng Investment Group, Baidu

According to a Bloomberg report, the nationwide crackdown on edtech actually stems out of a deeper backlash against the new-age educational businesses. The excessive tutoring not only torments youth, but also burdens parents with expensive fees, the report added. The edtech segment has also been accused of causing social inequalities.

Edtech is allegedly triggering a social inequality among urban and rural citizens of China by providing additional coaching to those who can afford it. This especially has a greater impact in tutoring students for China’s university entrance exam, gaokao, according to media reports.

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The nine-hour-long 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 really high stakes exam. Therefore, it is seen as one of the most brutal educational assessments in the world.

According to a report by news and analysis platform Protocol, Chinese families are willing to shell out an average of 11% of their annual family expenses for their Children’s future success. This does create inequalities among those who cannot afford to pay for additional education systems.

Besides this, the policy is said to be in line with Chinese president’s Xi Jingping’s top priority at the moment — boosting the declining birth rate in China. Affordable education is likely to promote people to have more than one child.

China’s latest regulation on edtech:

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Companies and institution that teach the school curriculum must go non-profit
These institutions cannot pursue an IPO or raise any foreign capital
Listed companies will not be able to issue stock or raise money in stock market
Foreign companies cannot acquire or hold shares in school tutoring companies
All vacation and holiday curriculum tutoring is prohibited
Online curriculum for kids below six years of age in banned
Companies cannot teach foreign curriculum or hire foreigners

This is not the first time that the Chinese government has shown interest in the nation's edtech industry. On March 31 this year, China’s Minister of Education Chen Baosheng announced that the education department should limit the timings for online learning to ensure that primary and secondary school students get enough sleep.

The ministry added that all live online broadcasting training activities should end no later than 9 p.m.

Chinese crackdown a boon for Indian edtech?

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China is the largest education market in the world, which has attracted venture capital, from all over the globe, over the last few years. Out of the 28 edtech unicorns in the world, eight are from China as per a market intelligence firm Holon IQ report.

A unicorn, in startup parlance, is a private firm valued at or more than $1 billion.

Online education has been booming around the world especially during the global pandemic. According to a weforum report, about 1.2 billion students across 186 countries were out of school in 2020 due to COVID-19 and related restrictions. The global investment in edtech will grow from $18.66 billion in 2019 to $350 billion by 2025, the report added.

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If China shuts its doors to global capital looking for opportunities in the edtech space, it is possible that money may seek out opportunities in countries like India with a large population of students and early career professionals. 81.3% of India’s population is under the age of 45, according to Census of India 2011.

Though India has only two edtech unicorns at the moment — BYJU’s and Unacademy — the sector has been gaining a lot of momentum over the last one year.


The Chinese government believes online education is bad for students, parents and the society
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BYJU’s is currently the biggest edtech startup in the world in terms of valuation, at an estimated $16.5 billion. The Bengaluru-based company has raised $2.7 billion in the last decade, from marquee investors like Prosus, General Atlantic, Tencent, Qatar Investment Authority (QIA), Tiger Global, Silver Lake and more.

Besides this, the Indian government’s National Education Policy (NEP) of 2020 that promotes digital and remote learning is going to further boost the segment in India.

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