Private-School Owners Jittery Over Proposed Restrictions

(Beijing) – Private-school operators said a proposed government ban that would prevent for-profit institutions from offering classes from grades one through nine could dry up private investment in China's booming education sector and affect the quality of teaching.

The country's top legislature, the National People's Congress (NPC), which started debating the latest draft revision to a 2002 education law on Monday, is considering allowing only private institutions registered as nonprofits to offer classes for first-through-ninth-graders, sources with knowledge of the matter told Caixin. For-profits would be limited to running kindergartens, offering classes from grades 10 through 12 plus university courses.

If the amendment to the Law on the Promotion of Non-Public Schools is approved during the eight-day NPC session, it will affect 12 million students.

It will deal a severe blow to many private schools as it severs ties between private investors and schools enrolling students 7 to 16 years old, said Zhang Jieting, chairman of Siwa Enterprises & Investment Group, which owns Beijing 21st Century International School.

"Most private schools operating in China receive virtually no support from the government, and they won't be able to compete with public schools without private funds," he said.

Nonprofit schools could get tax cuts, government subsidies and preferential terms on land use. But they need to get government approval when setting tuition fees and need to follow the government's complex enrollment requirements, which have made such schools an unattractive option for private investors.

Lawmakers were pushing the amendment to reduce inequalities in access to basic education, sources said, but critics said it signals the government's attempts to rein in private schools, some of which have moved away from teaching ideology and morals as mandated in the party-run school system.

There are three types of private schools in China. The first, targeting expatriate families and open only to foreigners, will not be affected by the new rules. Reputable international schools that have set up branches through a Sino-foreign joint venture, such as elite English boarding schools Dulwich College and Harrow, are already limited to offering preschool education and classes for grades 10 to 12, a report by industry information provider International School Consultancy showed.

Chinese-owned private bilingual schools such as Beijing 21st Century International School, which follow a Western curriculum and have seen enrollment numbers grow quickly as parents seek an alternative to the public schools' rigid teaching style, would be squeezed.

Zhang says that if the ban is passed, he will be forced to spin off the section of his school that offers classes from grades one through nine and reregister it as a nonprofit, while running the kindergarten and senior high school operations as a for-profit. This will affect access to funding and make it difficult to maintain consistent teaching standards at the two operations, Zhang said.

A senior administrator at Hailiang Education Group, a Hangzhou-based private school listed on the Nasdaq Stock Market, said the school was considering registering as a nonprofit. But this would affect its teaching quality and ability to expand operations because the new law would certainly cool private investment in the sector, he said.

The number of private schools in China rose 24 percent from 2011 to 2015 to 162,700, statistics from the Ministry of Education showed. But only about 10,700 schools offering primary and middle school classes would be affected by a change in legislation.

Some regional education authorities, however, have signaled they will tighten restrictions on private schools even before changes to the national law have passed. The Shanghai Municipal Education Commission said it plans to limit foreign investment in schools that offer classes through grades one to nine, according to a statement on its official account on social media platform WeChat on Oct. 24.

Authorities allowed private schools to make some profit in the past because they wanted the sector to grow, said Xia Guming, a deputy principal of Hangzhou Foreign Language School, a private bilingual school.

But the new change makes sense because operators of private schools need to understand that schools are places to offer a public service instead of making money, he said.

Contact reporter Li Rongde (rongdeli@caixin.com); editor Poornima Weerasekara (poornima@caixin.com)