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By Han Wei / Nov 16, 2018 12:05 AM / Business & Tech

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China is tightening the screws on investment in preschool education following public outcries over several cases of child abuse at private kindergartens across the country.

China will not allow private kindergartens to sell shares to the public either by themselves or as part of asset packages, the State Council, the cabinet, said Thursday in a policy document.

Listed companies are not allowed to invest in private kindergartens through share sales or cash injections under the new policy. Private investors will be barred from backing public kindergartens.

In 2017, about 62% of China’s 255,000 kindergartens are backed by private investment, according to official data.

Following the news, New York-listed RYB Education Inc., a private kindergarten chain operator, plunged nearly 55% shortly after trading opened, wiping out more than $200 million of its value.

The restrictions are part of a broader preschool education reform issued by the cabinet, which set goals to provide more affordable preschools and increase public funding. By 2020, 85% of children between ages three and six should be enrolled in licensed kindergartens, the cabinet said.

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