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Education Stocks Weaken as Beijing Vows Tighter Regulation

By Bloomberg / Jul 10, 2019 02:34 AM / Finance

Photo: VCG

Photo: VCG

Shares of Chinese education companies fell in Hong Kong after the government said it would tighten oversight of compulsory schooling and businesses providing tutoring services.

China Maple Leaf Educational Systems Ltd., China Xinhua Education Group Ltd., China New Higher Education Group Ltd. and Wisdom Education International Holdings Co. all retreated at least 3.2%.

New guidelines issued by the State Council covering the first nine years of schooling aim to better regulate "noncompliant, off-campus" classes and competition. The government also said officials would oversee registration, fee, advertising and antitrust issues for public and private schools.

In August, China issued draft legislation to amend rules governing the lucrative private education industry, troubling investors who regarded the sector as a safe bet amid escalating trade tensions with the U.S.

Rather than spending extra time on academics outside of school, Beijing wants students to master multiple skills in sports and art, the government said in a statement Monday.

The new rules could have a long-term impact on demand for after-school tutoring, China International Capital Corp. analysts Natalie Yue Wu and Yuzhong Gao wrote in a note. The guidelines also prohibit the use of foreign curriculum and textbooks, which would hurt Maple Leaf, according to Citigroup Inc.

Related: In Depth: Famous Prep School Runs Afoul of Government Crackdown

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