China’s After-School Tutoring Companies Must Register as Nonprofits by Year-End
What’s new: China’s Ministry of Education has set a year-end deadline for after-school institutions that teach school curriculum subjects to register as nonprofit entities, according to a sweeping new national regulation targeting the industry.
The announcement published on Tuesday confirms a Caixin report last month that Beijing’s municipal education commission had told executives of leading tutoring companies to revamp their business models and become nonprofits by the end of this year. Sources told Caixin that these companies were told they could shift to senior high school tutoring, vocational training, lifelong education and other areas.
Such institutions may not enroll new students or collect tuition fees until their registration as nonprofit entities has been completed, according to the notice released (link in Chinese) by the Ministry of Education, Ministry of Civil Affairs and State Administration for Market Regulation.
The background: China launched a sweeping overhaul of its private education sector in July, aiming to reduce the burdens of homework and after-school tutoring on students, as well as financial pressures on parents.
The notice restricts curriculum-based tutoring institutions from raising capital through IPOs, and publicly traded companies will not be allowed to invest in these institutions through stock market financing or by acquiring their assets by issuing shares or paying cash. Foreign capital will also be barred from participation in such institutions.
The move led to sharp drops in the share prices of major education companies including New Oriental Education & Technology Group Inc. and TAL Education Group.
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