Caixin
Oct 14, 2021 03:18 AM
CHINA

Tutoring Shutdowns Leave Parents Holding the Bag

The State Council, China’s Cabinet, issued new rules in late July requiring sweeping changes to the after-school tutoring industry
The State Council, China’s Cabinet, issued new rules in late July requiring sweeping changes to the after-school tutoring industry

Before China’s crackdown on after-school tutoring in late July, a significant number of extracurricular training operations coaxed parents into preordering long-term courses with low prices, Caixin learned from industry insiders.

But as those institutions were forced to abruptly shut down amid the regulatory upheaval and some even went bankrupt, parents realized they were trapped with no classes to be taught and no tuition to be refunded, according to industry insiders.

The thorny issue is complicating the process for after-school tutoring companies to register as nonprofit entities by year-end under government orders. Parents are increasingly concerned over whether they can get their money back.

Before the launch of the overhaul in July, known as “double reduction,” some institutions used lower prices to promote presales of classes, with many parents purchasing courses that took one to three years to finish, Caixin learned from the China Association for Non-Government Education (中国民办教育协会).

OneSmart International Education Group Ltd., a U.S.-listed Chinese after-school tutoring business, Tuesday suspended operations. Before the announcement, parents who paid large sums for presold, long-term courses had been demanding refunds for days.

A parent in Beijing’s Xicheng District told Caixin that in June a salesperson from the OneSmart Education Group promoted discounted course packages for 15 months at 50,000 yuan ($7,750) and 30 months at 80,000 yuan.

Authorities have prohibited tutoring companies from charging prepayments for more than three months, but staff members told parents that the contracts complied with the rules. Industry insiders said tutoring institutions promoted presales with the aim of improving their cash flow, but the lowered prices would still result in business losses.

The State Council, China’s Cabinet, issued new rules in late July requiring sweeping changes to the after-school tutoring industry to reduce burdens on students, requiring after-school institutions that teach school curriculum subjects to register as nonprofit entities. In early September, the Ministry of Education set a year-end deadline for the requirement.

In a notice released Tuesday, the Ministry of Education urged that there should be a “clear timeline and roadmap” for after-school tutoring institutions to complete their registration as nonprofit entities before the year-end deadline. The ministry reiterated that the companies must stop enrolling new students and collecting tuition fees.

Contact reporter Cai Xuejiao (xuejiaocai@caixin.com) and editor Bob Simison (hello@caixin.com)

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