NYSE-listed Chinese edtech companies New Oriental and TAL Education canceled their June quarter earnings releases as Beijing continues its crackdown on the sector.
The two largest private tutoring companies in China both announced the cancellation of their quarterly results that were originally scheduled for this week, citing “recent regulatory developments” with no further elaboration.
China’s after-school tutoring industry has been in turmoil since the government said at the end of July that edtech companies must operate a not-for-profit model, and banned them from raising capital through IPOs. New Oriental and TAL Education’s share prices have dropped by more than 70% in the past month.
China’s education system is still exam-oriented, and banning after-school tutoring may make parents even more anxious, leading to the misallocation of educational resources, argues Lu Yi, an associate researcher at Fudan University in Shanghai. A black market has reportedly already emerged as families’ demand for educational services remains high.
Netizens have even joked that New Oriental will hold a 45-day long training camp on a cruise ship, and the students will only receive tutoring when sailing in international waters. Michael Yu, CEO of the company, complained on his WeChat that the company’s detractors are relishing in New Oriental’s woes.
Still reeling from the government’s rebuke of Didi Chuxing after its IPO in New York, investors are increasingly concerned about China’s tough regulation, which resulted ina large selloff of US-listed Chinese stocks. Investor confidence was shaken to the point that Chinese officials met with global investors to reassure them about the market’s long-term promise. For China’s education giants, the road ahead is unclear, and their business models are in need of drastic overhauls in order to comply with the new policies.