China Takes Action Against Education Companies, Causes Stocks to Drop

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Chinese regulators banned tutoring companies from making a profit on Monday; As Beijing shifts its focus to the growing financial burden of students, a move that has caused its shares to plummet and wiped tens of billions of dollars from the value of the country’s once booming education sector. parents – hundred.

Some of China’s largest publicly traded education companies have lost a significant portion of their value as investors deserted them after the announcement of rules that required all companies offering curriculum training to register as nonprofits.

The rules will also restrict new foreign investment, which was once an important way for these companies to raise money. These are the latest in a series of Chinese moves. rein in the tech industry hit the shares of the largest companies in various sectors, ranging from salute and music licensing. Regulators say they are tackling privacy, cybersecurity and antitrust concerns, and are putting their pressure on the country’s booming internet industry.

Koolearn Technology, which provides online courses and test preparation courses, rules are expected to have “significant adverse impact” at work. Its shares lost 33 percent on Monday. New Oriental Education & Technology and Scholar Education Group, as well as US-listed Gaotu Techedu and TAL, made similar statements. TAL lost 71 percent of its value on Friday, while Gaotu 63 percent.

For years, China’s private education sector has been one of the most attractive to global investors, who throw billions of dollars into publicly traded companies that promise to benefit hundreds of thousands of families striving for better opportunities through education. By Monday evening, most of that money was gone in Asia.

Many middle-class families in China pay for post-secondary education to help their children excel in the national exams that determine their future. Last week, the country’s top governing body posted a comment targeting the sector, it revealed plans to “reduce students’ homework and off-campus education burden.”

Analysts have quickly recalibrated their assessments of prospects for the industry, which was once valued at more than $100 billion by Wall Street banks like Goldman Sachs. On Monday, the bank’s analysts estimated it would be worth $24 billion in the coming years.

The news echoed in Chinese stock market indices. The Shanghai Composite index closed down 2.3 percent and Hong Kong’s Hang Seng index fell 4.1 percent.

Separately, regulators over the weekend ordered Chinese tech conglomerate Tencent to terminate all exclusive music licensing deals with record companies and fined around $78,000 for unfair practices. Shares of Tencent Music, which trades in the United States, fell more than 13 percent in premarket trading on Monday.

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