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New restrictions: what's in store for China's education sector?

China's updated "education" law has banned local companies from providing tutoring services, attracting foreign investment in the edTech sector and listing on stock exchanges.  Analysts predict that the government will soon refuse to register new education companies.

Changes are also afoot in the technological field where companies are not allowed to use foreign educational systems, even if the entire teaching system is currently based on them.   Additionally, educational organisations won't work on holidays, weekends and school holidays, and children under the age of 6 won't be able to study with tutors.  Major players in the market are already reporting a drop in revenues, and the bleak outlook for the financial future is forcing employees to move to organisations from other sectors.

Furthermore, the bill has had a major impact on the labour market because foreign teachers are no longer allowed to work in educational establishments under the new rules.  Chinese children, however, are allowed to take lessons from foreign teachers.  However, it isn't yet clear how this paradox will work in practice.

Investor interest in the Chinese EdTech giants is waning by the day.  Shares of the big 'education provider' New Oriental Education and Technology, listed on the New York Stock Exchange,already fell by 50%.  Analysts report that the monthly number of classes booked by students has dropped significantly. As a result, the average tutor's salary for a single lesson has fallen by several dozen per cent.  Parents are also no help for the market growth, because they are paralyzed in anticipation of further law bills, and have temporarily given up on tutoring sessions. This is costing EdTech projects dearly.  Previously, up to 75% of students aged between six and eighteen took extra tutoring lessons, while childcares often taught first-grade curriculum.


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