China targets private tutors in its crackdown on free enterprise

Many Chinese parents feel forced to enroll their children in after-school tutoring to prepare them for a uniform university entrance exam that determines if they get a identify at top universities. That has given rise to a $100 billion for-profit tutoring industry that provided job opportunities for recent university graduates. 

In recent months, Chinese leader Xi Jinping has all but sunk many private tutoring firms by banning weekend classes and blocking foreign investment, among other sweeping restrictions. This has wiped billions of dollars in value from stocks in those companies.

Why We Wrote This

China’s recent crackdown on the for-profit tutoring industry highlights a new phase of a long-running tussle between state control and free enterprise. It also underscores Chinese leader Xi Jinping’s push to reduce inequality.

The squeeze on tutoring is part of a broader crackdown on sectors of China’s economy in which private companies are judged to have been given too free a hand to make profits. Mr. Xi has expressed concern about rising inequality in China and cast his campaign as an effort to put “shared wealth” first. 

But Mr. Xi confronts major challenges to reducing inequality. And canceling weekend cram schools may not matter to the high who can provide private tutors, while putting pressure on middle-class families for whom such classes functioned as child care while they worked. 

“We have to use more time educating them on weekends and holidays,” says Li Liangjie, the father of two young sons. 

Over the past decade, Wang Wenjing rose in the ranks of China’s private tutoring industry, advancing from teaching English to managing operations in one of the country’s biggest online cram schools.

But since the government announced sweeping restraints on private tutoring this summer – part of Beijing’s campaign to tighten the reins on large swaths of the private sector – Ms. Wang has watched the once booming business free fall.

Dozens of new rules published in July forbid for-profit tutoring of chief school subjects and banned such teaching on weekends and holidays, while barring the tutoring companies from raising capital or receiving foreign investment. The measures have crushed the value of an industry once estimated to be worth more than $100 billion.

Why We Wrote This

China’s recent crackdown on the for-profit tutoring industry highlights a new phase of a long-running tussle between state control and free enterprise. It also underscores Chinese leader Xi Jinping’s push to reduce inequality.

Ms. Wang, who is operations director at Homework Help in Beijing, expects many tutoring firms to go bankrupt. “Many of my friends and colleagues lost their jobs in July or August and nevertheless have not found other work,” she says by phone from Beijing. Homework Help had to close nine of its 14 branches in cities around the country and has laid off about half of its workforce, or about 20,000 people, she says.

The sudden blow to Ms. Wang’s industry is just one example of how Chinese leader Xi Jinping has taken aim at what are considered the excesses of capitalism in the country. Among the targets of the government’s new policies, regulations, and fines are online marketplace Alibaba, ride-hailing app Didi, and food-delivery platform Meituan, along with real estate developers and the video-gaming industry.

The sign of the online learning app of Chinese private tutoring service provider Gaotu Techedu Inc. is seen next to its mobile app in this photo illustration taken Aug. 20, 2021. China has cracked down on for-profit tutoring companies, erasing billions of dollars in value from their stocks.

Mr. Xi has called for-profit tutoring a “stubborn malady” that has pushed up the cost of education, burdening families and discouraging couples from having more children as China’s population grays.

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