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  • Private education firms in China could see a potential material hit to their operations following Beijing’s new education rules
  • The new rules aim to decrease workloads for students and ease financial pressure on families
  • Under these new rules, all institutes offering tutoring on the school curriculum will be registered as non-profit organisations and no new licences will be granted
  • News of the rules changes on Friday triggered a massive share sell-off in China’s $120 billion private tutoring sector
  • Companies impacted included US-listed TAL Education Group, whose shares dropped 71 per cent on Friday
  • There are currently no details around the implementations of the rules and when or how exactly they will impact the school education industry

Private education firms in China are preparing for a material hit to their operations after Beijing announced new rules.

The new rules aim to decrease workloads for students and ease financial pressures on families.

Under the new rules, all institutes offering tutoring on the school curriculum will be registered as non-profit organisations and no new licences will be granted.

News of the rule changes triggered a massive share sell-off in China’s $120 billion private tutoring sector. Companies impacted included US-listed TAL Education Group, whose shares dropped 71 per cent on Friday.

On Sunday, TAL said in a statement that it expects the new rules to have a material impact on its after-school tutoring activities, which “may adversely affect” its operations and prospects.

New Oriental Education & Technology Group, Koolearn Technology Holding, Scholar Education Group and China Beststudy Education Group all made similar statements on Monday.

China’s for-profit education sector has been under inspection as part of Beijing’s push to ease pressure on school children and reduce a cost burden on parents which has contributed to a drop in birth rates.

“The company is considering appropriate compliance measures to be taken, and expects such measures to have a material adverse impact on its afterschool tutoring services…,” New Oriental Education said in a statement.

There are currently no details around the implementations of the rules and how or when they will impact the school education industry.

“I personally have always stayed away from the education sector as regulations have been changing erratically for many years,”Portfolio Manager at Nuvest Capital in Singapore Dave Wang said.

“But the broader view is that the Chinese government has always been more particular on sectors that have widespread social implications. The increasing difficulty for investors and companies is that the boundary seems to be extending … (and) no one knows what might be next.”

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