China recently announced a set of reforms for its private education companies. Its governing body, the State Council, has banned after-school tutoring companies from making profits, raising capital, or going public. It has also said that these companies cannot take online or academic classes for children under the age of six.
The move is being looked at as a setback to China's booming $100 billion edtech industry, backed by large investors such as Tiger Global Management, Tencent, Alibaba, Temasek and SoftBank.
The move is being looked at as a blessing in disguise for India, as investors will now be keen on diverting the funds to the second biggest edtech market in the world.
Reasons Behind China’s Move
The Chinese government has taken such a drastic step to ease pressure on school children and reduce the cost burden on parents. “The recent move is driven by the thought that it is promoting an unequal society and is against the spirit of a level playing field with respect to enhanced learning skills for only the rich and the affordable and hence the move,” said Yagnesh Sanghrajka, founder and CFO, 100X.VC.
China is facing the obstacle of an aging and declining population. To combat the concern, China aims to encourage more childbirth. And, on average, Chinese families reportedly spend 11 per cent of their annual family expenses on their children’s future. So, the latest reform is in line with Chinese President Xi Jinping’s priority to address the issue of the declining birth rate in China, as making education affordable is one of the key drivers to encourage parents to have more than one child.
“Also, the pandemic has disrupted the education system all over the globe. This decision will help the students to focus on their studies more. This step can also increase the revenue generation inside the country as the pandemic has shaken the economy of all the countries,” added Ankit Shyamsukha, CEO, ICA Edu Skills.
Read More at https://www.entrepreneur.com/article/378609
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