Nabow is a One-Stop Destination for All the Latest and Greatest in the World of Technology News and Innovations.
⎯ 《 Nabow • Com 》

China’s $100 Billion Tutoring Ban Backfires, Spawning Black Market

2023-07-21 06:18
President Xi Jinping’s attack on China’s after-school tutoring industry was meant to ease the burden on households. But
China’s $100 Billion Tutoring Ban Backfires, Spawning Black Market

President Xi Jinping’s attack on China’s after-school tutoring industry was meant to ease the burden on households. But for many middle-class families, those efforts have had the opposite effect.

In July 2021, the government launched a sweeping clampdown on its private tutoring sector, banning them from providing for-profit classes on school curriculum subjects. The objective was two-fold: easing the burden on families, including overworked students and parents struggling to pay tuition, and curbing what it deemed “disorderly expansion of capital” in what had become a $100 billion education industry.

The high-profile campaign, widely known as “Shuang Jian” in Mandarin, or “Double Reductions,” drove legions of tutoring companies into the red or into bankruptcy in some cases, and wiped billions of dollars off the market value of listed tutoring firms, resulting in tens of thousands of layoffs.

But interviews with several parents in cities including Shanghai and Shenzhen found that spending on after-school tutoring actually rose for many households, especially since the start of summer holidays — the first school break since the end of Covid restrictions. Parents eager to give their kids a head start in education say they’ve turned to expensive, underground tutoring services which have mushroomed across the country.

This suggests that two years since the crackdown, one of Xi’s signature economic and social policies may have fallen short of its goal. It also underscores the challenges China faces in tackling some of its long-term structural headwinds, namely its declining birth rate and yawning wealth gap.

Many question the effectiveness of such a ban when the system of entrance exams, in which high schools and colleges admit students solely based on scores from once-a-year tests, still prevails. China’s college entrance exam, or gaokao, is notoriously competitive, with over 10 million students taking exams each year. Getting into an elite college often means a greater chance at securing a well-paid job, meaning demand for test preparation remains strong.

“Our burden has not been reduced at all,” said Sarah Wang, a 40-year-old mother who works at an e-commerce company in Shanghai. She described the competition to get into good schools as “thousands of troops and horses pushing and shoving to cross a single-plank bridge.”

She now spends 50% more than she used to on in-person tutoring sessions for her only child, a fifth grader. As her daughter starts junior high school and signs up for more difficult subjects such as physics, she expects the tuition, now around 300-400 yuan ($42-$55) per session, to rise further.

Middle-class parents in other parts of China spoke of similar experiences, with some citing even bigger price increases. Many private tutors who used to teach big classes run by major education companies now teach smaller groups, in many cases one-on-one, to avoid detection by officials. To make up for the loss in student numbers, many are charging higher fees, according to parents and private tutors.

Cathy Zhu, a Shanghai-based financial services professional in her 40s, said tuition for her son’s mathematics tutoring class has nearly doubled to 300 yuan ($42) per session. “As long as the high school and college entrance system still exists, there is absolutely no way to achieve such ‘reductions’,” she said.

China’s Ministry of Education did not respond to a Bloomberg email seeking comment.

There are some officially-sanctioned, large-scale online tutoring classes that are much more affordable. But many of these online classes aren’t popular with middle-class parents, who worry they don’t offer adequate guidance and supervision.

Private tutoring fees, which now easily exceed 100,000 yuan a year in cities such as Shanghai, are now being blamed for exacerbating social problems including a low birth rate and growing inequality. Rising costs of raising children, along with sky-high housing prices, are discouraging young people from getting married and having children, according to analysts. Poorer families are unable to afford private tutoring, potentially putting their children at a disadvantage in school and, later, their careers.

Competition over gaokao and the breakneck expansion of the country’s universities over the past two decades have also resulted in an oversupply of graduates without practical vocational skills needed by many employers. University graduates in China are finding it increasingly hard to find white-collar jobs amid a flagging economy. In face of soaring youth unemployment, the government has been calling for stepping up vocational education.

“That’s the consequence of a rampant and unsustainable expansion of the higher education system in response to parents’ desire for their children not to get their hands dirty for a living,” Andy Xie, an independent analyst and former chief Asia economist for Morgan Stanley in Hong Kong, said in a column published this month. “The solution is an adjustment in parental expectation.”

Crackdowns and Circumventions

The clampdown on private education was part of Beijing’s increased scrutiny of businesses, including big technology firms like Ant Group Co. and Tencent Holdings Ltd.

There are signs policymakers are starting to backpedal on some previous restrictions in an apparent bid to boost confidence among entrepreneurs as the world’s second-largest economy stagnates. On Wednesday, the Communist Party and government said they would treat private companies in the same way as state-owned enterprises. The party’s stance toward the private sector is closely watched in global markets, and the announcement was seen as the latest example of a shift in tone. Yet most analysts said the move, while reflecting an eagerness to bolster business confidence following crippling pandemic restrictions, didn’t represent a dramatic policy reversal.

As summer vacation kicked off earlier this month, there was little sign of change as parents around China searched for tutors to help with studies during the school break. Besides high tuition costs, common complaint among parents has been the difficulty of finding qualified tutors in the absence of public information on teachers’ credentials.

In a red-brick commercial building in Shanghai’s downtown district of Jingan on a recent weekend, a Bloomberg journalist witnessed scores of parents talking to staff of a private tutoring company, inquiring about the curriculum and qualifications of their teachers. In an apparent bid to circumvent regulations, the company’s marketing pamphlets labeled its mathematics class as “thinking,” while a Chinese class was called “literary linguistics.” Tuition was listed at around 300-500 yuan per session.

As the campaign nears its second-year milestone next week, authorities around the country are ramping up their scrutiny of the tutoring sector. In a recent report, the state-run China Education Daily warned of tutors engaging in illicit academic services disguised as non-curricular programs such as singing or painting.

In Hefei, capital city of the eastern Anhui province, local authorities carried out 77 raids of education institutions on June 28, according to a report by the People’s Daily, the flagship newspaper of China’s Communist Party. Many of those violating the rules were operating in hotels and apartment buildings, conducting curriculum tutoring under labels such as “education consultation,” the report said.

Jiangsu, a wealthy coastal province that borders Shanghai, recently renewed its crackdown on illicit tutoring classes disguised as “housekeeping” or “consulting,” state media reported. The campaign over the past two years has slashed the number of after-school tutoring firms in the province from nearly 9,000 to just 205. The southeastern province of Fujian recently launched a similar crackdown, mobilizing neighborhood committees to carry out inspections of tutoring activities, including summer camps. It also urged people to contact government offices to report illegal tutoring.

Such illegal tutors include public school teachers moonlighting after school hours.

“Most of them also have a mortgage and children to take care of,” said Lily, who used to recruit students for New Oriental Education & Technology Group, Inc.’s overseas test prep programs in Anhui, asking to be identified by only her English first name. She now runs an English tutoring business for students preparing to study abroad, and knows of school teachers who augment their meager pay by working as private tutors. “They can’t quit simply because of the ban.”

--With assistance from Kevin Dharmawan.