Chinese Education Stocks Plummet as China Decides to scale Tutoring Companies into Non-Profits

Students from China wearing masks amid Covid-19 pandemic by Unsplash
Students from China wearing masks amid Covid-19 pandemic by Unsplash

In a new shock to the Chinese stocks, shares of Chinese education companies plunged on Friday. The news followed a report by Bloomberg that stated that China might ask companies that offer school curriculum tutoring to become non-profits. The decision may cause the Asian country over $100 billion in the education technology industry.

China is currently considering changes to rules related to IPO. According to the report, several platforms will be blocked from going public or going public. The firms listed in the report can no longer invest or acquire education firms that teach school subjects. According to the same report, an education ministry spokesman said relevant policies are still being formulated.

Shares of Tal Education Group which is listed on NYSE plunged more than 55% in the premarket trade. The platform runs after-school tutoring programs for primary and secondary school students. Meanwhile, New Oriental Education & Technology Group tumbled 62%.

On the other hand, Gaotu Techedu dropped 59%. Koolearn Technology which is located in Hong Kong sank 28%. Shares of the E-commerce giant Alibaba also sank by 3% because the tech giant has made heavy bets in the online education sector before.

China continues its crackdown on U.S. related stocks

Bloomberg stated in the report that the country made the decision to decrease the expensive fees for tutoring. Moreover, the reason is that China is encouraging births and lowering child-related expenses as part of their efforts to allow couples to have three children.