China\’s for-profit, after-school tutoring classes to convert into a non-profit organization – Asks China\’s governing body.
According to this, the Chinese government askes companies and institutions teaching the school curriculum must go non-profit and not pursue IPO\’S or take foreign capitals, including mergers and acquisitions, franchises, etc. Additionally, they have been banned from conducting classes during weekends and holidays to reduce the burden on young students. The new rules shocked the market, putting China\’s $100 billion + private Edtech industry at serious risk.
Education is expensive these days. And Chinese government believes that the high fees of private coaching classes are discouraging young families from having children. Parents are unable to afford the high cost of schooling and tutoring for their kids. Lowering inequality is one of China\’s main focuses, and education is for the public interest, which shouldn\’t be overly privatized.
China\’s ageing population is more than the young population. And this seems a major concern to the Chinese government. It is for the same reason that it has recently changed its two children policy to three children per family.
Lillian Li, a Chinese investor, wrote in her Twitter thread – \”China\’s biggest woes in the future are its aging demographic and lack of children. Advertisements selling status anxieties to get kids into after schools are rife\”.
This drastic move by China could, however, be beneficial for India.
How Will It Impact The Indian Market?
Edtech investors earlier had an option to choose between India and China. However, after the Chinese government imposes this regulation, investors will give importance to India. This can turn out to be a great time for Indian companies to raise money.
India is a well-regulated market and has attracted private equity investment of around $4billion in the last five years, which has led to the emergence of global Edtech leaders like Byju\’s commanding a valuation of US$ 15 billion. Unacademy has also signed an MoU with the Government of Karnataka to provide free training to 4,500 students aspiring for competitive examinations as a part of its CSR initiatives, and the eligible students would be chosen through online tests. They will be offered free tuition, scholarships, and complimentary Unacademy Plus memberships.
According to reports, India\’s education system is one of the largest globally, with more than 271 million students. Lockdown due to covid has also resulted in a tremendous increase in investment in the Edtech sector. India\’s ed-tech firms are looking to raise money, considering IPO as a method, as Zomato did, can attract a lot of funds.
Ultimately, it is about demand and supply. With the restrictions being imposed in China, the supply gets limited, and it’s here where India comes into the picture and fills the gap.