With winter break around the corner, Mrs Jia in Guangzhou is getting increasingly anxious, as she has not yet secured an online tutoring spot for her daughter who is studying in primary school.
Mrs Jia told Zaobao that her daughter was previously attending tutoring agency Xueersi under TAL Education Group, for language, mathematics and English classes. After the “double reduction” policy came out six months ago, the institution suspended in-person classes. Recently, Xueersi rolled out a new app called Ledu Youke (乐读优课), only for the app to be quickly removed.
Ledu Youke went live on 29 December 2021, stressing that it was a “licensed” tutoring institution and would provide online courses and services for primary and secondary school students from January this year. The next day, parents flooded the app and it had to halt registrations — but this only lasted for all of two days.
Confusion with 'cabbage price'
On 31 December 2021, Beijing and Shanghai both announced pricing standards for after-school curriculum-based tutoring, setting prices for online classes at 20 RMB (S$4.20) per person per 30 minute block, with the maximum fee per block set at 22 RMB, which is not more than 10% of the standard fee. The fees for Ledu were twice as much as the pricing standards.
Ledu’s pricing was based on Shanghai where it was based, while prices in Guangdong, Shandong, and Henan are all lower than Shanghai’s...
On the day the pricing standards were announced, Ledu was removed for adjustments to be made, and it said prices would be standardised to 22 RMB per class block. However, new issues arose, as Ledu’s pricing was based on Shanghai where it was based, while prices in Guangdong, Shandong, and Henan are all lower than Shanghai’s, and it is not known whether the students in those locations will be able to continue registering for classes.
Coming nearly six months after the double reduction policy, the government’s pricing standards is another measure by the authorities to bring the tutoring industry under control. Supporters think the new rules can bring the out-of-control tutoring industry back on track, while detractors are worried that the “cabbage price” (白菜价, i.e, as cheap as cabbage) set by the authorities will make it even harder for industry players to survive, and worsen the effects of the policy.
The "double reduction" policy started with the document Opinions on Further Reducing the Burden on Students in the Compulsory Education State from Homework and Extracurricular Training, calling for standardisation of tutoring.
These include rules such as extracurricular training institutions must not use national holidays, rest days, or summer and winter vacations to organise academic training; existing academic training institutions are to be registered as non-profit institutions; academic training institutions must never seek funding through public listing, and the capitalisation of operations is strictly prohibited.
The new rules were a bombshell for the education industry, leading to a wave of retrenchments and closures. The share prices of industry giant New Oriental fell by 90% over six months, with 60,000 staff laid off. In the end, this educational institution that was established nearly 30 years ago decided to stop its academic tutoring for primary and junior secondary students, and pivot to an e-commerce platform selling farm products.
For the anxious Mrs Jia, setting a "cabbage price" for tutoring not only adds to the burden of the institutions, but has exacerbated parents' mental stress.
For the anxious Mrs Jia, setting a "cabbage price" for tutoring not only adds to the burden of the institutions, but has exacerbated parents' mental stress. "Now everyone is sympathetic towards the institutions. With these prices, they cannot retain teachers; many good teachers will leave, and we don't know if the teaching quality can be maintained. "
Compared to previous market rates, which could easily be above 100 RMB or even hundreds of RMB, the pricing standards are much lower. Industry players told Zaobao that the pricing standards are generally less than half of the market rate, and accounting for overheads like rental, salaries, and utilities, the tutoring institutions earn practically nothing. Many are currently operating at a loss, and if the pricing standards are strictly implemented, more institutions would be expected to shut down or restructure.
The implementation of the pricing standards would also lead to foreign teachers leaving the industry. As foreign teachers earn nearly twice as much as local teachers, many institutions have slashed the quota of foreign teachers to save money. Zaobao understands that the Shenzhen and Shanghai branches of EF Education First are now almost all local teachers, and if the foreign teachers who have lost their jobs cannot get work visas quickly, they will have to leave China.
"And if we cannot earn profits, will the government cover us when we make losses?" - Operator of an English tutoring chain
At the same time, tutoring institutions are still waiting for the other shoe to drop. One operator of an English tutoring chain revealed that institutions around China are currently undergoing evaluation, and if courses are categorised as enrichment rather than academic, they would not be limited by the pricing standards. According to China’s methods of categorisation, examination subjects are “academic”, while activities that build character and skills like music, art and sports are “enrichment”. However, even in the same city, the same institution can be categorised as academic in one district, and enrichment in another district, resulting in students taking classes across districts.
This industry player described the current operational situation as a funnel, where water is not coming in at the top but the bottom is still dripping. "If the authorities categorise us as academic, the bosses may not do English tutoring anymore, because going by the guideline prices, there is no money to be made. And if we cannot earn profits, will the government cover us when we make losses?"
Lin Wen, chief expert on home education with the Guangdong Association of Teachers’ Continuing Education, said that the pricing standards will help to correct rising education fees and chase out capital from the education industry, so that education can go back to its original role as a public good, and nurture the innovative talents that China needs for its future competitiveness.
...these policies can be improved in terms of implementation, such as preventing local authorities from ramping up measures out of fear of responsibility, leading to one-size-fits-all “lazy governance”. - Lin Wen, chief expert on home education with the Guangdong Association of Teachers’ Continuing Education
Lin previously worked in the public education system, and observed that in recent years the tutoring industry has expanded too much under the influence of capital, suppressing the growth of public schools and leading to a loss of good talent from public education, making it increasingly “involuted” and exam-oriented. The double reduction policy implies that in the future, education in China will be focused on the school and home, putting greater demands on parents who used to push the responsibility for education to tutoring institutions.
However, she also noted that these policies can be improved in terms of implementation, such as preventing local authorities from ramping up measures out of fear of responsibility, leading to one-size-fits-all “lazy governance”. Also, it should step up publicity to educational institutions and parents, to get them to understand the intentions, direction and implementation of the policies, to change their thinking and mindset.
Low birth rate led to adjustments in housing prices and tutoring industry
Liang Hao, an associate professor of finance at Singapore Management University (SMU), said that from adjusting housing prices to correcting the tutoring industry, the deeper reason behind the policy adjustments last year was China’s falling birth rate. The government wanted to do all it can to reduce the burden on young people in starting a family, and encourage more couples to have children to ease the growing population crisis.
But for Mrs Jia, the policy has thoroughly killed any ideas she had of a second child. She said she and her husband are both working and if the children cannot get tutoring outside of school, she would have to put in more time to guide them in schoolwork. She thought out loud: “If I had one more, I’d have to stay at home full time to look after the children. With one more child and no job, is it worth it?”
Parents lose school fees after private education companies flee the scene
Over the past six months, white-collar worker Xu Ming (pseudonym) has focused his energy on one thing: recovering the school fees owed to him by an after-school training institution.
Xu had spent over 20,000 RMB on his daughter’s lessons at the Birmy English School in Zhejiang’s Hangzhou. But his money went down the drain after this after-school training centre ceased operations last September. He told Zaobao that around 700 to 800 parents were affected by the closure, and the amount involved exceeded 60 million RMB.
Speaking about the incident six months later, Xu is still fuming: “We enrolled our children in the classes because we trust the brand’s reputation. It has been doing business here for over a decade. Who knew that it would be the first to flee as soon as the double reduction policy was announced?”
Xu found out later from other parents that even before the policy was rolled out, there were already problems with Birmy’s capital flow. This after-school training institution not only has over 50 branches in Changsha, Xiamen and other areas, but also runs a company offering micro loans. In mid-June 2021, Birmy even conducted an enrolment drive in Taizhou, collecting over 6 million RMB in school fees. The money was then allocated to Birmy’s Changsha branch, which was in severe lack of funds. But this was still not enough to alleviate the cash flow shortage as a result of rapid expansion.
Angry parents reported their cases to the education and public security bureaus, and also protested in front of the person-in-charge’s house, but to no avail. The Taizhou Jiaojiang Bureau of Education told parents that the police had already opened an investigation into Birmy English, while relevant departments were still conducting a financial audit of the institution.
Teachers and employees who have suddenly lost their jobs with unpaid salaries and parents who are unable to recover their children’s school fees have all become victims of the situation.
Birmy English is not the only after-school training institution to fold following the implementation of the double reduction policy. Wall Street English, which has been doing business in China for over 20 years; OneSmart International Education Group Limited, which specialises in high-end one-to-one lessons; and Only English, which is headquartered in Shanghai, have all ceased operations over the span of six months.
Teachers and employees who have suddenly lost their jobs with unpaid salaries and parents who are unable to recover their children’s school fees have all become victims of the situation. Parents were also revealed to have incurred “education loans” because of the exorbitant school fees, revealing yet another problem of the industry.
Prof Liang told Zaobao that the “double reduction” policy targets the capital behind the education and training industry and seeks to contain the industry’s rapid expansion bolstered by capital. While the intention of the policy is good, its execution was too aggressive, and this could bring about side effects.
Liang said, “Training institutions are equipped with quality assets and educational resources. If they are given a buffer period to adjust and transform, it would help stabilise the expectations of parents, industry practitioners, and investors, thereby promoting the healthy transformation of the industry.”
"I think that this policy essentially provides a way out for education institutions that have long been struggling to survive." - Xu Ming, white-collar worker and affected parent
As parents from Taizhou concern themselves with rights protection, Xu saw the news about a full refund of fees paid for English lessons at a local “youth palace”, angering him even further, “The higher-ups only care about publicising their political achievements pertaining to the double reduction policy. They wouldn’t even bat an eyelid at all the parents who are complaining to no avail.”
Although he failed to recover the fees he paid, Xu is still enrolling his six-year-old daughter in offline English classes because “she mustn't lose at the starting line”.
Xu does not agree with the new pricing guide for after-school classes nor the ban on tutoring over the winter holidays. “My neighbour’s kid is still doing the same amount of homework as before. Double reduction may work in major cities, but in a third-tier city like ours, it is just the case where ‘the higher-ups have policies while the lower rungs have their own ways of getting around them’. I think that this policy essentially provides a way out for education institutions that have long been struggling to survive,” he said.
Diary of a former salesperson at an after-school education company
I lost my job three months after the double reduction policy was announced.
My surname is Yao — just call me Xiaoyao. I am 26 years old and went into sales at an after-school education company after graduating from university. My former employer OneSmart International Education Group Limited was one of the largest tutoring institutions in Shanghai. It had over 60 branches in Shanghai alone and at least 10,000 students from elementary school to high school.
My company specialised in one-to-one teaching, and each two-hour lesson cost between 800 RMB and 1,000 RMB. Is that expensive? I know of private one-hour gym lessons that charge 400 RMB per lesson!
After the double reduction policy was announced, enrolment and lessons continued but employees were not paid on time. On 12 October 2021, the company suddenly said that they would cease operations. My ex-boss was very sly — he still asked the teachers to conduct lessons during the week-long National Day holiday right before the closure just to use up a few more lessons and offset some negative equity.
Many parents made a lump-sum payment of hundreds of thousands of RMB, and some of them, not many, also came to us to complain about it. After all, parents who are able to pay this much money are mostly very wealthy and well mannered.
Apart from our wages, the fees that parents paid in advance are also as good as gone. Many parents made a lump-sum payment of hundreds of thousands of RMB, and some of them, not many, also came to us to complain about it. After all, parents who are able to pay this much money are mostly very wealthy and well mannered. Besides, in cases where we know that the company is about to close, we will not go against our conscience to accept hundreds of thousands of RMB in school fees.
Actually, I tendered my resignation even before the company closed down. It was too stressful and I only had one rest day per week, not to mention I often worked overtime late into the night. During my two years with the company, I gained 10kg. Not only did my health deteriorate but I didn’t have time to meet my friends.
And it was not until I became unemployed that I realised that the education and training sector is such a lucrative business. After tax, I earned 15,000 RMB a month — it’s really not that high — others in the industry got 20,000 RMB to 30,000 RMB a month after tax deductions. Of course, this is all in the past. With the government’s pricing guidelines, this profession won’t make you money anymore.
It’s relatively easier for salespersons like us to find another job; the ones who are really suffering are the teachers.
We have over 60 full-time teachers at our branch, and a lot of them are now offering private tuition lessons to their existing students because there is still a demand for tuition. But after this batch of students graduates, they may not be able to find new students. Coupled with the crackdown on private tuition classes, teachers are unable to recruit students openly and can only do so by word of mouth.
If the policy wasn’t executed in such a one-size-fits-all manner and some buffer time was given to institutions and parents, the side effects would have been minimised.
Although parents complained about the costly school fees in the past, none of them really wanted these institutions to close down because their children needed the lessons. I know the higher-ups want to reduce the burden on students, but has the passing rate of students taking the High School Entrance Exam been raised? No! In the end, the ones who benefit are wealthy parents who have the resources to look for the best teachers who can teach their children one-to-one. Middle-class families can only hope that institutions will help them find good teachers.
Is the double reduction policy good? Maybe yes in the long term, but the impact is just too harsh now. If the policy wasn’t executed in such a one-size-fits-all manner and some buffer time was given to institutions and parents, the side effects would have been minimised.
For example, the policy could have come into effect a year later, so that students can still attend the lessons they have already booked before the institutions made the necessary adjustments. Teachers and other industry practitioners would also have time to make other arrangements. Right now, nobody has the time to adjust to these changes, and the situation is just very overwhelming.
I am now working at the marketing department of a sports equipment company. Although I’m earning less than before, I can rest over the weekend and almost never have to work overtime.
My days in the education sector feels like a dream to me now. I initially thought I would stay in the industry for 20, 30 years. Who knew everything would be over after just two years?
Alright, that’s all I have to say — I’m going to play billiards with my friends. Yes, I finally have time to meet them now.
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