Private education services have grown in China over the past decade into a force bringing opportunity, but sharpening pre-existing social divides with their emphasis on root learning
Riding the newly enriched Chinese middle class, responding in spades to the hopes of eager parents to give their only child a leg-up, an endless stream of educational services have come to market, with access to foreign capital on a one-way street to profitability
Criticism of after-school tutoring by private educational services has been signaled by President Xi Jinping as early as 2018 under the headlines of “increasing the financial burden of students and families”, “violating the laws of education” and “disrupting the normal order of education”
Still, share prices doubled in 2020, in an unintented snub of those fairly broad guidelines
Predictably, frustration of Chinese leadership boiled over, throwing the sector in disarray as the transition to a 'non-profit' status came under consideration
As extreme as the share price run-up had been since 2015, increasing 15 times and more near the top early 2021, as brutal was the collapse by mid-2021
Some of the largest U.S.. banks suffered staggering losses if they held on to their EduTech holdings according to their 13F filings, as of March ...
No one can be sure if, by sticking to its oversized position, Morgan Stanley
...and the banks, together, potentially lost more than $6 billilon on the large Chinese private education firms, TAL, New Oriental Education & Technology
The original vote of confidence of these institutions is no less striking
However much uncertainty swirls around private education services in China, we argue that delistings and bankrupcies remain unlikely
Looking down past centuries, Chinese society has been stratified but not bipolarized between the ‘rulers’ and the ‘ruled’
The social structure has been flexible in a multi-class coexistence of four ‘functional orders’: scholars, farmers, artisans and tradesmen – all of which were dominated by the government officials
Flexibility was attested by considerable movement between the different social groups
Open competitive examinations have been so many rungs on the social ladder
Swinging back and forth
- from long periods of intellectual isolation under the ancient imperial regimes and, later, with the utter destruction wrought by the Cultural Revolution
- back to the careful opening to Western training initiated by Prince Gong and implemented by Li Hongzhang, a top ranking mandarin at the Qing court, following defeats in 1860 and, again, from the late 20th century under the impulse of Deng Xiao Ping
education has remained a centerpiece of domestic policy
If private tutoring is on trial today, it can be argued that it is for hardening contemporary ‘functional orders’ and constraining the flexibility between social groups, where the Chinese Communist Party strives for exemplarity
However, the ambiguities of the path chosen by the Chinese leadership cannot be ignored
- the Chinese middle class has grown in strength, as a political force in its own right
- putting deep-seated trust in education as the rightful path to social promotion, middle class families will continue to seek private tutoring by any means
Further constraining public policy is the elephant in the room
- markedly poor educational opportunities in the rural areas, putting social advancement out of reach for millions of youngsters because their parents are deprived of the ‘hukou’ permit of household registration giving access the public services in the cities where they find work
With a middle class hardly enthused to see poorly educated children enter ‘their’ better schools ever, education in China remains a work-in-progress
With education at the heart of the social contract in China, it will hardly be surprising if the large and efficient private education sector is coopted in governmental planning, making the best of its technical expertise and networks
…to say nothing of opportunities beckoning across South-East Asia, putting educational services at the forefront of China’s outreach
Profitability of the sector remains impossible to forecast, weighting dramatically on share prices, but risks of bankruptcy seem farfetched