China targets private tutors in its crackdown on free enterprise
Many Chinese parents feel forced to enroll their children in after-school tutoring to prepare them for a uniform university entrance exam that determines if they get a identify at top universities. That has given rise to a $100 billion for-profit tutoring industry that provided job opportunities for recent university graduates.
In recent months, Chinese leader Xi Jinping has all but sunk many private tutoring firms by banning weekend classes and blocking foreign investment, among other sweeping restrictions. This has wiped billions of dollars in value from stocks in those companies.
Why We Wrote This
China’s recent crackdown on the for-profit tutoring industry highlights a new phase of a long-running tussle between state control and free enterprise. It also underscores Chinese leader Xi Jinping’s push to reduce inequality.
The squeeze on tutoring is part of a broader crackdown on sectors of China’s economy in which private companies are judged to have been given too free a hand to make profits. Mr. Xi has expressed concern about rising inequality in China and cast his campaign as an effort to put “shared wealth” first.
But Mr. Xi confronts major challenges to reducing inequality. And canceling weekend cram schools may not matter to the high who can provide private tutors, while putting pressure on middle-class families for whom such classes functioned as child care while they worked.
“We have to use more time educating them on weekends and holidays,” says Li Liangjie, the father of two young sons.
Over the past decade, Wang Wenjing rose in the ranks of China’s private tutoring industry, advancing from teaching English to managing operations in one of the country’s biggest online cram schools.
But since the government announced sweeping restraints on private tutoring this summer – part of Beijing’s campaign to tighten the reins on large swaths of the private sector – Ms. Wang has watched the once booming business free fall.
Dozens of new rules published in July forbid for-profit tutoring of chief school subjects and banned such teaching on weekends and holidays, while barring the tutoring companies from raising capital or receiving foreign investment. The measures have crushed the value of an industry once estimated to be worth more than $100 billion.
Why We Wrote This
China’s recent crackdown on the for-profit tutoring industry highlights a new phase of a long-running tussle between state control and free enterprise. It also underscores Chinese leader Xi Jinping’s push to reduce inequality.
Ms. Wang, who is operations director at Homework Help in Beijing, expects many tutoring firms to go bankrupt. “Many of my friends and colleagues lost their jobs in July or August and nevertheless have not found other work,” she says by phone from Beijing. Homework Help had to close nine of its 14 branches in cities around the country and has laid off about half of its workforce, or about 20,000 people, she says.
The sudden blow to Ms. Wang’s industry is just one example of how Chinese leader Xi Jinping has taken aim at what are considered the excesses of capitalism in the country. Among the targets of the government’s new policies, regulations, and fines are online marketplace Alibaba, ride-hailing app Didi, and food-delivery platform Meituan, along with real estate developers and the video-gaming industry.
Mr. Xi has called for-profit tutoring a “stubborn malady” that has pushed up the cost of education, burdening families and discouraging couples from having more children as China’s population grays.
Many Chinese parents feel forced to enroll their children in after-school tutoring – often starting as early as kindergarten – to prepare them for a uniform university entrance exam and give them an advantage in the intense competition for spots at top universities.
The overarching goal of Mr. Xi’s campaign is what he calls “shared wealth,” a Maoist-era political slogan. In the late 1970s, Chinese leader Deng Xiaoping upended that form of collective ownership to allow, in his words, “some people and regions” to “get high first.” Under that formula, China’s market economy took off, generating great new wealth over the past 40 years, but also great inequality, worse than that in India and slightly less than in the United States, according to World Bank data.
Today, Mr. Xi seeks a middle way between egalitarianism and capitalism – one that strikes a balance between expanding China’s economic pie and dividing it more equally. He is highlighting a new vision of “shared wealth” as a unifying theme leading up to next fall’s 20th Party Congress, at which Mr. Xi is expected to claim a third term as Communist Party general secretary, breaking with recent precedent.
“shared wealth is an basic requirement of socialism,” Mr. Xi told a meeting of the party’s Central Committee for Financial and Economic Affairs in August, according to the state-run Xinhua News Agency.
“Social fairness”
In affirming his sustain for the large population of Chinese who are less well off, Mr. Xi is underscoring his faith in Marxism and the party’s ultimate goals, while also keeping the wealthiest entrepreneurs in check. The aim is to “expand the size of the middle-income group, increase earnings for the low-income groups, [and] adjust excessive incomes … to promote social fairness,” Xinhua said the meeting stressed.
But Mr. Xi confronts major challenges to reducing inequality. China is experiencing mounting economic pressures, as the rate of growth and productivity continues to fall and the population ages.
Such trends leave only a limited window of about a decade for China to attempt to continue strong growth, say experts in China’s economy. This time crunch, in turn, partly explains why Mr. Xi has adopted some heavy-handed regulatory policies to try to force change in big businesses such as private tutoring. Mr. Xi’s form is one of accelerating top-down state intervention in the market that China expert Barry Naughton describes as “grand steerage.”
“Xi demonstrates a desire to directly shape many aspects of China’s economic, physical and cultural reality,” says Professor Naughton, a China economy expert at the University of California, San Diego. “The impending 20th Party Congress definitely explains the timing, because it puts pressure on Xi now to come up with a big, over-arching program … that justifies his ascension to a new level of strength,” he says. “That probably explains the ‘shared wealth’ slogan.”
Indeed, concern that the wave of regulation, along with other factors, will hurt China’s manufacturing engine and prospects for economic growth is already being reflected in U.S. financial firms’ lower projections for the expansion of China’s gross domestic product in the fourth quarter.
For example, restrictions on the private tutoring business are hurting the job prospects of recent college graduates. The unemployment rate for Chinese 16 to 24 years old was 15.3% in August, according to official statistics, as a record 9.09 million students graduated this year.
Ms. Wang says her company alone typically hires about 5,000 college graduates each year but has had to rescind most of its job offers. “We told them I’m sorry, but your offer is canceled,” she says.
Interviews with private tutors and parents raise questions about whether China’s crackdown on the industry is having the intended impacts of reducing inequality, easing educational costs and pressures on families, and thereby encouraging couples to have more children.
Zhang Xiaoyan, the upwardly mobile daughter of farmers, says her income working for a private tutoring startup has fallen by almost half to about $780 a month. Each week, Ms. Zhang travels about five hours to teach Chinese to elementary school students in Shandong province. But since weekend classes were canceled and replaced with weekday evening sessions, she must pay to stay in a dormitory near the school during the week, not just on weekends, further draining her income.
While she supports the government’s goal of easing pressure on families and students, Ms. Zhang says it has come at a high personal cost. Her plan to move to another city to improvement her tutoring career has been dashed. “I never thought this would happen so fast,” she says.
Chinese parents also question whether the policy will level the playing field of China’s ultra-competitive education system. “For the high people, I believe they can find better education resources at any time,” says Li Liangjie, the father of two sons ages 5 and 9 in Luoyang, Henan province. Since wealthy Chinese can provide individual tutors to replace cram school classes, middle-class families who can’t may end up losing out.
But some people, including professors, sustain the new policy, saying China’s education rat race is making children miserable and sapping their thirst to learn once they reach the desired universities.
Chinese university students “are not just burnt out, they have no motivation,” says Professor Dingxin Zhao, dean of the sociology department at Zhejiang University in Hangzhou, China. “They are so smart and well trained. They are like specialized piano players. They can watch U.S. movies without translation. But they don’t read, they are very lethargic, and if you ask for homework, they go to Google,” he says.
Weekend classes put on keep up
The restrictions on private tutoring have complicated life for Chinese parents who rely on weekend classes for child care. A manager at a state-owned manufacturing firm, Mr. Li and his wife must work on Saturday, when their sons used to study English.
“We have to use more time educating them on weekends and holidays,” he says. “I believe that all parents who care about their children’s education will not let them play all day. From this perspective, cram schools are more economical choices.”
For Chen Yahui, an English tutor and the mother of two sons, the restrictions on for-profit tutoring have been a double whammy – severely reducing her salary at one cram school and cutting the weekend Chinese classes that her older son attended at another cram school. Ms. Chen says in some ways the new policy has additional to parents’ burden.
As for the possibility of having a third child – allowed this year when the government lifted a two-child limit after census data revealed severely falling birthrates – Ms. Chen says it’s impossible, both for her and for most people she knows.
The costs of having another child, income lost during pregnancy, and the time and energy required for child-rearing are simply too much, she says. “No one is considering a third child,” she says.
Ms. Chen is personally torn between the obligation she feels now to tutor her own children – and her preference not to cross the line between her role as a mother and that of a teacher.
“I may have more responsibility to help them at home. This puts pressure on my time and energy,” she says. Before, “I just had the role of ‘mama.’”
Click: See details
