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Implications from recent education policy shift
The recently published draft for public commentary by China's Ministry of Education on February 8, 2024, marks a pivotal shift in regulatory stance since the Double Reduction policy's implementation in mid-2021. This draft suggests a move towards standardizing the framework governing China’s education sector, providing clearer guidance for future operations. Notably, the draft features a softening of previous stringent measures, particularly concerning tutoring for high school and preschool students. It aims to accommodate the varied educational needs of students while enhancing the quality of tutoring services, addressing issues related to unlicensed and substandard practices by smaller establishments.
For educational organizations specializing in high school tutoring, such as New Oriental and TAL, this regulatory adjustment could translate to improved financial performance, given that a considerable segment of their revenue is generated from this sector of their services. In the future, it remains crucial to observe the outcome of the final regulations post-public commentary, track any policy updates in June 2024, particularly those aimed at regulating informal tutoring, and assess how local authorities will enforce regulations related to non-academic tutoring.
In essence, these draft regulations seem to indicate a less restrictive regulatory approach, potentially paving the way for expansion opportunities for educational firms. There is a Chinese idiom “untying the bell (on the tiger's neck) requires the person who fastened the bell”. Abrupt crackdown on AST industry 3 years ago was first regulation that started to shaken investors’ confidence investing in China. Fine-tuning of that could indicate a more supportive attitude towards the market and private sectors, which could help in rejuvenating the currently faltering confidence in the market and the private sectors.
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