New Oriental Education & Technology (EDU), Gaotu Techedu (GOTU), TAL Education (TAL) plummeted: Here Are The Reasons

 Shares of Chinese educational platforms New Oriental Education & Technology (EDU), Gaotu Techedu (GOTU), and TAL Education (TAL) plummeted amid news of the introduction of new, tougher-than-expected restrictions on the continuing education industry in the PRC. They could be announced next week and take effect in July, Reuters reported, citing sources.

Bans will be imposed on online and offline classes on weekends, aggressive online advertisements, and lessons during vacations. According to the agency, restrictions of this kind can reduce company revenues by 70-80%. The new rules will first be tested in nine districts for a year, and then the experience will be carried over to the entire territory of China.

The Chinese government is introducing rules due to the excessive workload of schoolchildren and students and correct the demographic situation. According to local media estimates, raising one child has grown from 490,000 yuan ($ 76,600) in 2005 to nearly 2 million yuan in 2020. As conceived by the authorities, the new rules for educational services should reduce the costs of families.

Earlier, the Chinese regulator fined two Chinese EdTech platforms for false information about the training of their teachers and faking reviews on their resources. Each of the companies must pay 2.5 million yuan ($ 389 thousand).

The prerequisites for strengthening government control over the online market began in the fall of last year. In November, Beijing blocked the largest IPO, during which Alibaba’s fintech subsidiary Ant Group planned to raise $ 34.4 billion. A few days earlier, Jack Ma, the founder of Alibaba, criticized the work of the PRC financial authorities. According to another version, the failure of Ant’s IPO could be the result of a struggle between the political elites of China. After a lengthy audit, Alibaba received a record $ 2.8 billion fine.

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