DALIAN, China -- As Beijing's sweeping new ban on for-profit tutoring and test-preparation services takes hold, two publicly traded industry leaders will shut down their mainstay operations and look elsewhere to stay afloat.
New Oriental Education & Technology Group announced plans Monday to halt by year-end its tutoring business for students from kindergarten to grade 9. The operation, which includes such core subjects as Chinese and math for China's nine-year compulsory education, generated "approximately 50% to 60%" of the company's revenues for each of the past two fiscal years, New Oriental said in a news release.
The move follows Friday's announcement by TAL Education Group that it will end its tutoring business on the mainland this year. This operation "accounted for a substantial majority" of its revenue last fiscal year, and the exit will have a "substantial adverse impact" on results for the year ending February 2022, the company said in a statement.
New Oriental -- listed in New York and Hong Kong -- and TAL, also listed in New York, rode the wave of the booming industry as high-stakes school entrance exams drove Chinese parents to pour money into their services in recent years. New Oriental reported a 20% year-on-year jump in revenue to $4.2 billion for the year ended May, while TAL saw its revenue surge 37% to $4.4 billion in the year ended February.
New Oriental plans to shut down around 1,500 of its 1,669 tutoring centers, according to local media reports. TAL is also expected to drastically scale down its network of 1,098 locations.
The companies are charting a course to keep afloat by switching their focus to areas not subject to the new rules, such as arts, athletics and lifelong education. New Oriental will "shift its focus and resources" toward services such as "language training courses for adults," it said in the statement. TAL also said it will continue operations "not related" to the new restrictions. Neither provided specific strategies or targets.
To lower family expenses and fight China's falling birthrate, the Communist Party and the State Council have been rolling out sweeping measures since August. The overhaul prohibits tutoring companies from offering academic classes during school holidays and raising capital by going public. Furthermore, no new business permits have been approved.