Since the last round of regulatory crackdown for the tutoring industry, the Ministry of Education came up with a set of rules that have disallowed for profit companies to take advantage of the school core curriculum in particular for the 1st to 12th school graders on the core subject curriculum that every child in China has to go through.
The details of the published contents were:
- The provision of restriction to core school curriculum subjects will apply to weekend and holiday tutoring
- Bans on companies to raise capital through a public offering
- Raising the bar for private companies and private tutoring to obtain license
- Prohibits excessive marketing and advertising through multiple channels
When the news was announced, the entire education market capitulated as the market sees this as the end of the road for most private educators. More than $100 billion was wiped off the market value of three US-traded Chinese education giants – TAL Education Group, New Oriental Education & Technology Group and Gaotu Techedu Inc.
Pivoting to the New Business
If you have seen my previous analysis on New Oriental Education ($EDU), you would know that based on the financial records, the revenues earned from the K-12 AST, Test Preparation and other courses accounted for the majority of their revenues at 82.7%, 84.2% and 85% respectively for the year 2018-2020.
They did not exactly provide the breakdown specifically for the K-12 AST, but we would think that it’s going to be between 60-70% of those revenues.
Since then, private companies have taken immediate next steps to reduce overhead and pivot to the new hybrid model business.
Under the new hybrid business model, it would mean providing tutoring in school subjects from 6.30 to 9pm on weekdays while all round education on weekends and holidays – such as training in sports, music, arts and foreign language.
Just take a look at the demand in the weekend tutoring queues for training classes outside of school curriculum posted by a poster who lived in China. In his post, he mentioned that parents are scared to allow their children to spend their new free time on “Tang Ping”, hence they are replacing them similarly with classes that can boost their overall holistic skills in their children.
Classes such as swimming, chess (you need tuition for this??), dance, arts and technology are very popular and fully booked well into the future.
The poster likened the transition and pivoting to eating in the restaurant. If you offer free rice or side dish or beer in your menu, people are still going to come and order your other dishes in the menu. At the end of the day, that new free time which the 1st to 12th graders will have will still be filled with new activities and skills.
China is China – You can never run out of opportunities.
Beijing Announced 152 Whitelist Institutions and Standards
Just a week ago, the Beijing Municipal Education Commission announced the whitelist of Beijing’s first batch of out of school training institutions – which you can view it here if you can read here in Chinese (not sure if you can translate it into English).
You can view all the 152 list of training institutions inside the link I gave earlier.
This is in accordance with the relevant requirements of fund supervision, school license, epidemic prevention and control and school running conduct – which the Ministry has approved for restoration of the institution list.
This is a lot better news for most institutions than the generalization earlier of all “non-profit tutoring” which indicate zero profits.
In the whitelist guidelines, these institutions that have been approved inside the list can still charge a pricing but with a cap guideline such as not having more than 10%, one-time fee which shall not exceed 3 months or 60 hours and carried out according to the cycle and class time fee.
The end goal is to regulate the pricing for compulsory education but still gives enough room for these institutions to operate with a private profits in mind, albeit with likely lower growth (and not zero). This is only Beijing so obviously we’ll have more institutions later getting approval in multiple different states (do note they are trying out this in Beijing first as lead runner).
Vocational Training On the Demand
The regulatory crackdown on tutoring focuses predominantly on compulsory education, but the market seems to have discounted the majority of the education tech sector.
Skills outside of classroom activities are still highly sought and vocational training that allow its citizens to pick up additional skills is likely going to improve the overall productivity of the nation.
Private educators such as Gaotu has pivoted to vocational training while companies such as China East Education has already anchored its core in skills such as culinary, automotive and technology.
If the longer term goal of the CCP is to raise the awareness and productivity of its citizens, especially from the poverty and rural area, then these skills will be beneficial and align with their long term goal.
In fact, right from 2019, the government has been encouraging vocational training skills and have supported this as part of their longer term campaign.
Final Thoughts
I think there are some good opportunities around if you are looking within this sector.
Most of the worst news regarding the non-profit have been priced in and companies are likely already pivoting to the new business and opportunities abound in the new world.
But these companies are still beaten down recently due to sentiments and there are even companies that are unfairly beaten as a collateral even as they are mostly not too related.
While this may take some time to transition, we can expect a quick pick up given the Chinese usual style of having it done productively and we may see an emerging and stronger pivot towards the new norm and productivity in China’s next generation.
Hey Brian! What’s your thoughts on Ping An stock currently?
uncle168,
due to the low efficacy of the mrna vaccine of 40% and waning protection after 6 months the gov is now trying herd immunity by allowing the delta virus to infect its population and booster shots for elderly.
the logic is if one is vaccinated and infected will have mild symptons.
the gov will not do a full lockdown but targeted lockdown where there is a surge in infections like hawker cemtre and hospital.
this is a prolonged process hoping to reach some sort of herd immunity while keeping the economy going at the expense of some lives.
its fair now that testing is required for both vax and unvax for work and hospital visit.
the risk now is when icu case exceed the number of icu beds.
the problem is the gov is reacting to the case numbers instead of being proactive in lockdown measures.
we are in uncharted territory heading towards 3k cases, the risk is imposing lockdown too late as the surge in icu can be sudden.
the tradeoff is all icu case above 100 will have to die as no more ecmo machine.
if i’m the gov i also don’t know what to do.
save lives or money? both are important.
the only thing we can do to help is to wfh taobao and isolate by only going out for essential items.
god save singapore.
keekeekee
uncle168,
the gov should have gone back to full wfh and no dine in on 15 sep as advised by uncle168.
you notice the gov is no longer pushing unvax to vax and closing down vax centres.
the call for elderly booster is also now voluntary.
the gov has also stopped discriminating unvax by testing both vax & unvax in workplace and hospital visitors.
i guess we all know in our minds now whether the vaccine is working or not.
for the past 3 days most death reported were vaxed.
frontline healhcare worker vaxed more than 6 months ago are starting to get infected and affecting public healhcare as they need to be quarantined for 10 days.
i think we need to do some sort of time out to break the chain of transmission as i feel a sudden surge in icu cases is coming soon.
the scary thing is everyone critically ill above the number of icu beds will have to die including those with other conditions beside covid.
we need to change course to have a long term isolation strategy to flatten the death rate for as long as possible until a cure for covid is found.
make wfh taobao and isolation permanent and build an economy around it.
turn hotels into flats.
turn malls into warehouse.
turn office into vertical farm.
turn the airport into a data centre
the economy still runs just that people that once work in tourism and airlines have to switch to healthcare and logistics that have great demand.
it took great courage for lky to change course from fishing village to global hub.
it would once again challenge the 4g leaders to have the conviction to change course again to survive a pandemic that may probably never end.
god speed
keekeekee
uncle168,
the lockdown came too late, i expect to see the icu overwhelmed by 15 oct when critical cases above the number of icu case will have to die.
doctors would have to choose who to save and who to die because the gov were not decisive as money cloud their rationality.
the peak death would be 100 per day.
the peak cases would be 10,000 per day.
without a complete lockdown 20 people will die per day.
the gov has completely stopped unvax discrimination.
this is becase the number of vaxed serious case is now more than unvax.
we can help the gov by isolating ourselves for the next one month.
god save singapore.
keekeekee
uncle168,
gov is tightening now because we are entering a phase when doctors have to decide who gets to use the last ecmo machine and who to die.
the gov has done eveything to save us from vax to tightening measures.
god helps those who help themselves.
uncle168 teach you how to survive this pamdemic.
get vaxed to avoid future vax discrimination and keep your job as money is important for survival.
turn off your bluetooth after scanning to avoid being quarantined if you are fully vaxed and below 70 yrs old to avoid trouble to family and workplace as 98% infected is mild whther vax or not.
buy stocks related to logistic, it and healthcare to profit from the pandemic which probably will never end as mas never ask banks why deposit rate so low only 0.05%.
self medicate if fully vaxed + bcg and below 70 years old with panadol, tcm cough syrup as calling for help is useless as hospital are overwhelmed and excessive testing is pointless adding to emotional stress making you sick and paronoid.
call ambulance if o2 is below 92.
wfh and daobao as default to avoid getting infected, dine out only once a week in hawker centre with no aircon.
only go out to exercise and buy necessities.
a pandemic in sg will be widespread no matter who is the gov becase of 3 reasons, high population density, high proportion of elderly & low hospital bed per capital.
without a cure, going endemic would mean up to 2% or 120k of the population will have to die.
while some idiots would say die nevermind, when you end up in a situation when the doctor looks at you and say sorry no more ecmo machine then you realise endemic is mass suicide.
without a cure opening is impossible without a surge in deaths.
a long term isolation strategy is needed to flatten the death rate which include liquidating sia and the transition of migrant essential workers to local worrkers.
trying to open up is fultile and ends up in circles angering voters.
the gov is unwilling to to face up to reality that this pandemic will never end making its wet dream of immigration influx and global aviation hub impossible.
we now fact a peak infection of 10k and 100 death per day by 15 oct even with an immediate full lockdown.
the gov have to be upfront with the people that opening up means 120K people has to die.
even god cannot save us now.
we have to save ourselves.
keekeekee
uncle168,
covid death rate is 20 times the common cold even after vaxed.
dengue is not the same as covid as it does not spread from human to human. it can be controlled by killing the mosqitoes vectors. we can’t kill people who have covid right?
Professor Leo Yee Sin, executive director of the National Centre for Infectious Diseases already said covid is not the same as a common cold yet.
You can tell from her body lamguage she is not comfortable with the gov endemic narrative as she has noticed how covid is very different from sars and how dangerous it would be to let covid spread as the death rate is 2% of singapore population minus 100 icu beda.
She seems to be the only expert asking people to be careful about treating covid like a common cold.
While idiots like Dr Leong Hoe Nam, Associate Professor Kenneth Mak, Professor Dale Fisher and Professor Paul Tambyah parrot the gov endemic narrative that covid is like a common cold. I bet they will be the first to go to the a&e when their weekly art test is positive.
You know something is wrong when the gov stopped PAP MPs from holding mps while telling people covid is like a common cold.
we now have 30 icu cases, with only 70 beds left.
the exponential increase of icu cases have begun, thia is when these 4 medical idiots will change their narrative to covid is not a common cold yet.
the next 2 week we will see more and more people die because there is not enough icu beds.
remember only the paranoid will survive.
keekeekee
uncle168,
the vaccine waa helped delta spread quickly and widely in our community undetected.
had our vaccination were low, any spread will be quickly detected as unvaccinated would show symptons.
the cure has now become the disease.
th
uncle168,
its too late to stop the delta now.
we now need to be prepared for 100 deaths per day until 120k people die.
this will take 4 months.
we need to activate the tuas waste incinerator to burn the dead bodies.
ironically because of our high vax rate and dense population, our situation will become worst than india at its peak.
the hospital will be overwhelmed with dead bodies.
we need to activate dorscon red and start curfew now.
the hospital shoukd stop accepting covid patients.
the army should be activated and use 3-tonnes to send covid patients to army camp for quarantine.
many will die and the army will send the dead bodies to burn in tuas 24/7.
we need to prepare for many pap ministers to die of covid and hold many by elections as many are elderly.
keekeekee