Page 354 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
To be sure, the draft rules will cause plenty of take the SAT or ACT, they usually have to fly to another
disruption, if confirmed. Companies such as Maple country, and most students take those exams, as well as
Leaf have been using kindergarten acquisitions to the TOEFL, several times. In addition, the students have
boost revenue and profit, so investors will have to potentially paid US$10,000 or more for professional
recalibrate estimates if this avenue of growth is closed. application advice from a college-advising agent. And
The more serious issue is the signal the rules send on all of this is for the privilege of applying to American
the Chinese government’s changing attitude to private institutions that charge them more — in some cases
capital in education. Authorities were encouraging the more than double — than what they charge domestic
involvement of non-state investors in 2016, prompting a students. For many applicants from China, US college
wave of listings. Yuhua, RYB and Bright Scholar all went tuition, which they pay in cash, is the biggest expense
public in 2017 and appeared initially to be investor their families will ever have (Crawford).
gold. Shares of Yuhua tripled by their peak in July 2018,
but have since lost half their value. Bright Scholar has Private tutoring has been dubbed an “arms race” in
slumped 62 percent from its high. All private schools China, where young students will face the gruelling
in China are nominally nonprofit, though some have gaokao college-admissions test for limited seats at elite
been permitted to remit “reasonable returns” to their Chinese institutions as well as the tough competition
providers of capital. That’s enabled publicly traded for top foreign universities. Getting into a top-tier
education providers to qualify for lucrative perks such university is considered a make-or-break moment for
as cheap land and tax breaks. It’s the prospect of these young Chinese, who face a competitive job market
advantages being withdrawn that poses a potentially after graduation. About 15 percent of China’s college
crippling threat to the business model of privately-run graduates are unemployed in their first six months on
school operators. The government frightened investors the job market while about 25 percent with diplomas
with the 2018 draft rule that bans “corporations” from earn skimpy wages, L.E.K. Consulting said in a report
controlling nonprofit schools, a classification that on education trends in China. That helps explain why
encompasses pretty much all the overseas-listed the industry has grown quickly in China. The country
operators. Furthermore, there’s also the possibility that now dominates the world’s private education market,
the government could extend its kindergarten rules to including after-school K-12 tutoring, accounting for
other age groups. eight of the top 15 listed companies globally. Five years
ago, only two Chinese names were among the top 15
Pragmatism suggests that a compromise will be listed education companies. In China, with its brand
reached. There’s voracious demand among China’s conscious, aspirational consumers, education is the
parents for educational services: They spend an average ultimate consumer good. Nearly 9 percent of Chinese
total of US$42,892 on their children’s education from household spending is on education, compared with
primary through university — almost double the around 4 percent for other emerging markets – despite
amount in Canada or the UK, despite average incomes the fact that Chinese households have one or two fewer
that are much lower. The state is unlikely to be able to children than their counterparts in similar economies,
meet this demand on its own. Some advisors are saying and that public education is free (SCMP).
that for now, it’s understandable for investors to steer
clear. The price of regulatory confusion is a lesson that The 21st Century Education Research Institute claims
won’t be easily forgotten (Gopalan). that Chinese primary and secondary school students
spend more time on excessive homework inside and
Tutoring and Extracurricular Activities outside of school as well as for extracurricular tutoring
than their peers in other countries. The average time
In many ways a Chinese teenager who wants to study spent on extracurricular courses on weekdays was 0.8
in the US follows the same music, sports, movies, and TV hours in 2015, and 2.1 hours on weekends, doubling
shows that American students do. But their preparation and tripling that of 10 years ago, respectively. These
for college is significantly different in one respect: excessive burdens take away from their time to sleep
cost. They have probably paid for multiple years of and do sports resulting in more nearsighted and
extra English lessons, various extracurricular activities, obese students and adding mental as well as financial
and expensive tuition at “international” high-school pressure to the students and their families. Fair and
programs that prepare them to apply abroad. When they high-quality education results from widespread
354
To be sure, the draft rules will cause plenty of take the SAT or ACT, they usually have to fly to another
disruption, if confirmed. Companies such as Maple country, and most students take those exams, as well as
Leaf have been using kindergarten acquisitions to the TOEFL, several times. In addition, the students have
boost revenue and profit, so investors will have to potentially paid US$10,000 or more for professional
recalibrate estimates if this avenue of growth is closed. application advice from a college-advising agent. And
The more serious issue is the signal the rules send on all of this is for the privilege of applying to American
the Chinese government’s changing attitude to private institutions that charge them more — in some cases
capital in education. Authorities were encouraging the more than double — than what they charge domestic
involvement of non-state investors in 2016, prompting a students. For many applicants from China, US college
wave of listings. Yuhua, RYB and Bright Scholar all went tuition, which they pay in cash, is the biggest expense
public in 2017 and appeared initially to be investor their families will ever have (Crawford).
gold. Shares of Yuhua tripled by their peak in July 2018,
but have since lost half their value. Bright Scholar has Private tutoring has been dubbed an “arms race” in
slumped 62 percent from its high. All private schools China, where young students will face the gruelling
in China are nominally nonprofit, though some have gaokao college-admissions test for limited seats at elite
been permitted to remit “reasonable returns” to their Chinese institutions as well as the tough competition
providers of capital. That’s enabled publicly traded for top foreign universities. Getting into a top-tier
education providers to qualify for lucrative perks such university is considered a make-or-break moment for
as cheap land and tax breaks. It’s the prospect of these young Chinese, who face a competitive job market
advantages being withdrawn that poses a potentially after graduation. About 15 percent of China’s college
crippling threat to the business model of privately-run graduates are unemployed in their first six months on
school operators. The government frightened investors the job market while about 25 percent with diplomas
with the 2018 draft rule that bans “corporations” from earn skimpy wages, L.E.K. Consulting said in a report
controlling nonprofit schools, a classification that on education trends in China. That helps explain why
encompasses pretty much all the overseas-listed the industry has grown quickly in China. The country
operators. Furthermore, there’s also the possibility that now dominates the world’s private education market,
the government could extend its kindergarten rules to including after-school K-12 tutoring, accounting for
other age groups. eight of the top 15 listed companies globally. Five years
ago, only two Chinese names were among the top 15
Pragmatism suggests that a compromise will be listed education companies. In China, with its brand
reached. There’s voracious demand among China’s conscious, aspirational consumers, education is the
parents for educational services: They spend an average ultimate consumer good. Nearly 9 percent of Chinese
total of US$42,892 on their children’s education from household spending is on education, compared with
primary through university — almost double the around 4 percent for other emerging markets – despite
amount in Canada or the UK, despite average incomes the fact that Chinese households have one or two fewer
that are much lower. The state is unlikely to be able to children than their counterparts in similar economies,
meet this demand on its own. Some advisors are saying and that public education is free (SCMP).
that for now, it’s understandable for investors to steer
clear. The price of regulatory confusion is a lesson that The 21st Century Education Research Institute claims
won’t be easily forgotten (Gopalan). that Chinese primary and secondary school students
spend more time on excessive homework inside and
Tutoring and Extracurricular Activities outside of school as well as for extracurricular tutoring
than their peers in other countries. The average time
In many ways a Chinese teenager who wants to study spent on extracurricular courses on weekdays was 0.8
in the US follows the same music, sports, movies, and TV hours in 2015, and 2.1 hours on weekends, doubling
shows that American students do. But their preparation and tripling that of 10 years ago, respectively. These
for college is significantly different in one respect: excessive burdens take away from their time to sleep
cost. They have probably paid for multiple years of and do sports resulting in more nearsighted and
extra English lessons, various extracurricular activities, obese students and adding mental as well as financial
and expensive tuition at “international” high-school pressure to the students and their families. Fair and
programs that prepare them to apply abroad. When they high-quality education results from widespread
354
