Last week, China shocked the $120 billion domestic tutoring industry with harsh, dramatic regulations that are nuclear options. Claiming that education has been “hijacked by capital,” the Chinese government introduced a plethora of draconian rules, including forcing tutoring companies to become non-profit and halting foreign investments and IPOs. On one hand, it sounds good, since Chinese children are subjected to mind-numbing hours of learning in and out of schools. On the other hand, these new rules do not seem to solve the underlying problems that resulted in the tutoring mania. Moreover, this new crackdown will also end up affecting China’s innovation in technology such as artificial intelligence (AI).

The vaunted meritocracy in Beijing missed the obvious point: The reason for tutoring mania is the shortage of high-quality schools and colleges in China.

Rather than addressing the root cause, the government opted for a populist/socialist idea that pleases some of the masses but solves nothing. It’s sort of like banning cars and trying to force everyone to use public transportation.

Here are the three main problems with these new laws:

Does Not Eliminate Tutoring or Inequality

The first and the biggest problem is that the new rules don’t eliminate tutoring. There will still be tutoring, online and offline, but they will be non-profit and of inferior quality, thanks to lack of capital from investors. Not to mention, the smartest entrepreneurs are going to flee the sector.

There are 150,000 state-owned enterprises in China. Perhaps the government should have started its own tutoring firm rather than sabotaging a thriving and crucial private sector.

On social media, many liberals are applauding these decisions saying that “education should be free” and rich people should not have access to better education. However, these new rules don’t solve those problems.

• China still has private schools, where upper middle class kids get better education.
• Also, even in public schools, there are vast discrepancies between rich and poor districts. Thus, people who can afford expensive homes guarantee better education for their kids.
• Middle class people will still find private tutors to help out their children. For example, one mother said she will consider forming a small group with other parents to hire private tutors for their children.

Hence, from a socialist point of view, the inequality in education is not solved by these new diktats.

Bringing down one group of people (middle class and the rich) to help another group (poor) is a warped and counterproductive idea. This approach helps neither group. It’s much better to help the disadvantaged group. So, for example, income-based subsidies for tutoring and better schools and colleges in rural areas will help. Also, right now, most migrant children in the cities are not even eligible to attend public schools (and they don’t qualify for healthcare and many other services). If a child can’t even go to school, what good is cheaper tutoring?

Thus, the government should address the vast institutional discrimination that rural, migrant, and poor Chinese people face in many areas.

Also, China wastes hundreds of billions of Yuan every year on vain, underutilized infrastructure projects that only enrich corrupt politicians and their corporate friends. Beijing can stop this crony capitalism and redirect the money to help the poor people in meaningful ways. Prof. Yuen Yuen Ang describes this serious problem of “corrupt meritocracy” in this article.

More importantly, a vibrant, online tutoring industry would have led to better and cheaper choices in the long run. Cloud-based tutoring software can serve unlimited number of students at low prices.

Does Not Solve the Core Problems

The authoritarians in Beijing have failed to address two core problems in Chinese education: The extremely tough exams, lack of enough good schools and colleges, and the inadequate education in public classrooms.

In an ideal situation, getting into a good primary, secondary or high school would not be akin to qualifying for the Olympics. The supply-demand situation is so bad in China that parents start putting pressure on kids as young as three or four years old.

The kids would also learn all they need to learn inside classrooms and there would be no need for tutoring outside school hours. Plus, in a good system, the exams would be purely based on the materials taught in classrooms, again negating the need for extra help.

Thus, the government should be focusing on increasing teacher-student ratio, improving education materials, offering hi-tech solutions in classrooms, and fixing the exams. China also needs to build more schools, universities and colleges so that the entrance exams (Gaoko and others) do not invoke such brutal competition. There must be an overhaul of the education and testing philosophies as well — rather than blind memorization and regurgitation, the emphasis should be on creative and critical thinking.

Hurts Tech Innovation

EdTech leverages cutting-edge technologies such as artificial intelligence (AI) and virtual reality (VR) that represent the future of education. AI can offer personalized education that no human teacher can match — the software can monitor the performance, preference, strengths, and weaknesses of each student and can offer the optimal homework and education material. Think of how TikTok plays the videos that will be the most appealing to each user.

With these new misguided rules, China has virtually wiped out investments and innovation in a sector that’s crucial for China’s future. In one day, the Chinese government wiped out billions of dollars that domestic and foreign investors have poured into China’s innovative EdTech companies over the last few years. Shares of edtech companies like TAL plunged 70% on one day (Fri, July 23). And Gaotu founder Larry Chen lost his billionaire status overnight.

Conclusion

The CCP seems to be on a crusade to control the hi-tech industry since last October when the FinTech industry came under assault — Ant Group’s IPO with $300 billion valuation was abruptly halted and Jack Ma was disappeared for a few months. The attacks have since then targeted other Chinese tech giants like Didi, Tencent, ByteDance, and Meituan. China has also virtually killed all IPOs of Chinese firms in the USA. Even pro-China expert Stephen Roach is bemoaning China’s “disturbing actions” that are accelerating the new Cold War.

In the last six months, overseas-listed Chinese tech stocks have lost whopping $1 TRILLION, thanks to Xi’s communist jihad.

Is Xi Jinping worried about losing control over the capitalist class in China?

By the way, Xi’s new edtech rules also prohibit the use of foreign teachers living outside China as well as foreign textbooks. This reeks of xenophobia and paranoia. Chinese students need to be ready for a globalized world.

There’s a lot of propaganda about the Chinese government “helping the poor.” However, the inconvenient fact about communist/socialist China is that half the country gets exploited by the other half. The lavish lifestyle of the Chinese middle class and even the growth of the Chinese economy are predicated on the poverty wages of 500 million migrants, factory workers, construction workers, gig workers in delivery service, farmers etc.

Finally, in most countries, there’s a delicate power balance/struggle between the government and capitalists. Such checks and balances are healthy. However, before getting carried away by ideological fervor or obsessive need to control the private sector, the Chinese government should remember that China enjoyed its stunning growth in the last 30 years only due to capitalism, free market, and free trade. Is there a Chinese proverb about killing the golden goose?