In mid-2021, China’s private education sector – particularly after-school tutoring – took a blow from the government’s ‘double reduction’ policy, which aims to reduce the intense stress levels among the school student population by introducing tough new controls for extra-curricular activities and cutting down on homework.

However, the sector may finally be seeing the light at the end of the tunnel thanks to an unlikely saviour: live streaming. Former extra-curricular tutoring service unicorn New Oriental – which posted losses of $876 million (£719.1 million) and laid off 60,000 staff after the private education crackdown – has been the first of its kind to create new momentum with live streaming.

Former English teachers at New Oriental have now been able to return to the “classroom” online via the company’s new live streaming channel on the Chinese TikTok Douyin, Dongfang Zhenxuan (or Oriental Select), established by Yu Minhong, founder of the English-teaching organisation.

Teaching, which switches between English and Chinese, has been adapted for the hyper-commercialised live streaming world, with the lecturers-turned-live streamers promoting products ranging from books to steaks while blending the commercial activity with educational presentation by talking about philosophy and poetry. This unusual approach to bilingual live streaming soon set the channel apart from existing live streamers, amassing over one million followers in just one day and knocking out a sales increase of RMB 17.8 million (£2.18 million) in just three days.

New Oriental’s resurgence not only marks a successful transformation for the company itself, but also signals hope for other private education institutions in China. When it launched last December in its original format, the Douyin video channel was deemed to be a “last resort” for the company, and the teaching team didn’t see huge progress. For example, a total of 26 live streaming events generated sales of RMB 4.5 million (£551, 792), which is an average of RMB 175,000 (£21,474) per session. For comparison, major live streamers can sell hundreds of millions of RMB of goods during a single live stream. But the turning point came on 9 June when the English experts “accidentally” combined English teaching with selling products.

Many China commentators believe that the key to New Oriental’s success is that they figured out a consumption scenario that is well-suited to the products they are promoting. They promote a wide range of products at “down to earth” prices, a shift from the early days of the channel when they were promoting expensive steaks that were dubbed the “Hermès of agricultural goods.” While continuing its focus on farm-fresh products (a smart strategy that aligns with the Chinese government’s current focus on rural development), the channel now also covers books and snacks, which has broadened the scope of the English-language topics the team can talk about while also creating more avenues for income.

What started as an experiment has born fruit, with the channel seeing consumers who are interested in learning English rushing to join New Oriental to follow their updates. This has resulted in a closer relationship between the channel and its followers, encouraging sales through authenticity and trust. As Dongfang Zhenxuan continues to make a splash in the digital space, New Oriental has decided to strike while the iron is hot, with a new live streaming arm launching another six subsidiaries dedicated to specific categories from cultural and creative products to electronics. This furthers the synergy of the former after-school education service provider and the e-commerce sector.

New Oriental’s journey has the potential to open new doors for China’s struggling private education sector. By identifying products that are compatible with their expertise, tutoring service providers may be able to capitalise on China’s live streaming phenomenon while continuing to deliver educational value in a more playful and engaging way.

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In mid-2021, the Chinese government put forward the ‘shuangjian’, or ‘double reduction’ policy. The policy aims to reduce the intense stress levels among the school student population brought on by relentless extra-curricular activities, while simultaneously easing the childcare burden on urban parents.

This comes as part of wider changes in the education market that have sought to regulate and improve the growth of the private education sector, particularly for students in compulsory education (the nine years starting from age six).

Background

Many Chinese parents see education as the key to social mobility. They have traditionally invested heavily in education in the hope of improving their children’s performance in gruelling university entrance exams (known in China the gaokao). As a result, the potential for sustained growth in the tutoring industry was huge. In 2019, the Chinese after-school tutoring sector was valued at around $96 billion, making it the largest tutoring market in the world. Only months before the introduction of the new regulation, Macquairie Group forecast that this value would double by 2023.

In addition to concerns about rampant profit-making in the private tutoring market, the authorities are increasingly concerned with the slowing birth rate in China and hope that reduced childcare demands could encourage more people to have children. Securing places on extra-curricular courses and arranging for children to attend them was considered part of that burden.

What has the shuangjian policy changed?

The shuangjian policy is ultimately a regulatory shift with dramatic implications for the education sector, both domestic and international.

Part of the reason for this change is the belief that private tutoring companies operating in China had become too focused on profit rather than social good, triggering the need for stronger regulation. As a result, after-school tutoring companies must now register as not-for-profit organisations, and private education companies are prohibited from going public and raising capital. This is the case for both online and offline tutoring companies.

Extracurricular tutoring is prohibited during weekends, public holidays and the summer/weekend vacations, and is completely prohibited for pre-school students. In principle, foreign courses are prohibited, as are foreign teachers located outside of mainland China (teachers located within mainland China must be approved). 

Stocks in education companies crumbled immediately in a bout of panic selling after the announcement of the new policy in July. Key founders and CEOs lost significant personal wealth, such as Larry Chen, CEO of edtech company Gaotu Techedu, who saw his wealth drop by £10.9 billion since January, stripping him of his billionaire status. 

How does the crackdown on private tutoring fit into the wider situation in China?

This reform is only one in a series that has rolled out in quick succession over many key areas of Chinese business and society. The new regulations span from tech to real estate, from time spent playing computer games to the actions of celebrity fan clubs. The moves have been made in the name of ‘common prosperity,’ a new government vision to level economic inequality across the country by reining in the ultra-wealthy and major corporations and refocus on social and national benefit.

The common factor tying all of these changes together is the centralisation of power. If the other sectors suffering clampdowns, such as big tech, are anything to go by, the government may want to rein in education in a bid to retain majority influence within the sector. International schools, in particular, may not fit well into increasingly nationally focussed education policy. The Beijing education authority’s ban on the use of foreign textbooks in primary and junior schools in August is one such change highlighting the shift to a more nationally-minded curriculum.

The Beijing education authority’s ban on the use of foreign textbooks in primary and junior schools in August is one such change highlighting the shift to a more nationally-minded curriculum.

How might these changes affect the flow of Chinese students to foreign institutions?

However, a purely national curriculum doesn’t necessarily have the same appeal for parents. The popularity of extracurricular classes among parents indicates a lack of trust that schools alone provide adequate momentum to help students succeed. If the families reliant on extra tutoring are right, once said tutoring disappears, China’s top position in international academic rankings such as the Programme for International Student Assessment (PISA) may tumble. If they are wrong, parents will be forced to reconsider the value of filling all their children’s time with extracurricular activities.

This argument draws attention to the fact that there are shortfalls in the national curriculum that extra tutoring previously covered. The study of English language in state schools severely lacks speaking practice. It is not part of the notorious gaokao and is therefore left relatively untouched in the classroom. As a key factor in eligibility to study overseas, a drop in national English speaking proficiency could result in a hit to students heading to English speaking study destinations.

China is the world’s largest source of international students and an increase in barriers to mobility such as a drop in English proficiency should be of concern to UK institutions in the mid to long term. The ‘common prosperity’ campaign as a whole suggests a shift to a more domestic focus from the Chinese government, meaning it may become increasingly less interested in supporting overseas study. Indeed, with huge investment in Chinese domestic institutions and the astonishing speed at which many of them are climbing global rankings, the tutoring clampdown may well serve as a wrench that brings the inevitable slowdown in recruitment of Chinese overseas students a little closer.

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