By P.R. Venkat
Chinese education companies said that Beijing's new regulations that restrict after-school tutoring services will have an adverse material impact on their operations and financial results.
The high-level policy directives require institutions that provide after-school tutoring for academic subjects in China's compulsory education system to be registered as non-profit organizations. Foreign ownership in after-school tutoring institutions is prohibited and firms that have foreign ownership would need to rectify the situation.
U.S.-listed New Oriental Education & Technology Group said Monday that is "considering appropriate compliance measures to be taken, and expects such measures to have material adverse impact on its after-school tutoring services."
New Oriental Education's share price fell 54% in New York and was down 41% in Hong Kong on Friday. TAL Education Group, also listed on the NYSE, lost 71%.
TAL said Sunday that the compliance measures to be taken by the company will have "material adverse impact."
Dashan Education Holdings said that it was still unclear on how the local authorities will interpret and implement the policy.
"The management of the group believes that with the proper adjusted business model for its existing businesses and the expanded businesses, the group will be able to meet the challenges posed by the new policy," it said.
China Beststudy Education Group said that the impact on the group is still unclear and that it was in communication with regulatory authorities and would make appropriate adjustments to its business.
In May, a top-level meeting chaired by Chinese President Xi Jinping said that the government should step up supervision of the sector and crack down on irregularities in fee structure, strengthen regulation of prepaid tuition and ban arbitrary funding operations
Last month, the Chinese market regulator fined 15 tutoring companies a total of $5.7 million for false advertising and fraudulent pricing. Separately, a new office was set up in the Education Ministry to oversee the tutoring industry.
Write to P.R. Venkat at firstname.lastname@example.org
(END) Dow Jones Newswires