Yu Minhong, founder and chairman of the Chinese tutoring
giant, revealed in a WeChat post over the weekend that the company dismissed
60,000 workers in 2021 and saw revenue fall 80% after ending all K-9 tutoring
services following Beijing’s overhaul of the the $100 billion after-school
education sector last July. That’s nearly three-quarters of its more than
81,000 employees as of May.
The revelation underscores the widespread disruption wrought
by Beijing’s unprecedented decision last summer to outlaw profits in swathes of
the after-school education industry -- upending a market estimated at $100
billion at its peak. The three biggest operators in the space -- including New
Oriental and TAL Education Group -- together once employed more than 170,000
but total numbers are estimated in the millions given the hundreds of private
firms that vied for students in a fragmented and under-regulated arena.
“In 2021, New Oriental encountered too many unforeseen
events from factors such as policy, the pandemic, and international relations,”
Yu wrote. “Much of our business remains in a state of uncertainty.”
Once one of China’s leading private education providers, New
Oriental saw 90% of its market value wiped out last year after Beijing banned
tutoring companies from making profits and raising capital. A combination of
severance payments, tuition refunds and terminated leases for teaching sites
cost the firm nearly 20 billion yuan ($3.1 billion), Yu said in the post.
Operating losses may be wider than expected at $500 million
in the fiscal year ending in May, said Catherine Lim, a senior industry analyst
for Bloomberg Intelligence. New Oriental and rival TAL could see losses extend
to 2024 as government-imposed price controls on classes and bans on weekend and
holiday lessons handicap revenues, she wrote in a research note.
New Oriental has sought to increase investments into
businesses targeting college students and overseas Chinese markets, while
exploring new areas such as live-streaming and the sale of agricultural
products. Finding a new direction will be a focus in 2022, Yu said, adding that
he took part in a one-hour live broadcast last week that sold nearly 200,000
books.
The regulatory shifts in the edtech space, mirroring a
broader sweeping crackdown on Chinese internet companies, have forced major
players to adapt to survive, including by expanding non-academic curricula and
providing some after-school classes for free. Rivals have also trimmed their
workforces, with ByteDance Ltd. firing at least hundreds last year.
Beijing-based TAL cut 90,000 jobs, local media outlet Late Post reported
without saying where it obtained the information.
On Dec. 31, local regulators in big cities like Beijing and
Shanghai unveiled their pricing standards for nonprofit K-9 tutoring, signaling
that a relaunch of online classes could be imminent. Fees for online classes
are guided at 20 yuan per session, with companies allowed to charge a premium
of no more than 10%.
New Oriental is among at least 10 firms, including ByteDance
and Tencent Holdings Ltd.-backed Yuanfudao, that have obtained licenses to
offer online classes, according to a Caixin report.
New Oriental’s Hong Kong-listed stock tumbled as much as
3.7% in early trading Monday before reversing losses.