China’s edtech crackdown isn’t what you think. Here’s why.

It's part of an attempt to fix education inequality and address a looming demographic crisis.

Child on laptop

In the past decade, China's private tutoring market has expanded rapidly as it's been digitized and bolstered by capital.

Photo: Getty Images

Beijing's strike against the private tutoring and ed tech industry has rattled the market and led observers to try to answer one big question: What is Beijing trying to achieve?

Sweeping policy guidelines issued by the Central Committee of the Chinese Communist Party on July 24 and the State Council now mandate that existing private tutoring companies register as nonprofit organizations. Extracurricular tutoring companies will be banned from going public. Online tutoring agencies will be subject to regulatory approval.

Much of the coverage around the latest crackdown has linked it with Beijing's war on Big Tech or focused on ideological control, which has been a major aspect of Beijing's handling of the state-run school system. But when it comes to the sprawling ed tech industry, experts say what's happening looks more like an attempt to cure tech-enabled ills that have exacerbated nationwide educational — and thus social — inequality.

The confusion stems from the overlapping timelines of two regulatory trends: The first is far tighter regulations on the private education market, which were handed down last Saturday but have been bubbling up since earlier this year. The second is Beijing's increasingly widening crackdown on Big Tech generally. But "the crackdown on private tutoring is a crackdown on tech-mediated harm, not part of the crackdown on Big Tech," Michael Norris, head of China Consumer & Tech Research at AgencyChina, a global marketing agency, told Protocol.

Beijing, or at least one of its major regulators, appears to agree. To calm spooked investors, China's securities regulator reportedly held a call Wednesday night Beijing time with major investment banks. On the call, senior officials at the China Securities Regulatory Commission stressed that the curtailing of private education is a targeted crackdown on problematic practices that occur in the particular market, not a blanket move that targets other industries, according to Bloomberg.

Moves against tech titans like Alibaba, DiDi and Ant Financial are aimed at addressing genuine problems in China's tech industry including unfair competition, lax cybersecurity and predatory lending. By contrast, the latest ed tech rules are intended to rectify unscrupulous practices like false advertising and VC capital-induced pricing wars that have disrupted the market and are increasingly excluding underprivileged children. Tencent-backed Yuanfudao, one of China's largest ed-tech unicorns that had been rumored for an IPO, is already transitioning away from K-12 after-school tutoring. It launched a new product on Wednesday, Pumpkin Science, which will instead focus on a so called "well-rounded education" (素质教育), not (banned) subject-specific training.

Sociologists and political economists believe that while Beijing's tightened grip on the private education sector might hamper the growing wealth and power of the online-learning companies, it is ultimately an attempt to avoid massive social unrest.

"Education has been crucial to [the] CCP's legitimacy as a people's party," Ye Liu, a sociologist at King's College London who studies education inequality in China, told Protocol. "The recent crackdown on ed tech and private tutoring can be seen as an attempt to respond to the concerns of the poor."

China is home to one of the world's largest learning-technology markets, powered by its 240 million K-12 students and eager families willing to shell out an average of 11% of annual family expenses for their children's future success. The state is the dominant education provider, but deep-seated anxiety over education inequality and the highly competitive nature of the gaokao has fueled a private tutoring bonanza. Many companies offer services online and tools that are equipped with deep learning technology that helps solve questions for students. These startups are backed by behemoths like Baidu, Tencent and Alibaba and have adopted the same cash-burning strategy — grab market share, at virtually any cost — that has given rise to the tech giants. Buoyed by the pandemic, China's ed tech industry once enjoyed exponential growth. Online education startups raised over $10 billion in 2020, about two-thirds of the world's total venture capital investments that went into this sector, according to HolonIQ, a market intelligence firm.

The staggering amount of money pumped into China's private tutoring market has led to shady practices, such as misleading advertising and use of fraud, that have disrupted the market and, in the eyes of the government, exacerbated education inequality, a huge pain point for hundreds of millions of Chinese families, even though some ed tech companies claim they try to tackle the exact same problem.

One common practice private ed tech companies have adopted is to attract new user subscriptions with cheap, heavily subsidized trial classes. Once the trial period is over, families have found themselves on the hook for significant upfront course fees, which have proven budget-busting for even members of the relatively wealthy urban middle-class. "I believe this use of subsidies to attract new parents, and make them pay upfront, was one reason that this sector was targeted," Norris said.

Why private education?

Insiders in the private education sector had long anticipated heightened restrictions, and they'd gotten advance word of the new policy guidelines that came down last weekend, according to Rui Ma, a China tech investor and analyst who hosts the podcast and newsletter Tech Buzz China. Ma told Protocol that tech entrepreneurs she talked to last week, when rumors about upcoming sweeping rules were widely circulating, "basically all said that they felt like this is clearly to address the demographic crisis."

The latest Chinese census, released on May 11, showed the slowest population growth in decades, and plummeting birth rates since 2011. To address it, Beijing announced a three-child policy on May 31. Yang Wenzhuang, director of the Department of Population Monitoring and Family Development at China's National Health Commission, said in July that economic and social policies related to education, housing and employment have become key factors "influencing families' fertility choices." To encourage families to have more babies, Yang said, the government will roll out supplemental policies to make life easier for parents. And that could include reduced education costs and Ministry of Education-led support for after-school services and summer care services in order to reduce the burden of education for schoolchildren.

"The demographic crisis is exacerbated by social inequality," Ma said. "[If] I am struggling to see any future for my kids without spending a ton of time and resources on it ... I'm gonna not have kids."


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.


Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories