New Oriental Education laid off 60,000 people after Beijing’s crackdown last year

Yu Minhong – the billionaire founder of New Oriental Education – confirmed the massive shock in a post on his WeChat account this weekend, adding that the company faced “too many changes in 2021”. He blamed the dismissals on “politics, the pandemic and international relations.”

Yu’s post clearly describes the consequences for private business in China when Beijing took major steps to curb what they saw as ungovernable business practices.

New York-listed Oriental – China’s largest private education company by market value ̵[ads1]1; was one of the most high-profile victims of the extensive $ 120 billion restrictions imposed on the country’s private tutoring sector, as it fell from rules announced in July that banned profits, after-school tutoring services and limited such companies from making money or raising capital.

Regulators said at the time that excessive guidance had overwhelmed children and placed an excessive financial burden on parents, while at the same time social inequality worsened.

Since these restrictions were announced, the authorities have ordered these education companies to suspend online and offline tutoring hours.

China's private education companies are the latest targets of Beijing's attack
New Oriental, known for its after-school tutoring services, had more than 88,000 full-time employees and around 17,000 contract teachers and employees in May, according to the latest annual report.

It was not clear whether contract employees were among the 60,000 released, but the figure is about two-thirds of New Oriental’s full-time employees last year.

In another post late Monday, Yu clarified that the company still has around 50,000 teachers and employees after the layoffs.
After Yu’s post attracted a lot of attention, New Oriental said the post did not “represent the company’s views.” In a submission to the Hong Kong Stock Exchange late Monday, the company said it was reviewing its latest financial results and would update the market at a later date.

The company also spent nearly 20 billion yuan ($ 3.1 billion) last year on reimbursing prepaid tuition to customers, compensating employees who were laid off and handing over leases to learning places across the country, according to Yu.

He added that revenues fell 80% while market value shrank 90%. New Oriental lost about $ 28 billion in market value in 2021.

China's 'unique' breakdown paralyzed private enterprise.  One year later, it may have to cut some slack in the business

The ban on private tutoring shocked parents and led to many companies struggling. It also triggered strong sales of Chinese education companies in New York and Hong Kong: At the end of July, Goldman Sachs estimated that the regulations wiped out $ 77 billion from the market value of foreign-listed Chinese guidance companies within a week.

It was a sudden reversal of the fortunes of these companies, which had been beloved in the stock market in recent years and attracted billions of dollars in funding from investors such as Tiger Global Management and SoftBank Group.

It is not yet clear how many total jobs were eliminated due to the impact. However, former education officer Wang Wenzhan said in July last year that there are almost one million institutions in the country that focus on after-school care, and employ around 10 million people. In December, the Ministry of Education announced that the authorities had shut down 84% of the country’s online and offline teaching after school institutions.

But politicians are clearly concerned about rising unemployment, which could lead to widespread job losses turbulence and induces instability.

China’s Deputy Foreign Minister Hu Chunhua on Monday called for stronger efforts to keep employment stable, according to state-owned Xinhua.

“[We need] be more active in doing a good job of ensuring the overall stability of employment, “he told a group of leading jobs officials at a cabinet meeting.

Xi Jinping has taken on China's capitalists.  Here is why it will change in 2022

For the few survivors, life can still be difficult. Yu acknowledged in his post that New Oriental emerged from the last six months “with great difficulty.”

The entrepreneur, who founded New Oriental in 1993, said that the company has completely closed its core business tutoring business. It will then focus on teaching other subjects – usually music or sports, which are not part of the core curriculum in China – to provide tutoring services for students and offer Chinese courses in overseas markets.

New Oriental has also set up an e-commerce live-streaming platform focused on selling agricultural products, Yu said.

“Work hard, study hard and try to find new directions,” he added. “These should be my three main themes for 2022.”

SPEECH Education (TAL), another Chinese tutoring giant, announced in November that they would shift their focus from teaching curricula from kindergarten to ninth grade, and instead supervise other subjects, such as music and sports. It also wants to expand its business abroad.

Source link

Back to top button