China’s largest education firm continues dismantling its business

Business & Technology

An online tutoring subsidiary of New Oriental, China’s most famous education company, is closing its elementary and middle school courses in the wake of new bans on for-profit classes.

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Ever since China ordered after-school tutoring companies to go nonprofit or cease operations, it’s been a matter of time before firms complied:

  • Koolearn, owned by New Oriental Education, will end K-9 tutoring for core academic subjects, accounting for some 40% of the company’s revenue, by December.
  • High school tutoring was untouched by the announcement, but is likely to follow close behind, as are closures of other New Oriental departments.
  • The parent company last month warned of 40,000 layoffs and a gradual end to primary and middle school operations this fall.

The context: Founded by the rags-to-riches son of illiterate parents, New Oriental was once the poster child for Chinese self-made success, even inspiring a movie called American Dreams in China.

  • Now, all that is doomed. The next challenge is to rebuild as the company and competitors study up on the kind of educational services Beijing wants.
  • Vocational education and language training are two possibilities. But can firms manage the pivot, or make enough profit in a much smaller market?

What’s next: Other firms, including U.S.-listed TAL Education Group and Gaotu Techedu, will likely make similar announcements soon. OneSmart Education’s bankruptcy earlier this month shows what could happen if they fail to adapt.