New Oriental Education & Technology Group Inc (新東方教育科技集團) fired tens of thousands of employees, the biggest layoffs disclosed since China embarked on a wide-ranging crackdown on private enterprises more than a year ago.
Yu Minhong (俞敏洪), founder and chairman of the Chinese tutoring giant, revealed in a WeChat post over the weekend that the company dismissed 60,000 workers last year and saw revenue fall 80 percent after ending all K-9 tutoring services following Beijing’s overhaul of the US$100 billion after-school education sector in July last year. That is nearly three-quarters of its more than 81,000 employees as of May.
“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.”
Photo: AFP
Once one of China’s leading private education providers, New Oriental saw 90 percent 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 (US$3.14 billion), Yu said in the post.
Operating losses might be wider than expected at US$500 million in the fiscal year ending in May, said Catherine Lim, a senior industry analyst for Bloomberg Intelligence.
New Oriental and rival TAL Education Group (好未來教育集團) could see losses extend to 2024 as government 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 livestreaming and the sale of agricultural products.
Finding a new direction is a focus for the firm this year, 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 nonacademic curricula and providing some after-school classes for free.
Rivals have also trimmed workforces, with ByteDance Ltd (字節跳動) firing hundreds of employees 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 last year, local regulators in big cities such as 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 percent
New Oriental is among at least 10 firms, including ByteDance and Tencent Holdings Ltd (騰訊)-backed Yuanfudao (猿輔導), that have obtained licenses to offer online classes, according to a Caixin report.
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