China’s cabinet has recently issued policies to “curb excessively profit-driven acts of private kindergartens,” and encourage development of public or non-profit preschool institutions, one year after the child-abuse scandal of RYB Education, a New York-listed company in China was broke and ignited widespread public suspicion and indignation.
The State Council released “opinions” on the reform of preschool education on Thursday, which prohibit private kindergartens from going public or public companies acquiring or merging private kindergartens in any way.
After the new announcement, RYB Education soon witnessed a slump in its stock price, with US$300 million worth of market value being evaporated. It’s concerned the severe control measure would dampen the enthusiasm of private capital running the business which concerns people’s livelihood and remains in short supply.
Private kindergartens have remained dominant in the market for years. Based on the Data of the Ministry of Education, in 2014, 2015 and 2016, private businesses in the sector respectively occupied 66.4 percent, 65.4 percent and 64.3 percent.
The State Council ‘opinions’ also proposed to garner the non-governmental sector to run kindergartens, although it’s specified private capital would only be encouraged to flow into non-profit preschool institutions, meaning the government would extend subsidies to the private kindergartens for them to lower fees.
It’s notable the new regulations make it clear that private capital would be limited to invest into public or non-profit kindergartens from now on. Educational authorities would work with related governmental departments to ‘clean up’ existing ones that run against the new rules.
In 2017, as indicated by the Ministry of Education data, there were totally 255,000 kindergartens nationwide, among which 160,400 are private ones.
