(Bloomberg) – New Oriental Education & Technology Group Inc. laid off tens of thousands of employees last year, revealing the toll of China’s $ 100 billion out-of-school education industry upheaval.
Yu Minhong, founder and chairman of the Chinese tutoring giant, revealed in a WeChat article over the weekend that the company laid off 60,000 workers and saw revenues drop 80% after shutting down all tutoring services. K-9 tutoring following Beijing’s overhaul of the once-lucrative sphere. Last July. This represents nearly three-quarters of its more than 81,000 employees in May.
“In 2021, New Oriental has encountered too many unforeseen events due to factors such as politics, the pandemic and international relations,” Yu wrote. “Much of our business remains in a state of uncertainty. “
Once one of China’s top private education providers, New Oriental saw 90% of its market value wiped out last year after Beijing banned tutoring companies from making profits and raising capital. A combination of severance pay, tuition reimbursement and lease terminations for educational sites cost the company nearly 20 billion yuan ($ 3.1 billion), Yu said in the message.
Operating losses could be larger than expected at $ 500 million in the year ending May, said Catherine Lim, senior industry analyst for Bloomberg Intelligence. New eastern and rival TAL Education Group could see its losses stretch into 2024 as government-imposed price controls on classes and bans on classes on weekends and holidays cripple income, she wrote in a research note.
New Oriental has sought to increase investment in businesses targeting students and overseas Chinese markets, while exploring new areas such as live streaming and the sale of agricultural products. Finding a new direction will be a priority in 2022, Yu said, adding that he appeared on an hour-long live show last week that sold nearly 200,000 books.
Regulatory changes in the edtech space, reflecting a broader crackdown on Chinese internet companies, have forced major players to adapt in order to survive, including expanding non-university study programs and offering free courses. extracurricular courses.
On December 31, local regulators in major cities like Beijing and Shanghai unveiled their pricing standards for nonprofit K-9 tutoring, signaling that a relaunch of online courses may be imminent. Fees for online courses are set at 20 yuan per session, with companies allowed to charge a premium not exceeding 10%.
New Oriental is part of at least 10 companies, including ByteDance Ltd. and Yuanfudao, backed by Tencent Holdings Ltd., which have obtained licenses to offer online courses, according to a report by Caixin.
New Oriental’s Hong Kong-listed stock fell 3.7% early in Monday before reversing losses.
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