Edtech firm fires 60,000 in worst cuts since China crackdown

[BEIJING] New Oriental Education & Technology Group Inc has 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, founder and chairman of the Chinese tutoring giant, revealed in a WeChat post over the weekend that the company dismissed 60,000 workers in 2021. Its revenue plunged 80 per cent after ending all K-9 tutoring services following Beijing's overhaul of the US$100 billion after-school education sector last July. Even after the cuts, the company still has about 50,000 employees and teachers, he said in a separate post on Monday.

The revelation underscores the widespread disruption wrought by Beijing's unprecedented decision last summer to outlaw profits in swathes of the after-school education industry - upending a market estimated at US$100 billion at its peak.

The three biggest operators in the space - including New Oriental and TAL Education Group - together once employed more than 170,000 people, but total numbers are estimated in the millions, given the hundreds of private firms that vied for students in a fragmented and under-regulated arena.

Yu wrote: "In 2021, New Oriental encountered too many unforeseen events from factors such as policy, the pandemic, and international relations. Much of our business remains in a state of uncertainty."

Once one of China's leading private education providers, New Oriental saw 90 per cent 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 (S$4.2 billion), Yu said in the post.

Operating losses may 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 could see losses extend to 2024 as government-imposed 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 live-streaming and the sale of agricultural products. Finding a new direction will be a focus in 2022, 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 non-academic curricula and providing some after-school classes for free. Rivals have also trimmed their workforces, with ByteDance Ltd having fired at least hundreds 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, local regulators in big cities like Beijing and Shanghai unveiled their pricing standards for non-profit K-9 tutoring, signalling 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 per cent. New Oriental is among at least 10 firms, including ByteDance and Tencent Holdings Ltd-backed Yuanfudao, that have obtained licences to run online classes, Caixin reported.

New Oriental's Hong Kong-listed stock tumbled as much as 3.7 per cent in early trading on Monday, but reversed the losses.

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