What China's government policy on education means for investors
Investors who fear crackdowns in other sectors should see the tuition sector reforms as means to reduce income and social disparity.
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BEIJING'S moves to turn the US$100 billion after-school tutoring (AST) industry into a non-profit sector among other measures, sparked a 10 per cent sell-off in the Chinese stock markets last week (ending July 30), with MSCI China down almost 25 per cent from its peak on Feb 17 this year.
The approach taken by the authorities on the AST sector has triggered a broad base reassessment of overall Chinese equity risk and positioning. Understandably, investors are concerned that a crackdown of similar magnitude in the other sectors might be forthcoming.
However, a deeper appreciation of the rationale behind the recent government policies will show that such concerns are likely misplaced.
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