Chinese legislators announced a revised draft amendment on the Non-state Education Promotion Law that could impact foreign investment in schools in the country.
In the revised regulations for private education, private businesses now cannot partake in or acquire public schools, while non-profit government schools must seek approval before signing agreements with for-profit education companies.
“Foreign capital or control [would] not be allowed in K-9 education in China”
According to the Financial Times, nine China-focused education companies suffered share price falls from 18.7% to more than 40% on August 14.
Andrew Chen, chief learning officer at WholeRen Education, said that the draft law does not allow foreign investment or foreign organisations to participate in school ownership and management for grades one to nine.
“Foreign capital or control [would] not be allowed in K-9 education in China,” he told The PIE News.
“If the school caters solely for students with foreign passports or from grades 10-12, or before Grade one to Chinese citizens, foreign capital or control will be permitted.”
Wisdom Education International, which the FT said was worst hit, saw prices climb again on Tuesday after releasing a statement from its chairman, Liu Xuebin.
Xuebin explained it was “premature” to assess the impact as the draft amendment is in draft form and remains subject to further change.
“The Group has not been affected by the draft amendments in any material respect as at the date of this announcement, and the company currently does not expect that the draft amendments will have any material negative impact on the group based on its preliminary assessment,” he noted.
However, on August 22, the group’s share price closed at $4.31, down from $6.84 on August 10.
In 2017, London-based Westminster School and Hong Kong Melodious Education Technology Group, a Hong Kong-based educational group, announced they had agreed to open six international schools in China.
The first school to cater for Chinese students aged three to 18 is scheduled to open in September 2020 in Chengdu to teach Chinese National Curriculum blended with aspects of a Westminster curriculum at primary and junior levels, while students at senior high level will study IGCSEs and A levels.
The other dates and locations are yet to be confirmed.
Asked to comment on the draft legislation, a spokesperson explained that Westminster School is offering consultancy services to the new Chinese schools, which are being opened and managed by HKMETG.
The school declined to comment further.
Satellite schools in China can still be very lucrative for US and UK owned schools, Chen explained.
Demand for international K-12 education is high and growing rapidly in China. In the past four years, the number of international schools grew about 30% annually, according to Chen, making it the highest growth rate of newly opened K-12 private schools in the world.
Chen emphasised that students from new middle and upper-class families seeking to study abroad at universities in the US, UK, and Australia, have “pushed the education market greatly”.
“The government has repeatedly limited…the curriculum of the international schools with Chinese students”
“Just a contract to ‘give the name’ to a Chinese private international school will incur tens of thousands of income for a foreign school,” he said, adding policy uncertainty makes it difficult to understand what will happen next.
“The government has repeatedly limited, censored, appointed the curriculum of the international schools with Chinese-passport students.”
Students are often able to study foreign curricula at international schools in China, especially at higher levels. However, when students enter the international track, they cannot go back to the Chinese national Gaokao curriculum.
This means students cannot obtain admission to any decent Chinese university, Chen said.
Satellite schools will need to evaluate their operations if the draft bill is introduced, Chen noted, but this could add other difficulties.
“If the base school cannot control the satellite school, the reputation can possibly be at risk.”
Other stocks that were hit included New Higher Education and Tianli Education, which have failed to climb back to August 10 prices.
Minsheng Education Group, which initially shed 20% of its HKD$1.66 price, has since risen to $1.55.
According to Chen, more than 20 K-12 school operation groups successfully went IPO since 2014.
“With funding from the capital market, there are more and more public and private schools being controlled by those education groups, and foreign investment groups,” he added.
