Experts opine on what Chinese edtech regulation means for India

The Chinese Government, in its latest regulation, announced its $100 Bn to go non-profit. The government believes that the edtech sector has triggered social inequality among urban and rural citizens of China. Since it provides additional coaching to those who can afford it, it impacts the students, as well as, university exams. The Chinese Government also banned edtech companies to take the public route, or foreign capital; making it difficult for edtech investors in China.

Major Changes announced by the China Government include:

1. Institutions that provide after-school tutoring services on academic subjects in China's compulsory education system, or Academic After-School Tutoriung (AST) Institutions, need to be registered as non-profit

2. The current registration-based regime for operating online Academic AST Institutions has been changes to a government approval-based regime

3. Ban on foreign teachers located overseas from providing tutoring services in China

4. Ban on foreign ownership in Academic AST Institutions, including through contractual arrangements. Companies with existing foreign ownership further need to rectify the situation

5. Public companies cannot futher raise capital to invest in businesses that teach academic subjects in compulsory education

6. Ban on Academic AST Institutions from providing tutoring services on academic subjects in compulsory education during public holidays, weekends and school breaks

7. Academic AST Institutions must follow the fee standards to be established by relevant authorities.

Abhay Chebbi, Pro-Chancellor, Alliance University states, “China perceives online education to be harmful to children, parents, and society. In a move that should surprise no one, the Chinese government has issued a diktat to the $100 billion online and tutoring sector to transit into non-profit. Firms in the sector cannot go public. The development could be a huge opportunity for India. The pandemic has seen the sector growing exponentially over the last sixteen months.”

He added that three key drivers for leveraging on the opportunity are affordability, accessibility, and availability; without the three pillars, the “opportunity” may further exacerbate the inequality among the citizens. “Indian EdTech companies (bow numbering >3,500) can rise to the challenges by disrupting themselves (creating new SBUs to cater to different segments), innovating using AI-ML, and related technologies, and adopting a hybrid education model that combines the engagement that is the hallmark of face-to-face interaction with the 24x7 anytime, anywhere advantage of the Virtual Learning Environment,” he said.

“Those with access to bandwidth and technology can reap benefits, too; in the form of lower costs, a combination of brick-and-mortar classrooms and virtual learning. It also presents opportunities for earning while learning. With firms of all sizes embracing remote working, tech-savvy learners can find unprecedented avenues for growth through agile adaptation,” he concluded.

According to Bhavesh Goswami, Founder & CEO of CloudThat, this crackdown is both an opportunity and a challenge for Indian EdTech companies. “Indian EdTech sector was already hot with news like global PE giant Blackstone picking up more than 60% stake in Indian Ed-Tech company Simplilearn, BYJU'S acquiring Great Learning for $600 Million, and many other investment and mergers. International investors that have mostly invested in Chinese EdTech for the last 10 years. They will start looking at India with great interest. We expect the industry to become even hotter, with further investments from international giants. Being English-based is a great advantage most Indian EdTech companies have, as this gives them international customers, limiting the impact a crackdown by the Indian Government can have,” he said.

Does limiting edtech benefit China? Do EdTechs pose a threat to India?

“This will certainly make many investors of Indian EdTech concerned,” Bhavesh further added. “Imagine a scenario where a history lesson on BYJU'S that praise a particular historic figure anger the central government. Governments might want EdTech companies to teach the agenda set by their government in Delhi. With more and more students learning online, the power that EdTech companies hold will be greater than the frequent chancing of history textbooks that every government orchestrates. Thus, while Chinese crackdown will have a short-term positive impact; only with time can we ascertain the long-term impacts of this.”