Booming industry

Despite government determination to rein in the industry, strong demand among students for after-school tutoring has helped it grow rapidly.

The online tutoring business in China experienced rapid growth last year due to the pandemic, reaching 257 billion yuan, a year-on-year rise of 35.5 percent, according to market consultancy iResearch in Shanghai. The company estimated the industry would reach 490 billion yuan by 2024.

The overall market for K-12－kindergarten-to-12th grade after-school education－was worth about 800 billion yuan in 2019. The industry is expected to experience speedy expansion after setbacks last year during the pandemic, soaring to 1.4 trillion yuan by 2025, according to a report by consulting company Oliver Wyman and the National Institute of Education Sciences.

Yu Minhong, chairman of New Oriental Education and Technology, said that with a large amount of capital infusion, the education industry has grown quickly. For example, Yuanfudao raised $3.5 billion in three rounds of funding last year, while Zuoyebang raised $2.35 billion in two rounds.

Yu was quoted by Shanghai news outlet ThePaper as saying the instant benefits and quick success sought by investors do not work in the education industry, and a crackdown on online education, which is full of "chaotic misbehavior", is imminent.

Chen Zhiwen, editor-in-chief of online education portal EOL, said the business model for online tutoring companies does not make sense in either the short or long term and most of them have not made a profit.

They face two challenges－controlling new student acquisition costs and maximizing renewal rates. The companies attract parents and students with tuition costs for courses that cannot cover their business outgoings, Chen said.

They can only survive if they obtain more investment, and when this investment dries up, such companies are doomed to fail, he said.