China's "Double Reduction" in Education: Impacts and Opportunities
What does China’s Double Reduction mean?
The General Office of CPC Central Committee and General Office of the State Council jointly released the “Opinions on Further Reducing the Burden of Homework and Off-Campus Training for Compulsory Education Students” on July 24, 2021, taking immediate effect.
This “Double Reduction” policy is intended to improve the overall quality of school education, reduce excessive study burdens and protect the health of students, relieve the burdens and anxiety of parents, reduce social inequity, further regulate and standardize off-campus training (including both on-line and off-line training), and strictly implement the Compulsory Education Law, the Protection of Minors Law and other laws and regulations governing the education industry.
Implemented successfully, this initiative would imply limited options for parents to improve their children’s academic and educational achievements during after-school hours. A much safer and more compliant approach may be to revisit the conventional practices of self-reliant and self-regulatory learning models and activities.
How are businesses and industries impacted by this policy?
All subject-based training institutions are subject to government approval and must undergo mandatory review of their content and materials, they are also required to convert into or register as non-profit organizations, prohibited from conducting IPOs or otherwise raising funds from capital markets.
The government will tighten enforcement of the Anti-Unfair Competition Law and Anti-Monopoly Law against training institutions, ban advertisements and marketing campaigns on mainstream media platforms, and further regulate all financing activities and capital injections into training institutions. Adding insult to injury, foreign capital is prohibited from engaging in mergers or acquisitions, trustee arrangements, franchising, or using variable interest entity structures to control or participate (through equity or otherwise) in subject-based training institutions.
Which implications do we see for MNCs operating in China?
Considering these recent developments, manufacturers and service providers of educational toys and games, especially one that incorporate STEM (science, technology, engineering, and mathematics, including computer science), sporting activities and goods, fitness gear and apparel, Educational, Fitness and Health Tech, and Nutritional Supplements, may see the opportunity to reemerge as replacement champions.
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