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The rules issued last month not only bar curriculum-based tutoring for profit but also ban companies from employing foreign-based foreign tutors, putting a stop to language learning services that connect students in China with tutors outside China.

Several English learning providers in China have so far reacted to the policy by stopping selling courses taught by overseas tutors to students in China.

A sudden blow 

Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education (the "Opinion") issued by the General Office of the CPC Central Committee and the General Office of the State Council on July 24 require that companies are not allowed to hire foreign people who live overseas to provide tutoring services. This rule poses an adverse effect on online education companies which rely on foreign tutors to offer services.

Whales English, a Beijing-based company that teaches English by connecting foreign teachers with students in a small group, announced on August 6 that it will not sell classes taught by overseas-based tutors to students in China to “strictly comply with the Opinion”. Meanwhile, classes taught by these tutors cannot be renewed, added the company.

Following the company, online English learning platforms including VIPKid, Qkids, 51Talk, DaDa, and PalFish all made similar statements.

According to their announcements, they added that services for customers who have already purchased courses would be continued to deliver. International businesses will also not be affected.

GoGoKid, a one-on-one English tutoring provider for kids, was even shut down on August 5 by its owner Dali Education, Byte Dance’s education arm unveiled last October.

Due to business adjustments, some companies have already laid off employees. Whales English said in its post that “due to recent business transformation, they have to reduce the staff”. 

That also means these companies will no longer partner with foreign tutors living overseas who get decent pay from the job. 

VIPKid, which gives Chinese students access to native speakers from North America, said on its website that 70,000+ foreign teachers have served over 800,000+ students across 63 countries and regions on its platform. The company advertises that teachers can “earn $14-$22 an hour from the comfort of home”.

Some teachers left comments down below VIPKid’s latest post on its official WeChat account.

51Talk, an English education platform in China that connects Filipino teachers with Chinese students, was listed on the New York Stock Exchange (NYSE: COE). According to its website, it has more than 30,000 home-based teachers.

Foreign teachers for other companies such as Whales English, DaDa, and Qkids will also lose the easy way to bring in extra cash.    

From boom to doom?

One-on-one online English learning in China, which is among the popular sectors that attract investors’ interest, has witnessed a boom over these years. According to the Chinese market research firm Yiou Intelligence, online tutoring will reach $11.4 billion by 2022.

VIPKid has raised $1.1 billion from well-known investors, including Tencent, Sequoia Capital, and Coatue, since its inception in 2013, and it was reported to delay its IPO plan amid regulatory uncertainty.

DaDa has secured more than $860 million in funding from Warburg Pincus, Tiger Global, and TAL, according to CrunchBase.

Byte Dance, TikTok’s owner, launched GoGoKid in 2018 to grab a market share in the competitive area. The online one-on-one platform was then one of the products of Dali Education, the education business under Byte Dance.

As these companies have caught on quickly with support from backers, they began to spend much money on marketing to acquire customers. 51Talk’s sales and marketing expenses rose from RMB465 million in 2016 to more than RMB1 billion in 2020. Due to the one-on-one model and high marketing expenses, it’s hard for them to turn profitable. 

 51Talk 2020 Annual Report

The rule that requires them not to offer video classes taught by overseas-based foreign teachers seems to turn a boom into doom. However, these companies are still struggling to do something to explore other opportunities and at the same time to stay away from regulatory risks.

According to their statements, measures they would take include:

• Launching live classes offered by foreign teachers living in China, which has not been regulated by the Opinion document yet.

• Hiring Chinese teachers to help students improve English speaking abilities through online classes. But whether the services will deliver the same performance as those provided by native speakers remain unknown.

• Expanding into competency-based education area with the experience they have gathered from English teaching. 51Talk said it introduced a language literacy course that is taught by Chinese teachers with the assistance of artificial intelligence technology and aims to enhance students’ speaking and reading abilities in early August. VIPKid, DaDa, and Qkids will bring similar products to customers soon.

• Growing international presence. VIPKid, 51Talk, PalFish, and Qkids all said their international business would not be affected. PalFish noted it would sell its leveled reading product focusing on the Chinese language to more markets to speed up its global expansion.

• Teaching adults to learn English. 51Talk said it will double down on adults.
  

Whether these urgent and immediate measures will remedy these companies is still unknown.