China just wiped out a $US100 billion industry. It’s not its first assault on its big private sector businesses, however and probably won’t be its last.
It has effectively destroyed the companies and the wealth of the private sector entrepreneurs who profited from the ambitions of parents trying to maximise the chances of their children gaining entry to the country’s best universities. The founder of one of the biggest of the companies, Gaotu’s Larry Chen, lost $US15 billion of paper wealth as shares in the US-listed company plunged nearly 80 per cent.
There are, however, broader influences that tie the decision to effectively close down private education to other measures China has taken to crack down on its technology companies.Also at the weekend, China directed Tencent Holdings to relinquish exclusive music-licensing rights. Under the crackdown, private education companies are banned from making profits, raising capital or going public. It also banned them from teaching foreign curriculums, importing foreign textbooks and employing foreign teachers.That would be consistent with the tightening of the Communist Party’s control of everything within China under Xi Jinping’s leadership.The sectors China is now reining in experienced their explosive growth largely because they were essentially unregulated.
The sheer scale of the wealth of entrepreneurs like Ma and Chen also represented a challenge to the construct of China’s society and to the party itself.in the action taken against Ant GroupMa disappeared from public view for quite some time after the IPO was abandoned and the Chinese businessman with arguably the biggest international profile has maintained a very low profile ever since. The Party doesn’t want billionaire challengers to its authority to emerge.
China, with the “Great Firewall of China,” is arguably the most restrictive country in terms of cross-border data flows and its recent actions are tightening those restrictions further.
Other markets and entrepreneurs might want to make sure they are doing the right thing then.
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It's a pity that doesn't happen here - our private education sector is a sham.
We'd save millions if we didn't give exclusive rich people schools subsidies.