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Private school owners forced to hand institutions over to Chinese state

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Rising numbers of private school owners in China have been forced to give their institutions to the state as the fallout from Beijing’s abrupt education overhaul ripples across the country.

Over the past three months, city authorities have taken over at least 13 for-profit primary and middle schools as well as one high school without providing compensation, according to public records and Financial Times interviews.

“I didn’t have a choice,” said the owner of a school who handed it over to state controllers last week.

China has almost 190,000 private schools, educating more than 56m, or one-fifth of all students, according to official figures. There are more than 12,000 primary and middle schools.

Beijing wants to reduce the proportion of non-high-school students who attend for-profit schools from more than 10 per cent to less than 5 per cent as soon as the end of this year, according to people familiar with the discussions.

“The top leaders do not believe private schools serve the greater good,” said a Beijing-based government adviser. “Public education does.”

The $100bn-a-year private tutoring industry has been the most obvious victim of the creeping nationalisation of China’s large for-profit education sector.

Beijing’s decision to ban private tutors for primary and middle school students from earning a profit have sent the share prices of Chinese education companies tumbling and slashed their market value by billions of dollars. Annual earnings for the tutoring industry have been forecast to fall from $100bn to less than $25bn.

The problem for private sector owners of junior and middle schools has become more acute since May when Beijing told local governments to “rectify” their runaway expansion.

“We must make sure public schools are the main compulsory education provider,” said a circular sent by the central government to lower-level authorities, which added that Beijing would encourage some for-profit schools to turn into public ones.

The industry overhaul has raised concerns over the violation of private property rights. There are also fears the measures will undermine the quality of education, as many cash-strapped local governments struggle to keep previously well-managed private schools afloat.

“It is true that our industry has many problems but a state-led takeover is not the solution,” said Alex Li, owner of a middle school in Shandong, eastern China. He, too, is under pressure to transfer his operation to the local education authorities.

The education reforms are a striking change after years of liberalisation. Over the past two decades, China’s private primary schools grew 10-fold, teaching about 9.5m students in 2019.

Children at a private school on outskirts of Beijing
The problem for private sector owners of junior and middle schools became more acute after Beijing told local governments to ‘rectify’ their runaway expansion © EPA

Parents’ preference for private schools is more pronounced in rural areas where they believe a lack of funds for public schools has damaged the standard of education. In some counties, as many as half the students are educated privately, despite higher fees.

“Private schools are in general better managed than public ones because the former counts on good performance to attract students,” said Liu Qian, a Beijing-based marketing executive.

As a child, Liu transferred to a private middle school in the central city of Changsha from a state-backed rural school in a nearby county. “I wouldn’t have been able to go to college had I not made the switch,” he said.

Beijing, however, has grown uncomfortable with the sector’s rise. Government advisers maintain it has led to worsening inequality and has made it harder for the Communist party to control what is taught.

“Private schools are supposed to be a supplement to public education,” said Wang Feng, an official with the Ministry of Education, at a conference in June. “Now they are competing against each other for good teachers and talented students.”

Some parents believe the state takeover of private schools will help address education inequality.

“The rise of expensive private schools is making it harder for students of modest means, who mostly go to public schools, to move up the social ladder,” said Yang Ping, a Zhoukou-based office worker whose son studies at a state primary school. “I support the new policy because it will create a level playing field.”

Officials admitted it would be difficult for underfunded public schools to host an influx of students if private schools closed. Nor was it possible for cash-strapped local authorities to buy out private school owners.

The only solution, said the government adviser in Beijing, was for private schools to hand over their operations to the state.

In Zhoukou, central China, an executive at Huaiyang No 1 High School, known for its stellar academic performance, said he had no problem donating the institution to the government because it was “in the public interest”.

Additional reporting by Edward White in Seoul

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