Chinese authorities are considering asking tutoring companies to become non-profits as part of a crackdown on the $120 billion industry, Bloomberg reported on Thursday.
The report cited anonymous people familiar with the matter, who say that this move will push shares in the industry sharply lower.
It is expected that under the new rules, platforms will be forbidden from raising capital or going public in the future.
A source had be quoted to say that listed companies will likely no longer be allowed to invest in or acquire education companies that teach school subjects and financial investment from foreign investors will also be prohibited.
In order to ease the burden on parents and ease pressure on school children, the sector is being scrutinised.
Furthermore, the sector is also regarded as an obstacle to the country’s top priority, increasing its declining birth rate.
Recently, Chinese authorities also announced that couples may have three children, and a range of measures was released to encourage births and reduce costs associated with childrearing.
On Friday, tutoring stocks tumbled, with New Oriental Education and Technology Group shares falling by 40 per cent to their lowest level since listing last year, while TAL Education Group and Gaotu Techedu Inc shares fell by around half in pre-market trade.
(With inputs from agencies)