Chinese education technology stocks sank sharply on Monday as political shifts in Beijing appear to bode poorly for the space.
The cementing of Xi Jinping’s grip on essentially all aspects of Chinese polity also cements his push for “Common Prosperity”, which included a crackdown on tutoring services that were seen as fomenting societal inequality. The newly re-elected leader has long been opposed to the industry, not only for its increased benefit to affluent students, but its profit motive that goes against party ideology and Xi’s perception that a heavy focus on homework has produced a “burdensome” and “disordered development” for students.
“Only socialism has conditions and capability to achieve common prosperity for all, while capitalism seeks maximum interests for capital and therefore couldn’t attain real common prosperity,” Jiang Jinquan, director of the Policy Research Office of the Communist Party Central Committee, said in Beijing on Monday. “The Chinese central government will ramp up efforts to stabilize domestic economy and maintain sound economic momentum.”
New Oriental Education & Technology Group (NYSE:EDU) -24.18%, TAL Education Group (NYSE:TAL) -27.92%, and Gaotu Techedu (NYSE:GOTU) -21.44% all declined by 20% or more on Monday, while Golden Sun Education Group (GSUN) -13.23% and Tarena International (TEDU) -4.09% also marked notable drops.
Read more on reeling China-based stocks on Monday.