November 16, 2018 / 5:55 AM / a month ago

China education firms sink as Beijing tightens grip

SHANGHAI, Nov 16 (Reuters) - Chinese private education stocks sank on Friday after Beijing moved to tighten the reins on the early education sector, citing child safety issues that have hit some firms over the last year and saying that others were making too much profit.

China’s State Council said on Thursday it would not allow private kindergartens to go public as individual entities or as part of asset packages and that blocked listed firms from buying private kindergartens via share sales or by cash.

U.S.-listed RYB Education Inc, which was hit by a child abuse scandal in China last year, dropped over 50 percent overnight, wiping off $200 million from its market valuation. In Hong Kong and Shenzhen peers dropped sharply on Friday.

The move by Beijing is the latest regulatory crackdown to rattle investors, following its moves to rein in sectors from online lending to gaming.

In a draft document laying out the plans, China’s cabinet said it would look to standardise pre-education, bolster “lagging” teaching standards and look to curb excessive profit-seeking.

“Some kindergartens are overly profitable and some child safety issues have occurred,” the state council said.

“This relates to the healthy development of millions of children, social harmony and stability and the future of the Party and the state.”

The RYB case last year, involving allegations of child abuse, had sparked widespread anger in China about the lack of trained teachers, low wages and poor regulatory oversight in the massive and fast-growing private pre-school sector. (Reporting by Adam Jourdan; Editing by Stephen Coates)

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