Summary

The Chinese government published draft revisions to the Implementing Regulations of the country’s law on private education. Proposed revisions include forbidding organisations which are “actually controlled” by foreign entities from running schools that provide compulsory education to Chinese citizens, and banning non-profit schools from participating in “group-based education” such as mergers, franchise chains and agreement-based control.

Although foreign investment in compulsory education is already banned, the new draft would expand this definition to cover so-called Variable Interest Entities (VIEs) – nominally Chinese-owned companies that are controlled through contracts with a foreign partner, and which are widely used to circumvent foreign investment restrictions in China.

The restriction on group-based education is currently not clearly defined but would appear to prevent organisations or partnerships from operating multiple non-profit private schools in China.

Other changes to the regulations include preventing public Chinese schools from licensing their name to private counterparts or issuing certifications in their name to affiliated private schools; clarifying the relevant approval authorities for different types of private education; increasing scrutiny of the financial transactions of non-profit schools; and specifying that privately-delivered online education should providing credentials should receive approval before being established while those that do not provide credentials simply need to register with the relevant provincial-level education bureau.

The draft regulations will be open for public comment until September 10th 2018.

Analysis by Kevin Prest, Senior Analyst, British Council International Education Services

Although several Hong Kong listed companies provide compulsory education to Chinese citizens through a VIE model, the British Council is not aware of any UK schools offering compulsory education to Chinese citizens through this model. Even if the new regulations are approved, this restriction will therefore probably not directly affect any UK schools currently operating in China.

However, several UK schools work with Chinese partners to provide campuses in multiple cities across the country, and if the draft regulations become law they may have to restructure these activities.

More broadly the draft regulations point towards building a greater gap between non-profit and for-profit private education in China. For-profit private education in China was legalised last year at non-compulsory education levels.

Sources

1. The proposed draft regulations (in Chinese): http://www.moj.gov.cn/government_public/content/2018-08/10/tzwj_38281.html

2. Xinhua, China consults public opinion on online education regulation: http://www.xinhuanet.com/english/2018-08/13/c_137387612.htm

3. Lexology, China's new draft regulations on the implementation of the law for promoting private education (legal analysis): https://www.lexology.com/library/detail.aspx?g=7953bf7e-7410-4dcd-bcb4-c71eec1cc5b2