China has ordered companies that offer tutoring on school curriculum to go nonprofit as part of a sweeping overhaul of the country's $100 billion education system.
China will no longer allow profit-driven tutoring that has become very popular around its public education sector, multiple reports said, in a bid to lessen inequality and reduce a key source of stress for both children and their parents.
A notice released by China's State Council said companies that teach school subjects will be restricted from accepting offshore investment, which could include funding from overseas registered entities of China companies, Bloomberg News reported.
The ban is also part of a strategy to get couples to have more children and reverse China's falling birth rate, a report in the state-run Xinhua News Agency said this past weekend.
Based on 2016 data, the most recent year from the Chinese Society of Education, at least 75% of students are tutored outside of school.
China is now adding to its public online tutoring system and making the learning free as a substitute for tutoring institutions, which is expected to be forced to scale back or end their services.
Existing online tutoring companies will be subject to extra scrutiny and after-school tutoring will be banned during weekends, school vacations and public holidays, the State Council said.
The new regulation mirrors China's broader clampdown on the growing influence of Chinese internet companies, from Didi Global to Alibaba Group.
The move stems from a deeper backlash against the industry, as excessive tutoring torments youths and adds to the financial stress of parents, reports said.
The new policies threaten to wipe out the lucrative activity that made stock market favorites of New Oriental Education & Technology Group, TAL Education Group and Gaotu Techedu Inc.
The ban could also cut off the private tutoring market from international investors.
Education technology had become one of the most in demand investments in China in recent years, attracting billions from the likes of Temasek Holdings Pte., Tiger Global Management and SoftBank Group, reports said.
Meanwhile, Forbes reported that three large education companies lost $16 billion in just one hour Friday, after investors sold off shares following a leak of the new restriction.