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BACK TO THE ROOTS

An education billionaire is going back to his rural roots after China’s tutoring crackdown

Yu Minhong, the chairman of New Oriental
REUTERS/Jason Lee
Yu Minhong, Chairman and President of New Oriental Education &Technology Group.
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Many people outside China are acquainted with the success story of Jack Ma, the English teacher who founded Alibaba and became an e-commerce billionaire. But within China, it’s another English-teaching entrepreneur who often comes to mind—and whose troubles in the wake of a harsh regulatory crackdown are sparking a rare wave of public sympathy.

Over the past two decades, Yu Minhong (俞敏洪), 59, has been the embodiment of the power of education in China, a kid from the countryside who became the billionaire founder of a US-listed tutoring company. His life story was turned into an inspirational movie in 2013, known in English as “American Dreams in China,” based on how Yu and his co-founders began New Oriental, the biggest private tutoring provider in China.

“Yu and Ma actually have rather similar backgrounds: about the same age, both rose from humble beginnings, taught English at the start of their careers, and are astute businessmen with a penchant for publicity,” said Yangyang Cheng, a postdoctoral fellow at Yale Law School’s Paul Tsai China Center, and essayist on China. But as Yu and his business helped generations of Chinese students to realize their dream of studying in the US, it is Yu who “occupies a special place in the Chinese public imagination, especially among the college-educated class,” said Cheng.

If 2020 was the year Beijing cut Ma down to size in the wake of his comments on out-of-touch financial regulators, this year they came for Yu. On July 24, after months of murmurs about “chaos” in private education services, the government abruptly announced new rules to shorten the time students spent on homework as well as at after-school classes, dubbed the “double reduction.” Some see the effort as a way to reduce the cost of raising the children amid a plunging birth rate, while also retaining control of what young people are being taught.

For figures like Yu, this means their previous success has become past tense, and in order to stay in the game they need to reinvent themselves in ways that are in line with Beijing’s goal. With an increasingly inward-looking China that is more suspicious and dismissive toward western countries, areas that help increase the country’s self-reliance, such as by increasing rural incomes and consumption, are quickly drawing attention and funding from companies, including New Oriental. Tech giants including Pinduoduo and Alibaba have pledged billions of dollars into this area, which many see as a way to show compliance with the government’s agenda after an unprecedented reining in of the tech sector.

“Agriculture is indeed the new politically correct field,” said Henry Gao, an associate professor of law at Singapore Management University. “Overall, I think this could be good news for the rural areas if the firms really carry out what they promised to do,” he said.

Back to his rural roots

In a country where being born in a city or in the countryside presents dramatically different chances of future success because of the stringent hukou household registration system, Yu became a striking example of a village boy made good. He grew up in eastern Jiangsu province, the son of illiterate farmers, and made it into the English department of the prestigious Peking University after failing the notoriously hard college entrance exam twice. A decade ago, Yu joined the ranks of China’s billionaires.

Now, after a year that saw New Oriental’s market cap go from $30 billion to $3.5 billion, Yu is looking to his rural roots as a deadline looms for tutoring companies to overhaul themselves. Last month it said it would shut down its after-school tutoring programs for children up to ninth grade by the end of the year, which supply 50%-60% of its revenues, since the new rules ban for-profit tutoring of school subjects for these age groups. The company has said it will shift its educational focus to services such as test preparation and to language training courses for adults. Before the crackdown on tutoring, the company already invested in firms offering vocational training. Agriculture, meanwhile, is another area Yu has set his sights on as a potential lifeline for his business.

Yu said during a livestream on Chinese short video app Douyin last month that he plans to set up a platform to sell farm produce. Hundreds of the company’s teachers will join him to help farmers sell their products via live e-commerce—whereby customers purchase directly from streamers’ recommendations during their broadcasts. This move aims to help “the transformation of farmers, helping young farmers to be more willing to go back to their home in the countryside, and allow more ‘left-behind’ children to grow up with their parents,” Yu said (link in Chinese), referring to the millions of children brought up by grandparents as young people migrated to cities for factory work.

An online teaching division of the company has also established a new subsidiary whose business lines include selling fertilizer, pesticides, and fresh vegetables, among other products, according to Chinese media. As part of the reshuffle of his business, the firm is closing 1,500 teaching locations and has donated around 80,000 sets of desks and chairs to rural schools.

New Oriental declined a request to interview Yu.

A teacher at New Oriental who resigned in August said that while he “wasn’t optimistic about the chances of new lines of business,” he wished the best for Yu, whom he came to admire after watching the film American Dreams in China. “Since then, I read a lot about him, and felt inspired by his story growing from an ordinary person to one with such a big business. Given his decent behavior, including donating the desks to rural schools, Yu’s personal image is indeed a big attraction for us [teachers],” he told Quartz.

Serving an outward-looking China

When Yu graduated from university in the mid-1980s, “there was a sudden craze for going abroad,” he wrote in his 2019 autobiography. It was a wave Yu hoped to join as well—he applied to dozens of schools in the US in hopes of getting a scholarship. But after he was reprimanded by Peking University, where he was then teaching English, for using his off hours to coach students for the exams required to study in the US, Yu decided to pursue a different plan. In 1993, he founded New Oriental in Beijing.

Riding high on the surging demand for learning English, Yu’s business took off.

New Oriental went from a single classroom in a tiny, run-down flat in Beijing’s Zhongguancun area, now the city’s high-tech district, to a network of more than 1,600 centers as of this year. Its teaching style combined humor with motivational lectures—Yu was especially partial to quoting from Martin Luther King Jr.’s “I have a dream” speech. Some of its teachers, such as Luo Yonghao, who used to teach English at New Oriental, became internet celebrities. The company says its classes have served nearly 70 million students since it was founded.

“For many Chinese students of my generation and earlier, who aspired to study in the US, taking English classes at New Oriental was a coming-of-age experience,” said Cheng, who recalls taking classes in order to pass the exams required to study in the US, joining a swell of Chinese students that reached 373,000 in 2020.

The company later expanded to after-school tutoring services for students in middle and high school amid the country’s intensifying competition for slots in elite universities. In 2006, it became the first Chinese educational company to list on the New York Stock Exchange. The IPO roadshows for the US listing enjoyed unexpectedly warm responses in Hong Kong and other places, as many investors were students who attended courses at New Oriental before they studied overseas and hence were eager to purchase its shares, Yu wrote in his biography.

Before this year’s regulations on tutoring were announced, the company’s prospects still seemed promising despite the new competition in an industry now valued at over $100 billion, with online platforms that linked students in China with tutors around the world.

In its third quarter, which ended in February, New Oriental’s net income increased by nearly 10% from a year earlier to $150 million. That was just days before the president Xi gave a March speech signaling looming scrutiny of the industry. As Yu wrote in a WeChat post last month, “the era for private tutoring has ended.”

The former New Oriental tutor isn’t so sure. Currently still out of a job, he believes getting rid of tutoring firms won’t help level the playing field, but will instead add to the burden for parents who want to provide a better education for their children. “There are always some students who want to change their fate, and that is the meaning of tutoring services,” he said.

A bridge between citizens and “evil capitalists”

In recent years, public sentiment towards China’s entrepreneurial billionaires has visibly soured—a reflection of both the state crackdown on the private sphere and growing inequality. Anger over work conditions at tech companies have seen many online adopt phrases like “evil capitalist” when talking about tech founders. Yet since his regulatory troubles, Yu has continued to receive an outpouring of support both from employees and people outside the company.

Yu himself seems to have noticed the shift in how people talk about business figures in China these days, even if that ire hasn’t so far been directed at him. He has hosted a chat show co-produced by Tencent’s news channel, in which he talks to various entrepreneurs about their business philosophies and life stories. Yu has often talked about his own struggles.

By revealing the true characteristics of the business figures and the hardships they went through, Yu said he hopes to help “ordinary citizens to reach a kind of an understanding with entrepreneurs” and avoid the two classes forming confrontational emotions, according to an interview he did with Chinese magazine Southern Weekly. 

When a Chinese state-owned outlet criticized Yu’s plan to shift into selling produce as an attempt to “make a quick buck” many slammed what they saw as the publication’s ignorance and arrogance towards Yu’s efforts to save his business and thousands of jobs. “The livelihood of Yu and hundreds of his teachers have already been smashed…In the eyes of many, the efforts Yu has made for dealing with a desperate situation should be admired rather than being ridiculed,” wrote columnist Jianghu Xiaowu.

Eventually, Yu replied to the article, saying he treats it as a “kind reminder” of the potential risks for the company from wading into an area that it’s not familiar with.

“In fact, there’s not really a business model that allows one to make quick money, the education industry is also difficult to engage…But New Oriental and I will not disappoint everyone who has expectations of us, and will work hard to move forward,” he said.

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