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What lies behind China’s crackdown on ed-tech companies

Rohan D'Souza writes: The Chinese Communist Party has realised that ed-tech, if unchecked, could easily become a huge private capacity within Chinese society that would parallel the Party

The unprecedented crackdown still awaits an explanation.

The post-pandemic world is upon us. And, if there is one sector that sums up the changed times, it would be education. In many countries, the well off and much of the middle-class quickly discovered that online schooling could be almost seamless, if they possessed a stable internet connection. “Socially distanced” learning with repurposed home screens got mainstreamed so quickly that previous worries about missing the early morning school bus felt so 20THcentury.

The explosion in online-teaching for school children, however, proved to be a mere side show compared to the huge pandemic-caused economic bounce for educational technology (ed-tech) companies ─ the new learning platforms that combine information technology (IT) tools with educational practices. The chief calling card of ed-tech is their ability to curate customised learning by deploying artificial intelligence, teaching analytics, cloud computing and learning apps. Personalised learning through digital devices, moreover, radically flip the erstwhile classroom environment. Unlike the “traditional student” who attends a teacher-synchronised classroom, the user in the learning platform through IT tools is now enabled to set the pace and time for educational interactions. Ed-Tech, in other words, in a single swoop announces a decisive rupture from the physical classroom and the school bell.

China with its almost 240 million school going children, straddling the spectrum between kindergarten and the pre-college 12th grade, was, unsurprisingly, a natural destination for the early ed-tech startups and innovators. In 2018, over 50 per cent of the global investments in ed-tech startups was funnelled into China. As the pandemic began to sweep across the globe, over $10 billion in 2020 hotfooted its way to the Chinese ed-tech industry. This was about two-thirds of the world’s total venture capital investments in the ed-tech sector, further layering an already bourgeoning $120 billion ‘for-profit private tutoring’ market.

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India with its much talked about demographic dividend, witnessed a similar Covid-19 ed-tech bonanza of sorts by attracting close to $1.4 billion investments by October 2020. Industry trackers, in fact, foresee the strong possibility of the near tripling within the next five years in India’s overall ed-tech growth: From being a $2.8 billion (2020) to a $10.4 billion (2025) market. Reportedly, from January 2020 to barely halfway through 2021 itself, three Indian ed-Tech Startups ─ Unacademy, Eruditus and UpGrad ─ have already become unicorns, while Byju is now a decacorn. In Startup parlance, a company valued at above $1 billion is a unicorn while a company valued above $10 billion is a decacorn.

While Asia’s biggest two, demographically speaking, seemed all set for a competitive scramble over ed-tech investment and venture funding, the road itself which was to carry the race suddenly broke into a fork. Or as Finshots, the online newsletter, put it: ‘The red dragon’ decided to hit the ‘kill-switch’ on China’s entire ed-tech industry. On July 24th, the Central Committee of the Chinese Communist Party (CCP) issued comprehensive guidelines that required existing private tutoring companies to register as non-profit organisations, banned extracurricular tutoring from going public and made it obligatory for all tutoring agencies to have regulatory approval. The new regulations also sought limitations on extracurricular programmes for students, curbs on teaching school subjects during weekends and public holidays, and the prohibiting of tutoring for children aged six.

Picking immediately on the new regulatory cues, share prices of China’s ‘for-profit education’ sector went into a tailspin. Blistering selloffs followed from companies such as Koolearn Technology Holding Ltd, New Oriental Education & Technology Group and the US-listed stocks such as Gaotu Techedu and TAL Education Group. China’s formerly booming education industry sub-index, in fact, dropped as much as 14 percent within the span of a week, with stocks falling between 30 and 40 per cent.

While the ed-tech sector in China remains in a daze, the crackdown still awaits explanation. Thus far, the suggestion is that the CCP was driven by the need to stanch growing social inequality, stoked by the rat race culture which the private tutoring market was increasingly fomenting. Second, some argue, was the government’s benign desire to stop the brutal overworking of young children by over aspiring and ambitious parents. Some even link the regulations to the government’s larger design to encourage families to have more babies, now that education was back to being public and cheap. Though such good intentions might indeed have spurred the anti-ed-tech regulations, they shed little light on how critical education is for the continued dominance of the Chinese Communist Party.

The membership of the Chinese Communist Party, as of June 5th 2021, stands at 95.15 million, which roughly adds up to being about 7 per cent of China’s 1.4 billion people. What is often missed is that admission to the party is extremely competitive and in 2014 the acceptance rate was even on par with that of the IVY league universities in the U.S. ─ out of 22 million applicants only 2 million were accepted. The Chinese university ecosystem has, in fact, over the decades emerged as the primary recruiting grounds for the Party ─ on average, university students comprise 40 percent of the new party members. Many of these university trained who are inducted into the CCP often go on to hold top positions in government, military, education, state owned enterprises, healthcare and banking. China’s current ruling and administrative elites, in other words, are mostly nurtured, credentialed and hot housed within its sprawling public higher education system.

The universities, in turn, draw their aspiring candidates from the vast network of primary, tertiary and secondary schools that dot the country. The very same school going children who prior to the crackdown of July 24th would have made up the potential user base of the ed-tech industry. While ed-tech teaching modules claim to spruce up skills and fine tune varied learning abilities, its raft of IT tools, however, are trained to collect massive amounts of personal and sensitive data. That is, ed-tech is hardwired to extract from its users what the political philosopher and theorist Shoshana Zuboff calls the ‘behavioural surplus’ ─ the data exhaust that every User leaves in the wake of their digital interactions. This digital trail empowers the platform in two definitive ways. Once possessed of the behaviour surplus, it can exhaustively map the user’s abilities, challenges and learning curve. And second, the more worrying, the ed-tech company now potentially possess the capacity to modify, steer, nudge modulate and even inflect the behaviour of its users.

The bottom line for the Chinese Communist Party is the realisation that ed-tech, if unchecked, could easily become in quick time a huge private capacity within Chinese society that would parallel the CPC in having information on the psychological and behavioural profile of future and even admitted party members. The monopoly, in other words, in knowing and monitoring the intimate life- worlds of its ruling elites would no longer be exclusively held by the CCP.

There are good reasons, therefore, to believe that the July crackdown on the entire ed-tech industry in China was a deeply informed political decision rather than a logistical or humanitarian response by the Chinese government. The CCP, clearly, intends to produce, sustain and cultivate China’s ruling and administrative elites primarily through public assets. The private sector and its incredible digital capacities, hence, it seems, are firmly and surely being contained and effort are now on to block it from spilling over into China’s powerful and delicately poised political realm.

The current Indian governing dispensation, however, appears to be moving in the opposite direction. If one goes by the recent New Education Policy, that got the cabinet nod in early 2020, the effort is to further amplify an already ongoing momentum for privatising and commercialising India’s existing educational capacities. There is a similar market inspired enthusiasm by the government for embracing both the novelty and the aggressive pitch of the rapidly growing Ed-tech sector within India. At heart, however, the steady weakening and dismantling of public education and assets seems to draw upon a deeper political commitment to corporatise India’s administrative and ruling elites. At the current pace at which public goods are being eviscerated and being disappeared, India, it appears, will soon not only no longer have bureaucrats that are produced by its public education system, but might also pretty much lose the ability to check private interests and markets with any meaningful public capacity and intervention.

India, in other words, is increasingly reconciled to the idea of having its ruling elites being remade and reorganised by private education and corporate interests. China, on the other hand, seems determined to ensure that the reproduction of its political establishment will stay beholden to public assets. The elephant and the dragon are clearly going their separate ways and their respective responses to education is the dividing line.

This column first appeared in the print edition on September 8, 2021 under the title ‘The party wants its pupils back’. The writer is Professor at the Graduate School of Asian and African Area Studies, Kyoto University

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