Chinese Education Stocks Drop as Beijing Vows Tighter Regulation

(Bloomberg) -- Shares of Chinese education companies fell in Hong Kong after the government said it would tighten oversight of compulsory schooling and firms providing tutoring services.

China Maple Leaf Educational Systems Ltd., China Xinhua Education Group Ltd., China New Higher Education Group Ltd. and Wisdom Education International Holdings Co. all retreated at least 3.2%.

New guidelines issued by the State Council covering the first nine years of schooling aimed to better regulate "non-compliant, off-campus" classes and competitions. The government also said officials would oversee registration, fee, advertising and antitrust issues for public and private schools.

In August, China issued draft legislation to amend rules governing the lucrative private education industry, troubling investors who regarded the sector as a safe bet amid escalating trade tensions with the U.S.

Rather than spending extra time on academics outside of school, Beijing wants students to master multiple skills in sports and art, the government said in its statement on Monday.

The new rules could have a long-term impact on demand for after-school tutoring, China International Capital Corp. analysts Natalie Yue Wu and Yuzhong Gao wrote in a note. The guidelines also prohibit the use of foreign curriculum and textbooks, which would hurt Maple Leaf, according to Citigroup Inc.

To contact Bloomberg News staff for this story: April Ma in Beijing at ama112@bloomberg.net;Wendi Hu in Beijing at whu109@bloomberg.net

To contact the editors responsible for this story: Sharon Chen at schen462@bloomberg.net, Philip Glamann

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With assistance from Bloomberg