China Bans For-Profit Operation of Primary and Lower-Secondary Schools

The Chinese government imposed a ban on for-profit operation of primary and lower-secondary schools, upending a burgeoning sector, reported The Wall Street Journal. The new law, entitled "Promotion of Private Education," stands to be costly for such commercial ventures as Nord Anglia Education, a company based in Hong Kong that manages six schools across China, and Avenues, a company based in New York that has long planned on opening a school in China. As the name of the law makes clear, private schooling is not the target. To the contrary, the Chinese government wants to promote private education to provide a wider array of academic offerings to students. However, the concept of for-profit management had fallen out of favor. In fact, the new law stipulates that private schools should better align curricula with the goals of the Communist Party. A bulletin from the Education Ministry declared that a central purpose of the law was to "ensure private schools are run from start to finish in a way supportive of socialism." This reversal by the Chinese government, in turn, provides a classic illustration of the political risk involved in foreign direct investment. Nord Anglia Education and similar companies will have to refashion themselves as nonprofits or close their schools.