What makes it interesting is not “WHAT”. It’s “WHY”.

China just cracked down on some of its biggest “Big Tech” firms. The target hit hardest by that “crack down” is also the one that usually has the most lasting effects on any society, and that’s a point that should be very visible to everybody.

What China cracked down the most

In the words of New York Magazine:

China’s cultural commitment to education, combined with great inequality between those who test into its meritocratic elite and those who do not, had created a vast market for online tutoring companies.

Chinese regulators hit hardest just that “ed-tech sector”, even if its startups had raised $10 billion in 2020 alone.

Still, China’s government just prohibited such firms from going public, accepting foreign investment, and… making profits. Which is to say: China outlawed one of its fastest-growing industries overnight.

Why China did it

Education inequality is among the most explosive issues in China. resent their children’s relatively poor prospects for upward mobility.

Middle-class parents in major cities exhaust their household budgets in order to keep pace with their peers' spending on private tutors. Parents in low-income and rural areas just cannot afford that.

The exorbitant child-rearing costs are a major reason that keep birth rates so low that, if they don’t resume growing practically tomorrow, Chinese population in 2100 will be about half its current size, with bad, bad impacts on China’s long-term economic and geopolitical strength.

In other words, as the NY Magazine says:

• the crackdown on the online tutoring industry is “the most conspicuous component of a broader push to reduce household education spending (and thus, political disquiet and obstacles to family expansion)"
• the Chinese state is subordinating the growth and profitability of the digital economy to higher national objectives

Regardless of what one may think of China having a greater and greater “economic and geopolitical strength”, or of the effectiveness of its new norms on online tutoring, its priorities are worth some serious thinking. Especially considering how much, borrowing one last quote from that article, “America’s education system is riddled with inequality and rent-seeking” (and many other countries are going in the same direction).

Image: a 2019 list of global edtech unicorn companies, including many chinese ones, from “Which EdTech Companies from China Can Go Global?" and Holoniq