ISSUE 4 | 2021
44
NEW REGULATIONS IN EDUCATION AND GAMING SECTORS China also announced a number of new regulations in Q3 2021 which will impact the growth of private education firms and online gaming companies. China’s education and technology companies will face increased regulatory pressures from the Chinese government as follows: • Reforms on private education companies: In July 2021, China issued a new ‘Double Reduction’ policy, which aims to ease homework and after-school study hours for students and reduce after-school training programmes. All subject-based training institutions are now prohibited from conducting initial public offerings or otherwise raising funds from capital markets. Public companies are restricted from investing in any subject-based training institutions through stock market financial transactions or acquisitions of assets from such institutions in the form of equity or cash. Foreign capital is not
22.3% to USD 117.7bn for the first eight months in 2021 compared with the same period in 2020. The growth in foreign direct investment into China has reflected the increasing confidence from foreign investors in China’s future economic development. It is expected that FDI will continue its momentum in Q4 2021 as a result of China's effective COVID-19 epidemic controls, the stable economic recovery and complete supply chains.
allowed from engaging in mergers or acquisitions, trustee arrangements, franchising, or using ‘variable interest entity’ structures to control or participate in subject-based training institutions. This new policy has curtailed the rapid growth of private education companies as a result of massive funding from global investors. • China's new online gaming restrictions: a new anti-addiction regulation to prevent online gaming addictions among under-18s was announced in August 2021. China will limit online game time for under-18s to three hours per week. All online game companies are required to only provide under-18s with one-hour online game service on Fridays, Saturdays, Sundays and statutory holidays. This regulatory action has curbed the growth of the fast-developing tech industry and restricted foreign investment in the online gaming industry. This has significantly increased investors’ concerns on the future returns from their investment in China’s online gaming sector. According to China’s commerce ministry, China’s year-on-year FDI increased by
KENNETH WONG PRINCIPAL
kennethwong@bdo.com.hk
KENNETH YEO DIRECTOR
kennethyeo@bdo.com.hk
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