VIE adoption across Chinese education companies

This article about Asian test-prep in New York prompted me to take a closer look at all the Chinese education companies. Obviously the market cap of after-school tutoring and test-prep companies (EDU and TAL) are much bigger than companies provide private international K-12 education. Here’s the quick comparison of all education companies -

Ticker Company Mkt Cap Sub-Industry VIE Revenue %
BEDU Bright Scholar Education Holdings $2,830 K-12 International and Bilingual Schools 100%
COE China Online Education Group $265 Online Education Platform for English 100%
DL China Distance Education Hldgs Ltd $266 Online Education Partner for Professionals 93%
EDU New Oriental Education & Tech Grp $13,720 K-12 After-school Tutoring Services & Test Prep 99%
HLG Hailiang Education Group Inc $919 K-12 Private Educational Schools 100%
REDU RISE Education Cayman Ltd $677 After-school English Teaching and Tutoring Services 95%
RYB RYB Education Inc $762 Early Childhood Education Services 99%
TAL TAL Education Group $15,163 K-12 After-school Tutoring Services 94%
TEDU Tarena International Inc $852 Professional Education Services 0%
FEDU Four Seasons Education ~$230 After-school Tutoring - Math 100%
Market Cap in millions - as of 11/8/2017 - sourced from Google Finance


  • Common themes related to VIE structures remains the same except Tarena (TEDU), few examples from SEC filings are -

    PRC laws and regulations currently prohibit foreign ownership of companies and institutions providing compulsory education services at primary and middle school levels, and restrict foreign investment in education services businesses at the high school and kindergarten level. (BEDU)

    …foreign ownership of high schools for students in grade ten to twelve is restricted and foreign ownership of primary and middle schools for students in grades one to nine is prohibited. As a result, our offshore holding companies are not allowed to directly own and operate schools in China.(EDU)

    To comply with PRC laws and regulations, we operate our business through our PRC consolidated affiliates, including Beijing Step Ahead Education Technology Development Co., Ltd., or Beijing Step Ahead or VIE, and its subsidiaries and schools that operate self-owned learning center. (REDU)

  • Tarena used to operate VIEs until 2012, the current VIE (Beijing Tarena) doesn’t contribute any revenue, but is the holder of the licenses required to operate. Here’s justification from the filings -

    Prior to 2012, we conducted a substantial portion of our operations through our consolidated VIEs and their subsidiaries and schools. On January 30, 2012, the PRC Catalogue for the Guidance of Foreign Investment Industries (amended) became effective, which listed professional education service as an industry for which foreign investments are “encouraged” by the government. On April 10, 2015, the new PRC Catalogue for the Guidance of Foreign Investment Industries (amended) became effective, which listed non-accredited professional education service as an industry for which foreign investments are “encouraged” by the government. In light of such change of law, starting from the second half of 2012, we began to transfer the operations, including related assets and liabilities, of our consolidated VIEs to Tarena Tech and its subsidiaries and schools.

    Due to the foreign ownership restriction on Internet content and other value-added telecommunication services, we operate our TMOOC.cn website through our VIE, Beijing Tarena. Beijing Tarena has added our TMOOC.cn website under the ICP license held by Beijing Tarena. Beijing Tarena is 70% owned by Mr. Shaoyun Han, our founder, chairman and chief executive officer, and 30% owned by Mr. Jianguang Li, our director. Mr. Han and Mr. Li are both PRC citizens.

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