When he was an old man in a wheelchair, Yu Minhong once said that he wanted to roll into the classroom and tell students: “I am the founder of this university.”
Today, however, the 58-year-old Chinese education “godfather” is fighting for the survival of his empire.
New Oriental Education-developed from a single classroom in a dilapidated building in Beijing in 1993 to the largest private educational institution in the world’s most populous country-a group listed in New York-fell into a trough in the comprehensive reform led by Xi Jinping, the President of China .
Beijing has restricted “Non-profit” based tutoring for elementary and middle school students, This is the core of Yu’s business model.
The suppression shocked students, teachers and Parents across China, and Investors around the world. As the annual revenue of the tutoring industry is predicted to fall from 100 billion U.S. dollars to less than 25 billion U.S. dollars, the stock price has fallen sharply.
Investors, as well as Yu’s friends, colleagues and former students, are working hard to solve two key issues. How did he offend the Chinese government? And, can he make a comeback?
“Yu told me a few days ago that his wealth has dropped sharply and he is becoming a poor man. But it’s not a big deal, he said, he has experienced life and death situations before,” a close partner said.
Yu’s rise is legendary in China: from rural poverty to New Oriental’s blockbuster listing in New York in 2006. Ten years ago, after the company withstood an investigation by the U.S. market regulator, the Securities and Exchange Commission, his reputation further increased, as well as high-profile attacks by short sellers muddy water after claiming accounting violations.
His story embodies the dream of a generation: education can provide a way out of poverty. His company sold the means.
As of May this year, the group has approximately 70,000 employees and 12,000 contract teachers in more than 100 cities. Since its launch, its school has enrolled nearly 65 million students in total.
In conversations with students and frequent interviews and speeches, Yu Chang talked about the hardships he had overcome. He was troubled by the illiteracy of his parents, failed repeatedly in school and university, and never obtained the grades or money that would allow him to study at a prestigious American university.
“He said he was evicted by the landlord and had to sleep under a piece of plastic sheet in the open air,” said former student Michael Lee. “His biggest dream that night was to own an apartment in Beijing.”
His early students admired his determination. A former student said that Yu Zhi was late for teaching once; after the birth of his daughter, he was 30 minutes later than planned.
But what the student pays is the content; initially, his courses more or less reflected the language proficiency assessment required by foreign universities. This highly test-centric approach has been extended to cover the entire education curriculum of all age groups in China.
“What really makes his class unique is that it uses real test questions, which I let his staff memorize during the exam. You can’t find them anywhere else,” another former student said.
Yu has become a kind of educational idol and has spawned many imitators. His timing is not only good in China, but he also tapped the enthusiasm of international investors for fast-growing Chinese companies.
Prior to the 2006 New York IPO, the bankers underwriting the stock offering-Credit Suisse and Goldman Sachs-told him that the stock price would be around $8. After the investor roadshow, they raised it to $15.
Despite the windfall, Yu is still humble, insisting that he and his wife lead a “simple life”: “We do not buy luxury cars or luxury yachts-if I want to use yachts, I have many friends [who] There are yachts,” he said in 2009.
He also developed philanthropy, mainly in education and child welfare. “Unlike many Chinese philanthropists who either want to completely control their donations, or write a check and stay away completely, the difference is that as long as it can bring actual results, I don’t attach any conditions,” said the Beijing partner.
Sometimes, Yu dangerously flirted with criticism of government policies and Chinese society. In 2009, he said that an entire generation had grown up in an “unfortunate” environment. “Chinese students, they study hard and score high, but they are not happy.” In 2018, his public image was damaged after sexist remarks about Chinese women were exposed.
He did not neglect to please the Chinese Communist Party through donations to the Communist Youth League and his membership in the Chinese People’s Political Consultative Conference, a Beijing consulting organization that held meetings with the National Assembly.
However, people close to him stated that he lacked close contact with high-level government officials. “Yu’s political relationship can only help him in a small area,” the colleague said.
In fact, he runs counter to the route that Xi Jinping describes—or right President’s warning Critics say that in March, the tutoring industry was “a chronic disease”-this is likely the cause of his downfall.
“He has been focusing on providing for-profit training for many years without linking his business to national policies-how can you run such a large business without allowing yourself to be part of the national interest?” The consultant who worked closely said.
The consultant said that under Yu’s leadership, New Oriental was basically competing with public schools for students and teachers: “This is part of the business that is not allowed under the Chinese political system.”
However, Yuen Yuen Ang of the University of Michigan and experts in the intersection of Chinese business and political elites said that the broader problem is unequal educational opportunities, and Xi Jinping is trying to solve this problem. “The real problem here is that wealthy families can get the privilege of receiving education through private tutoring,” she said.
In any case, Yu’s personal wealth has been hit hard by the market rebound. The value of his 12% stake in New Oriental has fallen from approximately US$3 billion to US$500 million. His next move is unclear. This week, the company cancelled its planned earnings release on the grounds of regulatory uncertainty. The company and Yu declined to be interviewed.
“He can’t recover,” a former student said. “This is a disaster.”
Others think that the godfather will not be defeated so easily.
“He will reshape the entire concept of the tutoring industry-take more social responsibility and reduce market-driven behavior,” a close friend told the Financial Times.
Additional report by Sherry Fei Ju in Beijing