Private equity firms in China ‘waiting for death’ after new rules

The severity of the new rules could kill many companies and block the exits of investors.

China’s move to ban private tutoring firms from making a profit from teaching core school subjects and raising capital is set to trigger a scramble among venture and private equity investors to find an exit after pouring billions of dollars into the sector. While stricter regulations were expected with China looking to ease pressure on children and the cost burden on parents that has contributed to lower birth rates, private equity industry sources say they were surprised by the severity of the rules that could kill many companies and block their exits. “Every company is going to take a hit with large layoffs coming,” said a Shanghai-based private equity (PE) investor whose firm invested in a number of online education apps targeting school-aged children. “There is zero VC (venture capital) and PE investors can do at the moment.