Summary:
Earlier this month China issued a regulation banning "for-profit" private schools from the nine-year compulsory education system, which covers primary to junior high school years. The amendment of the “Law on the Promotion of Non-government Education in China” (the Law for Private Education) was adopted on 7 November 2016 at the close of the National People's Congress (NPC) Standing Committee's bi-monthly session after a third reading. The revised law, which will take effect on 1 September 2017, does not change the scope of activities previously allowed under the regulations, but more clearly defines "for-profit" and "non-profit" private schools and specifies different measures to support private education.

China's compulsory education covers six years of primary school, usually starting at age six, and three years of junior high school. Zhu Zhiwen, Vice Minister of Education, said at a press conference that “profit-led private schools are unsuitable for the free education program," Zhu said. He stressed that "non-profit" private schools are still allowed to offer diversified, market-oriented paid education services, as long as they comply with the law.

According to Ministry of Education statistics there were around 4,900 private schools offering education at the junior high school level and around 5,900 offering primary education as of the end of 2015. According to Zhu Zhiwen, currently none of these registered schools is "for-profit". However, there are some schools obtaining surplus through financial means without legitimate basis, said Wang Feng, Director of National Center for Education Development Research (NCEDR).

Therefore, the law will only have impact on those who want to turn their schools into profit-led establishments, a possibility that had been hinted at in previous drafts of the law. The new law does allow "for-profit" private schools at other levels of education, including pre-school, senior high school, higher education and non-academic education.

To differentiate "non-profit" and "for-profit" private schools, the Ministry of Education clarified that the organisers of "non-profit" private schools shall not obtain income (revenue) from running schools, and the school's balance shall be returned for the use of school management. In contrast, the investor/sponsor of a "for-profit" private school may seek profits, in compliance with relevant laws and regulations for business companies.

Aside from defining "non-profit" and "for-profit" schools and setting out the levels at which "for-profit" education is acceptable, other amendments in the private education law included:

• "Non-profit" private schools will enjoy the same preferential policies as state-owned (public) schools in land use, taxation and fiscal support. Standards for tuition fees and other charges of "non-profit" private schools shall be formulated by provincial-level governments, while fees at "for-profit" schools can be decided by the schools according to market forces.
• Existing private schools to be registered as “non-profit” institutions may continue with their current schooling management, and the investors/sponsors will be given corresponding compensation or awards in terms of the capital contribution in due process of termination. Meanwhile, schools choosing to register as a "for-profit" private institution must conduct financial settlements to clarify property ownership and clear the payment of taxes, and must re-register to continue schooling management. Specific measures shall be formulated by local provincial governments.
• One article specifies that "Communist Party groups in private schools should carry out Party activities according to the Party Constitution and strengthen Party building".
• The law clarifies that all private schools must guarantee the staff’s legitimate rights and interests in salary and welfare, and must supposed to pay social insurance and pensions for their employees.
• Local governments at or above county level may adopt measures such as student loans and scholarships to protect the rights and interests of students of private schools.
• Private schools should set up school councils, boards of directors or other forms of decision-making bodies, establish a sound internal supervisory mechanism, and entrust a third-party agency to inspect their educational environment. They should also establish an information publicity and credit file system. Any institution found to have issued fake degrees or educational certificates will be punished. 
• Specific measures on the transition of existing schools to "non-profit" or "for-profit" status will be developed by local governments and education authorities, however no unified/specified transition period has been set in the amendment articles.

China has a total of 162,700 private schools nationwide, although a large majority of these are at kindergarten level. Excluding kindergartens there are currently 22.6 million students studying at private schools from the primary to higher education levels.

Analysis by Kevin Prest and Xiaoxiao Liu:
The legal changes aim to block schools from profiting from tuition fees for children eligible to receive the country's nine years of compulsory education. This will have a particular impact on international schools at this level that enrol local students on dual-curriculum courses, as these schools are typically private institutions.

However, the amendment also allows institutions offering pre-school, senior-high or higher education courses, including international schools, to offer "for-profit" education. It also allows schools at the compulsory education level to continue offering education on a "non-profit" basis. Many high-profile international schools have confirmed that they plan to continue operating as non-profit institutions.

It is important to note that schools at the compulsory education level have never been formally allowed to operate as "for-profit" institutions. However, the new law defines non-profit institutions more strictly and excludes some activities that had previously existed in a grey area. It is also possible that some schools had previously been developed with the expectation that they could be turned into for-profit institutions, as a previous draft of the law would have allowed "for-profit" education at all levels.

This amendment could mean that UK institutions have less opportunities to work with Chinese partners on establishing private schools at the compulsory education level. However, restrictions on these schools could create more incentives for parents to opt for overseas education at an earlier age. Meanwhile, formally allowing "for-profit" education at other levels, particularly the high school level, could lead to an increase in private or international education at this level.

Sources:
1. The official announcement of the amendment of the “Law on the Promotion of Non-government Education in China” (Chinese): http://news.xinhuanet.com/legal/2016-11/07/c_1119867415.htm
2. The press conference of the Ministry of Education regarding the amendment of the “Law on the Promotion of Non-government Education in China” (Chinese): http://www.moe.gov.cn/jyb_xwfb/s271/201611/t20161107_287961.html
3. Previous SIEM article regarding the second amendment draft: https://education-services.britishcouncil.org/news/market-news/china%E2%80%99s-npc-standing-committee-approves-changes-education-law-higher-education-law
4. http://news.xinhuanet.com/english/2016-11/07/c_135811758.htm
5. http://www.chinanews.com/gn/2016/11-08/8056060.shtml
6. http://news.qq.com/a/20161108/002015.htm