Chinese president Xi Jinping’s crackdown on the country’s $100bn-a-year tutoring industry has created a crisis for parents, who had planned to send their children to study programmes over the holiday period. The new rules have led to sharp falls in the shares of US-listed Chinese tutoring companies, whose business models have been disrupted. Authorities have ruled that tutoring for primary and middle school students can only be conducted on a “non-profit” basis and have banned such activities during the summer break, traditionally the industry’s busiest season. In anticipation of the tougher regulations, dozens of cities had launched government-sponsored summer day care programmes costing less than Rmb60 ($9.30), including meals, for a 10-hour day.

The classes are taught by licensed teachers and focus on extracurricular activities, such as painting and badminton, rather than the traditional academic subjects students must master to succeed in the gaokao, China’s gruelling university admissions exam. But many parents have shunned the government programmes and turned to expensive private tutors instead. The camps’ focus on play and entertainment has made them unpopular among those who want their children to make more “productive” use of the holiday. Li Linhua, a Beijing-based business owner, said he was happy to pay almost Rmb10,000 to enrol his 11-year-old daughter in two, two-week private courses — one in English and the other in creative writing. “I am sure my daughter will learn something,” he said. “That’s better than chatting with her classmates and playing with water guns in a summer camp.”

More than a dozen schools in four provinces said their low-cost summer services were operating well below capacity. “Very few parents are interested in our camp because we are not allowed to provide academic training as they wish,” said the principal of a Hangzhou-based primary school, who asked not to be identified. Fewer than 40 of the school’s 1,500 students signed up for its August day care programme. “The government thinks it is doing a public service,” said a Beijing-based adviser to the local education bureau. “But few students can afford to lose time to improve their test scores.” In a 2018 speech, Xi said the tutoring industry should not be “profit-driven” and must focus instead on “well-rounded development of students”. He also told a group of educators in March that the industry was “a mess” and “a chronic industry that is very difficult to cure”.

Despite such omens, few investors or parents anticipated the severity of this week’s crackdown. “None of us expected anything like this,” said one Chinese private equity investor. “This was much more harsh than our worst-case scenarios.” But some parents appreciate the initiative. Helen Li, a marketing manager in Beijing, said her life became easier after she was able to send her nine-year-old son to a public summer camp for just Rmb46 a day. “There is a big demand for affordable childcare for working parents like me,” she said.

A shortage of teaching staff has added to the challenges facing government-backed day care programmes. Most private tutoring companies boast a student-faculty ratio of below 10 to one but the figure is far higher at cash-strapped public schools, where teachers have been reluctant to sacrifice their summer holiday. “I have spent a whole semester working 12 hours a day,” said Zhou Yu, a primary school teacher in Shanghai. “I deserve a break.” Government officials have adopted a carrot-and-stick approach to convince teachers to participate. Some rich cities, such as Hangzhou, are offering teachers a Rmb500 a day subsidy, a decent level by local standards, to supervise day care classes. Yet in places where public finance is tight, teachers may lose promotion opportunities if they do not participate in summer programmes despite poor compensation. “I will back down if the government orders me to walk into the classroom,” said Zhang Yue, a teacher in Yichang, in Hubei province. In that case, “I don’t have a choice”.