I was reading several articles regarding kindergartens in China. The industry has changed a lot in the past few years, mostly related to regulations/policies and RYB Education (NYSE: RYB). RYB has renamed itself as GEH Education.
One set of definition is around “for-profit” and “not-for-profit”, which is used in private education in general, not just for kindergartens.
Another definition is “affordable”. In an opinion document issued in November 2018, the target is that 80% of kindergartens should be “affordable”.
Nuances:
1/ Technically, “affordable” doesn’t equal to “not-for-profit”. Though it’s not surprising that some confusion may come. (seems to be a good and necessary public education)
The law around “for-profit” and “not-for-profit” is issued by Minister of Justice, and it defined based on legal definitions. “Not-for-profit” basically means the entity cannot distribute residual “profits”. The law itself, by defining “for-profit” private education, actually gives a boost in drawing investment.
“Affordable” is a term developed for policies. For kindergarten owners, it means to accept local government’s guidance on pricing while receiving grants or other help from local government.
In reality, local governments often require that “affordable” kindergartens are registered as “not-for-profit”.
2/ “Affordable” sounds like what parents might want – it indicates that the kindergarten is not expensive (?)
It should be. However, in certain circumstances, “affordable” also mean cost control, which leads to cutting the existing offerings/amenities, which parents might don’t want. And kindergartens might charge extra fees on top of the “basic” package.
3/ “for-profit” implies profits, IPO…?
Nonono.
Many kindergartens won’t be profitable if not with some form of government support.
And it’s not allowed for any public companies to invest or acquire kindergartens, whether it’s for profit or not.
4/ “not-for-profit” means no profits?
No.
I think this is actually the path that many policies would want – “not-for-profit” kindergartens that offers high quality services and can sustain itself. (like non-profit private institutions/universities)