Officials said Saturday they will stop approving new after-school education institutions, while all existing ones must now register as non-profits, as they warned that the industry had been “hijacked by capital”.

The private education sector was worth US$260 billion in 2018 according to consultancy and research firm L.E.K. Consulting, driven by China’s hypercompetitive kindergarten-to-university education system in oversubscribed cities.

While the move — which also bans teaching on weekends and during holidays — is aimed at reducing pressure on children, parents and teachers, it is a gut punch to the tutoring industry, which was reflected in Monday trading.

Shares in New Oriental Education & Technology Group Inc. plunged as much as 40 percent in Hong Kong, mirroring Friday’s record 41 percent fall that came as speculation about a crackdown spread on social media. Its United States-traded shares shed 54 percent.

The company said in a statement on Sunday that it expected the new measures “to have a material adverse impact on its after-school tutoring services related to academic subjects in China’s compulsory education system”.

Another firm, Koolearn Technology Holding Ltd dropped as much as 35 percent, while China Maple Leaf Educational Systems fell 16 percent. New-York listed TAL Education Group fell 71 percent on Friday.

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