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.

Analysts say the fallout from the new rules could jeopardize listings.

“It’s unclear what level of restructuring the companies should undergo with a new regime and, in our view, this makes these stocks virtually uninvestable,” said JPMorgan Chase & Co. analysts in a note dated Saturday.

China’s for-profit tutoring sector has faced heightened scrutiny in recent years, with excessive workloads and prohibitive costs of a “good” education coming under the spotlight.

The cost of education has also been cited by many young Chinese as a reason they are unwilling to have more children, even after China formally allowed all couples to have three children this year in an effort to stave off population decline.

The crackdown resembles authorities’ moves to rein in China’s tech giants, taking aim at monopolistic behavior and imposing huge fines against firms.

On Saturday, the market regulator said market heavyweight Tencent had violated antitrust laws, compelling it to relinquish its exclusive music label rights and prompting the company's shares to fall more than seven percent Monday.

Tencent acquired a majority stake in rival China Music Group in 2016, effectively controlling more than 80 percent of exclusively held music streaming rights in the domestic market, the State Administration for Market Regulation said in a statement.

This gave the firm’s music arm the ability to urge labels to “reach more exclusive copyright agreements, or require better trading conditions compared to [Tencent’s] competitors”, the regulator said, calling the case an “illegal concentration of business operators”.

Tencent’s music arm was also fined 500,000 yuan ($77,144), SAMR said.

Chinese music streaming firms have in recent years fought to snatch up exclusive rights to play labels' tracks in the country after regulators tightened rules against piracy.

The biggest players in China’s tech sector — after years of growth thanks to lax regulation — are now facing increased scrutiny.

Earlier this month the financial regulator blocked a merger between video game live-streaming sites that would have given Tencent a majority stake overall, accounting for over between 80 to 90 percent of the country's domestic market share according to analysts.

Tencent did not immediately respond to AFP’s request for comment.

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