China’s State Council has released new rules on the regulation of after-school private tutoring and classes, forcing an industry that had swelled to an annual value of $120 billion, to reshape itself into a not-for-profit sector. It also announced that no new licenses would be granted for such programs.

The announcement sent shockwaves through markets worldwide, as well as surprising Western commentators. It comes amid soaring costs for private education that has been pushing parents and families to the brink. It is a move being done for the sake of the common good, and putting the needs of the people and the country above all else.

If you know Chinese and Asian culture well enough, you will be aware that education is something that is prized and cherished. There is arguably no other region on Earth that takes education as seriously and competitively as East Asia does. Chinese culture focuses strongly around the institutions of family and lineage, from which social esteem is derived.

Educational attainment is subsequently seen as a meritocratic means of advancement. As a result, parents believe it is their responsibility to endow their children with the best education possible in order to invest the family’s future. This creates a hyper-competitive educational system whereby parents devote their resources to children’s schooling and extracurricular activities.

While in many ways such a system is admirable for the work ethic and achievement it drives in Chinese culture, it also has many negative repercussions for the development of society as a whole. The intensely competitive nature of such a system has led to a swelling of a private, for-profit extra-circular sector that sees such an environment as the opportunity to exploit parents and make money.

In China, and likewise in countries such as South Korea, after-school classes covering official university entrance examinations, for example the extremely competitive “gaokao,” as well as other things, are intensely sought after.

This is a drain on the resources of parents, yet the competitive nature of the system compels them to do it, allowing these sectors to make ever growing tuition profits without any kind of regulation whatsoever.

As a result of such arrangements, parents are increasingly finding it financially untenable to raise their children as all their resources are channelled to this area. In addition, it also divides society by deepening inequality, as some families can afford it more so than others, cutting off social mobility and economic development as a whole.

For example, affluent families in cities such as Shanghai have more money to invest in the private education of their children, than those farming families in rural areas, who cannot afford it. This means that educational opportunities and success across China subsequently become uneven, and this becomes a pitfall for the country’s development.

In this case, China’s timely regulation of the private education system is an act for the sake of the common good of society, and the ultimate point of such policy is that you cannot put the interests of private profit before people.

China embraces market dynamics in its economy, but it does not embrace the principle that the market dictates and overrules the interests of society as a whole to the point it becomes hugely detrimental.

By making this sector non-profit, the government is ensuring private education is priced reasonably, equally and fairly, easing the burden on parents and children. China thus shows its resolve to do what it is necessary to ensure a prosperous society, and this is why it is a commendable move.