The clampdown will also have the effect of cooling China's cutthroat tutoring market for kindergarten through to the 12th grade, or K-12 pupils, that has grown exponentially in recent years to around $120 billion.
One source said the draft rules could be unveiled as early as by end-June. All three sources requested anonymity as they were not authorised to speak publicly. As well as protecting sleep-deprived students, Beijing sees the changes as a financial incentive for couples to have more children as it seeks to shore up a rapidly declining birth rate, the sources said.
Living costs in big cities, with education accounting for a big chunk of that, have deterred couples from having children. Yuanfudao, which was valued at $15.5 billion in a funding round last October, started informal talks with investors in December, one of the sources said, adding plans were put on hold in March in response to increasing regulatory oversight of the sector.