RHB Group’s Financial Win and Trust Loss

Recently, a number of parents have accused teachers at the newly Nasdaq-listed Chinese pre-school education group RHB of child abuse. After investigation, police have confirmed some of allegations and refuted others. The behaviour of this “leading” childcare group has caused a great deal of unsettlement throughout China’s middle class who are questioning regulations for child protection, the morality of the entire childcare industry, and the trustworthiness of the Chinese media and justice system.  
With an average teacher:student ratio of 1:17, many kindergarten teachers receive approximately RMB3,000 (USD450) as a monthly salary. For the 44 million children in kindergarten to reach the government’s objective of a ratio of 1:5 or 1:7, an additional 6 million kindergarten teachers are needed. This is a problem that cannot simply be solved by 24-hour video monitoring, or capital investment only.
RHB was condemned by the general public for considering shareholders’ interests above the children’s well-being. Its shares initially halved in value, but have since bounced back, something that many claim indicates the inherent detachment of the capital market and its ability to turn a blind eye to many of the defects in RHB’s operations. Being listed in the US, RHB faces potential litigation from Chinese parents under US law, particularly as it also failed to disclose some of its previous legal cases relating to child abuse, prior to becoming listed on the Nasdaq.

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