Wed, Nov 22, 2017 - Page 9 News List

China’s top economic risk might be the looming education gap

Chinese President Xi Jinping has a plan to transform the economy, but with what some are calling an invisible crisis in the making, it might be tougher than he hopes

By Christopher Balding  /  Bloomberg View

Chinese President Xi Jinping (習近平) recently laid out a bold vision for transforming his country into a fully developed economy by 2050, with a particular emphasis on spurring innovation and technology. Given China’s level of human capital — and some looming changes in the world economy — that might be harder than he expects.

A widely held view in the West is that China’s schools are brimming with math and science whizzes, just the kind of students that companies of the future will need. Yet this is misleading: For years, headline-grabbing studies showing China’s prowess on standardized tests evaluated only children in rich and unrepresentative areas. When its broader population was included, China’s ranking dropped across all subject areas.

Official data bears out this dynamic. According to the 2010 census, less than 9 percent of Chinese had attended school beyond the secondary level. More than 65 percent had gone no further than junior high. From 2008 to last year, China’s total number of graduate students actually decreased by 1 percent. Outside the richest areas, much of China’s population lacks even the basic skills required in a high-income economy.

Making matters worse are the millions of children in rural areas who are being raised by their extended families. With their parents working in faraway cities, these children tend to fare much worse in school and on IQ tests. Stanford economist Scott Rozelle has referred to this as an “invisible crisis” in the making: In the coming decades, he estimates that about 400 million underprepared Chinese could be looking for work. His research has touched such a nerve that even state media have// given it serious coverage.

At the moment, it is easy to overlook these problems. Official unemployment remains low and stable. Wages are rising and the middle class is expanding. China’s factories still rank among the world’s best, and its workers broadly have the skills they need to support themselves.

Yet, with demographic and technological changes accelerating, the education gap will soon loom large. As wages rise, Chinese manufacturers will face growing competition from less developed countries. As automation improves, factories will need workers with more and better education. As older industries are disrupted, employers will also demand new skill sets.

China — like many countries — is not prepared for these changes. Sustaining an advanced, service-based economy is not possible when only 25 percent of the working-age population has a high-school degree. In every country that made the jump from middle-income to high-income over the past 70 years, at least 75 percent of the working-age population had a high-school degree before the transition began. Even China’s elite schools can not drive economic development for 1.4 billion people.

Raising the level of education more broadly will require both investment and reform.

Most countries would benefit from investing more in education. However, in China, the need is especially acute: Even in prosperous urban centers, classrooms are commonly crammed with 50 students apiece, forcing much of the actual education work onto frustrated parents. That is a recipe for failure.

Another priority should be overhauling the hukou system of household registration. The reason so many children are being raised by their grandparents in rural areas is because they are restricted from accessing public services — including schools — in the cities where their parents work. Yet, it is significantly easier to offer a quality education in urban centers than in far-flung villages. With apartment vacancy rates greater than 20 percent in many cities, it would be both a humane and economically sound policy to end these restrictions.

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