Thursday 22 February 2018

University-educated Chinese a workforce to be reckoned with

China sends roughly 200,000 university students to the US each year, 10 times the number of Americans who study in China
China sends roughly 200,000 university students to the US each year, 10 times the number of Americans who study in China

David J Lynch

BARELY 26 years old, Zhang Xi has studied at an elite American university, worked for an investment bank in Hong Kong and an oil company in Beijing and now may launch an internet startup with two friends.

Zhang, a foreign movie buff who quotes lines from 'Forrest Gump' in fluent English, symbolises a transformation of China's labour force that is minting college graduates in a country better known for its factory workers.

"We just don't want to sit on the side while all the big things are happening," she says. "There are tons of choices in front of young people right now."

Some of those choices may shake the global economy. Close to seven million Chinese people will graduate from college this year, up from 1.1 million in 2001. By 2020, China's college-educated talent pool is expected to number 195 million – more than the entire US labour force that year.

The Chinese for more than a decade have been potent rivals to American and European manufacturers. Now, China is giving Westerners something new to worry about: a generation of workers able to compete in higher-technology endeavours. The aim is to develop service industries and shift from producing simple exports – often assembled from parts made elsewhere – to making a larger share of more sophisticated products.

To be sure, the emergence of tens of millions of college-educated workers will challenge China as well as its trading partners. Too many Chinese universities offer sub-par educations and too many students fail to find jobs after graduation, potentially imperiling social stability.

VALUE CHAIN

Well-educated workers such as Zhang, who earned a master's degree in finance at the Massachusetts Institute of Technology, are essential to the government's plans to reorient the world's second-largest economy. As Chinese companies grow more capable – what economists call "moving up the value chain" – they will encroach on markets now dominated by advanced economies.

"We're going to have to compete with Chinese banks and Chinese insurance companies and Chinese software companies," said William Overholt, president of the Fung Global Institute in Hong Kong. "We're not used to thinking of China as a powerhouse in these areas."

That change is already happening. More than half of China's $4.2 trillion (€3tn) in trade last year involved significant value added by Chinese workers, while lower-value processing trade fell below one-third of the total, down from almost 39pc in 2010, according to the Chinese ministry of commerce.

Yukon Huang, an economist who headed the World Bank's China office from 1997 to 2004, says the proliferation of college graduates is lowering skilled labour costs and making China more competitive in a broader range of industries.

MANUFACTURING

As rising factory wages push labour-intensive manufacturing to countries such as Vietnam or Bangladesh, Chinese manufacturers are taking on more complex – and lucrative – work, says Louis Kuijs, chief economist for China at Royal Bank of Scotland in Hong Kong.

"We see a lot of upgrading of the manufacturing sector where companies do things that they didn't do before," Kuijs said. "People talk about will it happen? Forget it – it's happening already."

Reflecting that economic maturation, Chinese exports to the US of industrial engines and related parts roughly doubled last year compared with 2007 before the financial crisis disrupted global trade, while toy shipments fell 11pc, according to the US Census Bureau.

China is advancing along a path blazed by countries such as South Korea, Huang said. Once derided for poor quality, South Korean companies such as automaker Hyundai and Samsung now boast globally competitive products.

That's only a hint of what's ahead, according to Dan Breznitz, of the University of Toronto. Breznitz and co-author of 'Run of the Red Queen: Government, Innovation, Globalisation and Economic Growth in China', says China soon will have a surplus of college graduates to devote to research on fields the West is neglecting, such as power grid improvements, and to innovate in the way many goods are produced.

COMPETITION

"It's not necessarily competing head to head," Breznitz said. "They're going to outflank us."

If they do, it will be partly thanks to what globalised Chinese have learned at American universities. China sends roughly 200,000 university students to the US each year, 10 times the number of Americans who study in China.

Roger Olesen (70) spent 27 years working on Wall Street before retiring to a new life teaching Chinese college students at Tsinghua University, one of the country's top schools. Almost all, he says, would be good enough to work in New York or London. "They're smart and they're tough." (Bloomberg)

Indo Business

Promoted Links

Business Newsletter

Read the leading stories from the world of Business.

Promoted Links

Also in Business