Jan 25 2013

China Market Insight – Pushing to Become an Advanced Economy

degree glut in china

In 2013, MCI will be bringing you a new feature to GrowGlobally .org called “Market Insight” that will offer information on select emerging market countries.  The focus will be on data that could be useful to help improve market intelligence and help make business decisions.  Be sure to subscribe to either via RSS feed or to receive future installments to your email address.

China – Need to Retool

Despite China’s rapid economic growth in the past 30 years, forecasts show slower growth in part because China cannot sustain its earlier growth rates unless and until she can make the next great leap from the world’s “low cost factory” to becoming an “innovation-based economy” similar to Western countries today.  What is understood is that what got China to where it is today will not take them forward.   This fact may offer significant opportunities for US-based associations who have products built from “generally accepted” standards, codes or practices that are proven among advanced economies.

china demand for skilled workers

According to China’s Industrial Competitiveness Report, China’s competitiveness has begun to drop since 2008, and China has experienced its first trade deficit in the past 26 years.   The report states that China is in the process of transformation of its industrial competitive advantage.

  • Traditional “low cost” industries will be replaced by other developing countries as China’s wage costs increase
  • New more competitive, innovation-based industries will be difficult to establish in the next few years on its own
  • Must develop key technologies to improve competitiveness in traditional industries
  • Support promising industries which may play a strategic role in the global market
  • Introduce new skills and high technologies to ensure a 21st Century workforce

Too Many Graduates Not Enough Talent

A recent New York Times article offered an interesting story to illustrate the challenges of Chinese finding good professional jobs despite having degrees.

Wang Zengsong is desperate for a steady job. He has been unemployed for most of the three years since he graduated, and  has worked only several months at a time in low-paying jobs.

But he will not consider applying for a full-time factory job because Mr. Wang, as a college graduate, thinks that is beneath him. Instead, he searches every day for an office job, which would initially pay as little as a third of factory wages.

“I have never and will never consider a factory job — what’s the point of sitting there hour after hour, doing repetitive work?” he asked.

Millions of recent college graduates in China like Mr. Wang are asking the same question. A result is an anomaly: Jobs go begging in factories while many educated young workers are unemployed or underemployed. A national survey of urban residents, released this winter by a Chinese university, showed that among people in their early 20s, those with a college degree were four times as likely to be unemployed as those with only an elementary school education.

China’s swift expansion in education quadrupled the number of college graduates each year, creating millions of engineers and scientists. The best find work at Chinese companies while the rest find they offer few marketable skills for 21st Century knowledge-based professions and the companies who need such skills.

China now has 11 times as many college students as it did at the time of the Tiananmen Square protests in 1989, and an economy that has been very slow to produce white-collar jobs.

China’s Confucian tradition reveres educated people who do not engage in manual labor, but still largely produces blue-collar jobs. Manufacturing, mining and construction represent 47% of China’s economy (twice that than in the United States) while its service sector is far less developed.

The glut of college graduates is also eroding wages even for those with more marketable majors, like computer science.  In some markets, large volumes of graduates with similar degrees reduce wages for all.

With China’s need for greater future economic development, an enormous demand for talent in sectors like services is expected in the next five years.  Today, a talent gap exists among college graduates in services and will pose a serious threat to the long-term global competitiveness if not properly managed.

Demographic trends, especially aging workforces in developed economies, have begun to exacerbate this challenge.  China and India have and will continue to be the largest talent pool of younger people but the Chinese talent pool of young people are expected to shrink 13% by 2025.

global talent pool







A list of the top ten occupations (by demand) in the talent market over the most recent reporting period (2006-2010) shows .

Ranking 2010 2009 2008 2007 2006
1 Sales & Marketing Sales & Marketing Sales & Marketing Sales & Marketing Sales & Marketing
3 Business Administration Management Business Administration Management Manufacturing Manufacturing Secretary
4 Accounting Manufacturing Accounting Administration Management Management Engineering
5 Manufacturing Accounting Architecture Management Engineering Architecture
6 Electronic Engineering Electronic Engineering Administration Management Architecture Manufacturing
7 Architecture Secretary Electronic Engineering Electronic Engineering Electronic Engineering
8 Finance Economy Management Engineering Economy Accounting
9 Secretary Architecture Company Management Accounting Healthcare
10 Healthcare Finance Finance Finance Company Management

Closing the Talent Gap

The Chinese government has planned to increase investment in education and training. The first China Enterprise Learning and Talent Development Research Report was issued by China Society for Training and Development (CSTD) in 2011.

The report indicated Chinese companies have shown increasing interest in training its talent.  Fifty nine percent of the domestic companies have now set up training department.  In 2010, the market capacity of employee training in China achieved RMB 200-300 billion (USD 31-46.9 billion), and the figure of 2020 is expected to be RMB 1,000 billion (USD 156 billion).

Part of this investment appears to be in gaining professional credentials.  In 2010, a total 5,474,000 Chinese took professional examinations with 1,753,000 of them passing to receive a professional certification or 32%. The increasing demand for certification and accreditation has been a significant source for modernizing talent and the promotion of the professional training market.

Productivity, Productivity, Productivity

One key element for raising job quality is to boost labor productivity levels, which could lead to sustainable increases in wages and working conditions.  Chinese labor productivity level remains only one-fifth of that in the Developed Economies.  The importance of increasing labor productivity and higher wages as drivers of economic growth will become even more prominent in the coming decade.  To this end, fostering research and innovation and increasing the technical skills of young graduates  will be instrumental in China and possibly offer associations a means to build traction in the Chinese market.

About the author

Peter Turner

As MCI's Senior Advisor, Global Development Strategy, I help associations build and execute global growth strategies. Over the past 30 years I have served three associations (ASAE, MPI and IEEE Computer Society) as a leader of business, product and partnership development.

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>