China’s investment in education accelerating overall economic growth

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China's increasing investment in its educational system will accelerate the move toward rapid wage growth, higher levels of consumer demand, slowing population growth, and overall economic development, according to a new report from the Manufacturers Alliance/MAPI.

The report, 'China's Educational Performance: Implications for Global Competitiveness, Social Stability and Long-Term Development,' is the latest in a series of MAPI research notes on the evolution of the Chinese economy and its impact on the emerging global economic order.

Economist and report author Cliff Waldman notes that since the 1990s, when China made higher education a priority, the share of graduates from senior secondary schools who continued on in higher education has risen significantly, from nearly 50% in 1995 to 75% by 2006.

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China's progress in higher education enrollment places it in the midrange of the enrollment status of major developing and industrialised nations. The gross enrollment ratio in tertiary education reached 20% in 2005 from 6% in 1999. China's percentage is above India's 11% and Vietnam's 16%, yet remains well behind that of Japan at 55% and the United States at 83%.

Still, the United States and Japan have reason for closely monitoring China's progress, especially in the important engineering discipline, in which both countries find skill shortages. In 2006, 36% of Chinese undergraduate degrees and 37% of graduate degrees were awarded in engineering, a linchpin in any technologically sophisticated economy.

Clearly, China's double-digit gross domestic product and manufacturing growth rates have created a very strong demand for, and now supply of, engineers, MAPI reports. Comparable data for 2004 show that only 6.2% of US undergraduate degrees were in engineering. This, Waldman says, should serve as a 'wake-up call' for the United States and other industrialised powers to invest in science and engineering education.

'Research has shown that the growth in the science and engineering work force is one key element contributing to growth in product and process innovation,' he said.

The report also discusses the impact of education investment on labour market and demographic trends. There is evidence that the positive impact of education on labour market prospects and wages has been increasing over time in China.

'Efficient and productive education investments will only accelerate the already speedy upward climb of Chinese wages, particularly for skilled workers,' Waldman concludes.

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