China's Investment In Education Should Accelerate Overall Economic Development

June 11, 2008
Enrollment in tertiary education has reached 20% in 2005 up from 6% in 1999.

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 released June 10.

The report, "China's Educational Performance: Implications for Global Competitiveness, Social Stability, and Long-Term Development" finds 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 rose significantly, from nearly 50% in 1995 to 75% by 2006.

China's progress in higher education enrollment places it in the mid-range of the enrollment status of major developing and industrialized 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 U.S. at 83%.

Still, the U.S. 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. Comparable data for 2004 show that only 6.2% of U.S. undergraduate degrees were in engineering. This, says Cliff Waldman, author of the study, should serve as a "wake-up call" for the U.S. and other industrialized 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 notes that China was ahead of other East Asian nations in decentralizing its school system, shifting more responsibility to local governments. While the full effect is yet unknown, Waldman agrees with other researchers that success may at least in part depend on the fiscal health and stability of individual provinces.

Finally, the report discusses the impact of education investment on labor market and demographic trends. There is evidence that the positive impact of education on labor 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," he concludes.

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