Higher education in China should support economic growth

The continued growth of college education in China means that by 2030, more than one in four (27%) of the labour force will have a college degree, similar to the level in Germany, France and the UK today. The research report from Standard Chartered expects this will help China compete in skill-based high-end manufacturing and modern services and hence support economic growth, but warns that China must adapt its structures to this new paradigm, as college graduates currently have difficulty finding jobs and services that cater to their middle-class lifestyle.





China’s labor force will be as educated as that of Germany in 2030, which will support economic growth in the coming decades for the country, says a research report by Standard Chartered.

There are growing doubts about whether China can maintain high economic growth in the coming decades, driven by doubts about its ability to transition to a more sustainable growth model.

A key reason for these doubts is that China’s quantity-based demographic dividend – fueled by cheap labor supply – is rapidly disappearing.

Largely as a result of low fertility caused by the one-child policy, China’s labor force has been declining since 2012. Wages for unskilled workers have risen sharply in the past decade, cutting the profit margins of manufacturing companies.

While falling supply of unskilled labor is eroding China’s competitiveness in low-end manufacturing sectors, a new demographic dividend is emerging, based on quality rather than quantity of labor, says the report.

After the rapid expansion of college education in the past 20 years, the number of new college graduates soared to seven million in 2015 from less than one million in 2000.

This number will continue to grow in the coming decades. By 2030, about 27% of the labor force will have a college degree, similar to the level in Germany, France and the U.K. today.

With the world’s biggest pool of educated labor, China will be well positioned to compete in high-end manufacturing and modern services.

This is likely to facilitate an industrial upgrade to skill-based high-end manufacturing, supporting growth in the coming decades.

China’s economic structures will need to adapt to this new paradigm, as they are designed for a society with an abundant unskilled labor force.

Today’s college graduates face difficulty finding jobs, while services to cater to their middle-class lifestyle are lacking.

In addition, most suitable jobs are concentrated in tier 1 cities like Beijing and Shanghai.

Meeting the demands of the growing middle class, most of which hold college degrees, is the key to sustaining economic growth, according to the report.