China’s efforts to sustain economic growth, enhance supply chains, develop its science, technology, and engineering sectors, and secure military superiority hinge on its ability to cultivate and effectively utilize human capital. Commonly referred to in Beijing as “national talent,” this emphasis is particularly significant as it bolsters China’s competitive edge against the United States as a global powerhouse, directly influencing the future of innovation and talent on the world stage.
Beijing’s investments in human capital focus on key areas such as higher education, science and technology, engineering, and military sectors. However, substantial challenges persist, including significant demographic pressures, social and economic disparities among citizens, the ability to attract top talent both domestically and internationally, and ensuring their retention within the country.
Amid growing interest from the West, particularly the United States, regarding China’s rising global power, the Center for Strategic and International Studies published a study in June 2024 examining the impact of human capital on China’s competitive capacity. This study discusses Beijing’s policies for developing human capital, noting that its large population provides a crucial advantage in terms of national talent. Moreover, China’s rapid economic growth in recent decades can be linked to its mobilization of human capital, having transformed its economy from an agricultural base into more productive industries and services through educational advancements and workforce participation.
Core Challenges
Human capital consists of the knowledge, skills, and health individuals invest in, enabling them to realize their potential as productive members of society. China has been investing in human capital to serve as a primary driver of economic growth and a foundation for its national capacity to support key technological industries and unleash new scientific discoveries. However, this endeavor is hindered by several regulatory, demographic, and normative challenges, including:
One key issue is the inequality between urban and rural areas. China is experiencing structural unemployment among low-skilled workers concentrated in rural areas. Low high school graduation rates and disparities in education and mobility between urban and rural regions limit the country’s transition to a high-skilled workforce.
Early childhood development presents another challenge. Since the 18th National Congress of the Communist Party of China in 2012, the party has viewed children as a strategic component in establishing a “national talent base,” committing to national planning to address early childhood development and primary education issues, particularly as over two-thirds of China’s children come from rural areas. Nevertheless, early childhood development continues to pose challenges for China’s economic future, exacerbated by urban-rural disparities. For instance, 60% of primary school children in rural areas suffer from anemia, vision problems, or intestinal worms, negatively affecting their learning ability, alongside growth delays among infants and young children. To tackle these disparities, the state has intervened to enhance child nutrition and cognitive development in rural regions.
Another challenge lies in the nature of the examination system. The rigorous high school examination system in China limits opportunities for skill development. For example, the Gaokao, or the unified college entrance examination in China, is more demanding than comparable tests, such as the SAT in the United States. Furthermore, the complexity of the college entrance exam constrains the national development of vocational schools, which operate outside the examination system, limiting the quality and quantity of resources, infrastructure, and educational staff available to these institutions, consequently reducing the pathways available for youth to access suitable careers.
The household registration system, known as “Hukou,” reflects divides between urban and rural areas, restricting the mobility of rural workers to areas where their skills could be utilized more effectively. It also limits access to urban public education and healthcare services, leaving rural youth with jobs that offer lower salaries, fewer benefits, and less stability due to this system. In response to these challenges, the National Development and Reform Commission announced in 2021 plans to ease Hukou restrictions in most cities, with Hainan, Shanghai, and Hangzhou lifting residence or housing purchase restrictions. However, efforts to improve the Hukou system remain partial, adversely affecting productivity and human capital development in China until labor mobility is fully realized.
Policing policies that restrict ethnic minorities constitute another concern. China is home to more than fifty ethnic groups, including Han, Manchu, Mongolian, Tibetan, Hui, and others, with the Han ethnicity representing over 91% of the total population. Consequently, the remaining ethnic groups are considered minorities, and there are significant social and economic disparities between these groups and the Han, particularly in terms of wages and educational attainment, which negatively impact their contributions to national economic productivity and, ultimately, the government’s ability to fully leverage its human capital.
In this context, the Chinese government’s policy towards ethnic minorities is intertwined with counter-terrorism strategies and demands for separatism, which represent a top political priority. Consequently, certain ethnic groups may face repression under these policies. The study indicates that China’s ethnic policy varies by ethnicity and region. While official discourse highlights the benefits of assimilating ethnic minorities, it often overlooks human rights violations and the preservation of cultural differences among various ethnic groups.
Innovation constraints also emerge from the unique structure of the Chinese economy, asserting a central role for the government. Many exceptional young graduates prefer employment in the government sector, viewing it as the ideal job, which stifles innovation among entrepreneurs, further exacerbated by a widening gender gap in labor force participation rates in China.
Talent Development Strategies
China’s strategy encompasses several lines of investment in human capital and the construction of national talent aimed at boosting national competitiveness. Key initiatives include:
Investment in higher education has heightened research productivity in top Chinese universities and improved their global rankings. Expenditures on higher education rose from $24 billion to $47 billion between 2012 and 2021, creating pathways to enhance the identified skill sets needed, especially in science, technology, engineering, and mathematics (STEM). Policymakers in China are also establishing targeted programs to develop university talent in specific fields such as cybersecurity, alternative energy, and artificial intelligence. However, university students in China are witnessing a decline in critical thinking levels and STEM skills due to weaknesses in curricula and program design.
China has directed significant resources toward initiatives designed to attract and ensure the development of national talent in science and technology. Nonetheless, the study suggests that this support is linked to misallocation of funds, while Chinese universities and companies remain unattractive to top domestic talent, particularly since institutions of higher learning in China are not yet known as their global counterparts for knowledge production.
The enhancement of military talent has also been a priority for China, focusing on developing human capital expertise within the military to ensure higher levels of efficiency and preparedness. However, there are notable weaknesses in the People’s Liberation Army’s human capital, such as difficulty attracting educated recruits due to compensation issues, making civilian sectors more appealing to Chinese youth and prompting the military to offer pay increases for qualified officers since 2017.
Retention of local talents has become a focus of government-sponsored programs aimed at encouraging Chinese students, researchers, and experts abroad to return home. Nevertheless, many returning talents face obstacles regarding the limited digital environment in the country, adversely affecting researchers’ and academics’ ability to access essential online resources for information, such as Google Scholar and Springer Nature.
Attracting international expertise has gained paramount importance for countries seeking to fill gaps in local skills shortages, representing a crucial element of overall human capital competitiveness. In this respect, China suffers from a restrictive immigration system that hampers its ability to attract global talents. The COVID-19 pandemic shifted the government’s focus to preventing the virus’s spread rather than attracting foreign experts. Although travel to China has resumed since the end of pandemic-related restrictions, the number of foreign residents has sharply declined compared to 2019 levels.
In conclusion, China’s investment in human capital aligns with the state’s ambition to lead in various sectors of national competitiveness. The government recognizes that enhancing human capital resources will be pivotal in securing future economic and geopolitical potential, leading to efforts to attract expertise and nurture national talent. As China continues to succeed in improving the quality and efficiency of its workforce, it can accelerate innovation and become increasingly competitive on both national and global levels.
Source:
Boland, B., Dong, K., Blanchette, J., Hass, R., & Ye, E. (2024, June). How China’s human capital impacts its national competitiveness. Center for Strategic and International Studies. https://www.csis.org/analysis/how-chinas-human-capital-impacts-its-national-competitiveness
