Susan Mays, Ph.D., contact mays999@gmail.com

Globex Faculty Fellow, Peking University; Faculty, The University of Texas at Austin

China’s Economy:Technology, Growth, and Global Connections

China’s Talent Pool

北京大学工学院PKU College of EngineeringGlobex

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The shape of the S&T system from 1949, under central planning• Three tiers of hierarchal S&T institutions with narrow specialties

• Separation of R&D from production and application (factories)

Systemic changes from 1978• CCP’s ambitious new policies (re)emphasized S&T as part of economic development and “catching up”

• Existing elite S&T talent/infrastructure enabled both bottom up and top down initiatives

• Government approved new “S&T Enterprises” with special legal status and also established new technology “markets” in the 1980s

Today’s industry and S&T leaders and managers have strong ties to earlier institutes and enterprises

The Chinese leadership has long prioritized advances in the technical and scientific level of China’s human resources

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China’s 10th, 11th, and 12th 5 Year Plans (2001-15) prioritized and allocated greater funding for R&D

Expenditures on R&D1

1991 1999 2004 2007 20120.0%

0.5%

1.0%

1.5%

2.0%

Percent of GDP

(1) Various reviews of China’s 11th 5 year plan. For details on the national (governmental) organizations involved in S&T, see Michael Pecht, China’s Electronics Industry, 2007, pg 53–61.

In 2012China at 2.00%

US at ~2.77%

R&D is about half of total expenditures for education;R&D spending has grown more than overall education spending

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Changes in higher education Reform and expansion of universities (leading universities vs. others; PhD-educated professors)

– 100 key universities Send students abroad; attract back overseas talent

– “1,000 Talents Program” (3000?, more entrepreneurs than scholars)– Increase in returnees (due to numbers)– Open, competitive, peer-review for funding/promo to lure academics

Create special support programs for outstanding scholars and universities, especially in S&T– 211 and 985 programs, other programs

Establish MBA programs (w/ international partners) and law schools

Results: College enrollment increased by 6x in the 2000s Percent of workforce with “higher” education: 2010, 12.5%; 2020, est. 20% (OECD is >25%)

– 2010 = 120 million people– 2020 estimate = 180 million

Are Chinese graduates less creative and independent?

Moving to a “knowledge-based” economy

In addition to R&D, China has reformed and expanded higher education to foster China’s talent pool

See works by Wang Huiyao, Cong Cao, Denis Simon, and David Zweig. Wang and Zweig, “China’s Diaspora and Returnees,” conference “The Globalization of Chinese Enterprises”, Harvard, 10/08.

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III The Exam-Oriented System

Students studying abroad have increased dramatically; high schoolers and undergrads will majorly affect China’s talent pool

Chinese students in the US

6

Post-secondary enrollment growth; 7+mm graduates in 2014

Enrollment in Postsecondary Institutions (1,000s)

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However, Cao and Simon illustrate that qualified engineers may be far less than statistics indicate

Problems include supply and quality, but also management and retention

1.34 millionundergraduateengineers

Minus short cycle

programs

Minus grad

school

Minus low-

quality or mismatch

Minus those

“choosing” (?) other job options

576 000

461 000323 000

+/-207 000

(1) Denis Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent , 2009, pg 275, Figure 7.3, authors research, and pg 98, Table 3.15, source Ministry of Education, Bureau of Development and Planning.

Many Engineers CompleteShort Cycle Programs1

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Chinese university graduate too often have alack of technical training, inadequate English, and deficient

soft skills, such as the ability to work in teams, critical thinking, and innovative flair.

McKinsey and Co., research report 2013

International concerns with quality in China’s high-end talent pool….

9(1) Cao and Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent , 2009, pg 102, Table 3.17 and pg 287-288, Tables 8.1a/c. Sources include: National Bureau of

Statistics, National Development and Reform Commission, and Ministry of Science and Technology, 2007.(2) World Bank, data.worldbank.org., latest figures as of March 2014.

By the numbers, China has had the world’s largest S&T labor force in the 2000s

Still, employers comment on not finding tech-skilled professionals;this issue may grow in the coming 10 years

Science and Technology Workforce in“High Tech”1

1995 20060

100,000

200,000

300,000

400,000

1995 20060%

20%

40%

60%

80%

100%

S&T Papers Published2

2003 2009China Number of Papers 29,000 74,000

US Number of Papers 196,000 208,000

World Rank 1 2

Engineers and Scientists(as a Percent of Chart at Left)1

• Pharmaceuticals• Air/space craft• Electronic/communications equipment• Computers and office equipment• Medial equipment and measuring instruments

Above, “High Tech” refers to:

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Executives say new grads have decent skills, but middle & senior managers are lacking

China’s mid-senior managers are “first generation;” have few role models and rely on guanxi May have background with SOEs, the Cultural Revolution, etc.

In last 5+ years, Chinese have begun to take top posts in global firms Take a more Western approach to business and have Western-style career tracks

Early 2000s, educated Chinese wanted to work in private and foreign firms, but from about 2009, anecdotal evidence of favoring state-affiliated orgs for stability and prestige…changes over the years

Ongoing difference:“build trust in order to work together” versus ”work together in order to build trust”

Managers: in years past, China has also had a shortage of mid/senior managers with “global” skills….changing?

(1) McKinsey and Company, “Destination: China” and “Winning the Talent War in China,” 2009. (2) Cao and Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent , 2009, pg 224, Table 6.2, cumulative number of study abroad students is 1.2 million. China’s

People’s Daily, article by Sheng Ruowei, March 16, 2012.

However, an “age-wave” of experienced, capable Chinese (age ~35+) has arrived

Local Example:– Graduate in 2001 in China, age 22– Work in multi-national firms– In 2015, now age 36…middle manager

Returnee Example:– Go abroad in 1995, age 24– Return to China 2005, age 34 (PhD; 3 yrs work)– In 2015, now age 49…executive

The current “age-wave” of Chinese professionals

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Still, foreign firms with operations or offices in China often rely on returnees or overseas ChineseReturnees: In IT, telecomm, computers, bio-tech, media Initially, returnees were mainly scientists and

engineers, but from 2000, in business & entrepreneurship

Businesspeople versus PhDs for econ growth? New PRC laws recognize private enterprises, so

returnees can start firms Returnees’ management teams tend to be more

accepted by the global business community Returnees and overseas Chinese can experience

resentment, as they may have less experience with PRC business conditions (and thus not as effective)

Returnees that go abroad prior to grad school are more global in their outlook and approach

Returnees foster domestic Chinese firmswhile also supporting global businesses in China

For further reading, see works by Wang Huiyao, Cong Cao, Denis Simon, and David Zweig. On brain drain, brain gain, and brain circulation, see A. Saxenian, R. Lucas, and J. Bagwati, respectively.

Cumulative Number of Returnees2

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As China’s talent pool has grown, foreign R&D centers in China had increased to 1200 in 2007 with estimates of ~3000 today1

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(1) Cao and Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent , 2009, pg 32, Table 2.2. Beijing Review, “Foreign R&D Centers in China,” 7/16/2012.

These centers serve as training grounds for Chinese S&T personnel

1997 2001 2002 2003 2004 2005 2006 2007 20120

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

13

China can no longer simply be considered “the world’s factory floor;” industries have moved into high-value-added activities

Val

ue-

add

ed

Value Chain

Design Marketing

Manufacturing

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China’s talent pool is rapidly growing and also evolving to support a knowledge-based economy

Questions going forward:

Will China improve the quality of education and training?

How will larger numbers of globally integrated professionals affect the competitiveness of firms in China?

What career paths will Chinese professionals pursue (study tech vs business, choose state vs private firms, etc.)?