Vocational Education & Training and the Chinese Economy: Driver or Obstacle?

Cross-posted at Education Week

In 1978, When Deng Xiao Ping took over the moribund Chinese economy, only the Red Army had access to people with any significant technical skills. China had an informal education system that was millennia old, but Mao had destroyed the formal Chinese education system a decade earlier, and the rudimentary vocational education and training system that China had built along with it. Now, 38 years later, China boasts some of the world’s most advanced Maglev high speed train systems, many of the world’s most advanced airports, many of its most technologically sophisticated buildings and a large fraction of the world’s most technologically advanced port facilities. Have you ever wondered where the skills to build these modern wonders came from? Or what those skills might portend for China’s place in the global economy as the dynamics of that economy take their next twists and turns? Well, we did.

So four of us, with the cooperation of the Chinese government, went to see for ourselves, to try to understand how China, less than 40 years ago a backward, rural economy virtually bereft of modern technical skills, had managed to pull off this prodigy of technical competence on such a grand scale, and to see if, having some insight into the answer to that question, we might be able to gauge the probability that China has the skills needed to move from an economy in which growth was largely driven by low skill, low wage manufacturing for export, to an economy driven by internal consumption and innovation and powered by high skills, rather than low wages. We had a hunch that, to a significant extent, the future of the Chinese economy as a whole might depend on its ability to produce millions of Chinese workers with high technical skills, but less than a four year college education.

Made in China: Challenge and Innovation in China’s Vocational Education and Training System is the result of our research. Authored by Vivien Stewart, Formerly Vice-President of Asia Society and a member of NCEE’s Board of Trustees, the report traces the development of China’s vocational education and training system, assesses its strengths and weaknesses and presents the research team’s views as to what China will have to do to create the kind of modern vocational education and training system that could conceivably enable China to successfully make the transition from a low-wage, low-skill export-driven economy to a high-wage, high skill economy driven by a balance of domestic consumers and external customers. Stewart’s deep knowledge of China and her wide-ranging experience with other education and training systems worldwide were an enormous asset to our team as we tried to make sense of an endlessly complex country, one full of contradictions at every turn.

First, there can be no doubt that the Chinese accomplishment is simply staggering in its scope. Engineering marvels abound in many parts of the country, on a grand scale. But this unfolded in stages, beginning in Guangdong Province, on the mainland of China, close to Hong Kong. At first what was needed was the construction of port facilities and simple buildings that could be used by foreign-invested firms to manufacture relatively simple products using China’s very cheap labor. Much of the technical expertise to do this sort of construction came from people who had been in the Red Army. At the time, the management and professional expertise required to staff manufacturing enterprises of this sort were in very short supply. Some of the people they needed were recruited from all over China. But much of the needed expertise came from Hong Kong, which initially acted as an intermediary between foreign investors worldwide and the mainland Chinese interested in partnering with foreign investors.

In time, very large firms in Hong Kong, South Korea and Taiwan, backed by deep-pocketed investors all over the world, undertook very large-scale development projects in China, bringing with them the technical expertise needed to design and complete the projects that have since earned the admiration of people all over the world. These firms typically came into China prepared to supply, all or nearly all, the technical training required by their native Chinese employees, often sending new employees all over the world to their own facilities for training. This proved very expensive, but it made good bottom-line sense because of government subsidies and because Chinese labor was so cheap and hardworking that this high training expense could easily be born.

Prior to Deng Xiao Ping’s reforms, all companies in China were state-owned, because everything was owned by the state. The large state-owned companies provided everything their employees needed, from their meals to their housing to their medical care. And this included training, too. In time, foreign-invested companies took their place side-by-side with the state-owned firms. Some state-owned firms, in time, entered the global markets for their services and learned how to compete with foreign firms in the same markets. Many did not. Among those that did, some produced training for their employees as good as any we have seen worldwide. But the vast majority of state-owned firms stuck with their domestic market and their standard of training was often far below the global standard. Though the training standards of foreign-invested firms were typically higher than those of the state-owned firms, working conditions in the foreign-invested companies were often far below the minimum standard expected in Western countries.

By the turn of this century, the foreign-invested firms were using fewer expatriates in their Chinese operations, as the Chinese educational institutions supplied ever-larger numbers of people with the credentials they were looking for and Chinese who had gone to college and graduate school abroad returned to their native land.

Many of our readers know that Shanghai has placed at the top of the world’s league tables in secondary education on the PISA Survey for two survey administrations in a row. There is good reason to believe that Shanghai is not alone among coastal Chinese provinces in providing a high level of education to its students. But this turns out to be a two-edged sword in China. The ancient veneration of highly educated people in China comes with a downside, which is a very low regard for people who work with their hands, In China, this translates into a very low status for vocational education and training. Even within the vocational education and training sector in China, there is a sharp divide between those who provide the “theoretical” (read “classroom”) part of the training and those who provide the practical training. Though those who provide the theoretical training have higher status than those who provide the practical training, both have much lower status than those who hold positions as teachers in the regular (non-vocational) schools and higher education institutions. This creates a world in which the vocational education classroom teachers often have very little practical background in the industry they teach in and very little incentive to acquire such a background. Those who are in charge of providing practical experience in firms are not typically in a position to provide a high quality experience for their students.

Our team observed other key weaknesses: the structural barriers that exist between vocational and academic education that magnify the image problem that vocational education suffers from, the narrowness of the vocational education curriculum, weak connections to industry, a frequently deep mismatch between skills of graduates and needs of employers (most especially the need for graduates who can apply what they have learned in the environment in which they will be working).

China faces an enormous challenge. For a host of reasons, ranging from the demographic effects of the one-child policy, to the need to get far more from each acre farmed as the Chinese move to the city from the countryside to the need to greatly reduce the acute pollution in the cites, the productivity of the Chinese economy must increase dramatically in the next few years to avoid major economic and social disturbances. That can only be accomplished by greatly upgrading the skills of those Chinese who will do the work requiring high technical skill below the level of college graduates. China is already producing a potentially socially destabilizing number of unemployed college graduates. Though the numbers of high school graduates is rapidly increasing, the proportion of those young people who have the skills the next economy will need is disturbingly small.

China has a boot-strapping problem. It needs to find a way to identify the domestic and foreign-invested firms that have the competence and need for highly skilled technicians to make them well-qualified to train the native Chinese and to raise the training standards for the country as a whole. But the state has yet to find a way to offer the kinds of incentives to either their domestic champions (think Alibaba) or the best of the foreign-invested firms that would induce them to offer powerful apprentice-like experiences to the millions of students who will need them. Training institutions have established relationships with state-owned firms, but the training standards in those firms are typically very low. This is not a problem that is unique to China, but, because China’s vocational schools are so insulated from the industrial settings in which their graduates will work, it is an especially serious problem in China.

These are very daunting problems. But anyone betting against the Chinese government solving them has to contend with the astonishing record of accomplishment of the Deng Xiao Ping years, when the government at all levels reduced illiteracy among Chinese adults, increased enrolment in Chinese primary and secondary schools and built universities and research institutions on a scale and at a pace without precedent in world history. Chinese governments, both national and provincial, are now focused like a laser beam on the need for technical skills. Much now depends on their success.

It turns out that vocational education and training provides a powerful lens for helping the reader to understand some of the most important challenges facing modern China. Combine that with the fact that Stewart is a fine writer, and you will, I predict, not be able to put this report down once it is in your hands.