CHINA: Investment in tertiary education on the rise

China's increasing investment in education will accelerate economic development, lead to rapid wage rises and increased consumer demand, and slow population growth, says a new report from MAPI, the Arlington, Virginia-based Manufacturers Alliance.

The report, China's Educational Performance: Implications for global competitiveness, social stability and long-term development, written by economist Cliff Waldman, is the latest in a series of MAPI research reports on the evolution of the Chinese economy and its impact on the emerging global economic order.

Since the 1990s when China made higher education a priority, the proportion of graduates from senior secondary schools who go on to pursue higher education has risen significantly, from nearly half in 1995 to 75% by 2006.

The gross enrolment ratio in tertiary education rose from 6% in 1999 to 20% in 2005, more than India's 11% and Vietnam's 16%, but well behind that of Japan's 55% and the US' 83%.

Still, the US and Japan would do well to closely monitor China's progress, especially in the discipline of engineering in which both countries are experiencing skill shortages. A recent RAND Corporation report on US competitiveness in science and technology by Titus Galama and James Hosek notes that China is graduating more scientists and engineers than America.

More than half of Chinese students graduate in natural sciences and engineering, compared with a world average of 27% and only 17% in the US. In 2006, 36% of Chinese undergraduate degrees and 37% of graduate degrees were awarded in engineering whereas fewer than 7% of US undergraduate degrees awarded in 2004 were in engineering.

What drives Chinese higher education in science and engineering is China's big ambitions in these areas. During the period 1993-2003, China's R&D expenditures grew faster than any other nation, pushing its share of world R&D investment from 3.6% to 9.5%. During the same period, the European Union's share of world R&D investment declined from 28.5% to 25% and America's share dropped from 37.6% to 36.1%.

In January 2006, China initiated a 15-year medium to long-term plan for the development of science and technology. The nation aims to become an "innovation-oriented society" by 2020 and a world leader in science and technology by 2050.

Under the plan, China wants to develop indigenous innovation capabilities, leapfrog into leading positions in new science-based industries, increase R&D expenditures to 2.5% of GDP by 2020 (up from 1.34% in 2005), increase the contribution to economic growth from technological advances to 60%, limit dependence on imported technology to 30%, and become one of the top five countries in the world in the number of patents granted.

While other nations and regions are not out-pacing the US in science and technology employment, China added about the same number of researchers as America and overtook Japan during the period 1995 to 2002. Between 1995 and 2003, science and technology employment in China grew by 6.5% a year: if current growth rates for the US and China are maintained, China could overtake America in the total number of researchers by 2021.

The second and perhaps the more important driver is manufacturing. In 2005, China accounted for 14% of the Gross World Product - compared with 20% for America and 6% for India - up from a mere 3% in 1975.

China's rapid growth in manufacturing is evident from a recent study on global warming by the Netherlands Environmental Assessment Agency. The agency found that China had clearly overtaken America as the world's leading emitter of climate-warming gases. The increasing emissions from China - up 8% in the past year - accounted for two-thirds of the growth in global greenhouse gas emissions in 2007, the study found.

Clearly, China's double-digit GDP and manufacturing growth, as well as its burgeoning R&D enterprise, have created a very strong demand for, and now supply of, engineers.

This, Waldman says, should serve as a "wake-up call" for the United States and other industrialised nations to invest in science and engineering education. After all, the growth in the science and engineering work force is one key element contributing to growth in product and process innovation.