China’s Coming Education Crisis – China Real Time Report – WSJ

Yao Xinyu, founder of a popular software hosting service called GitCafe, opted not to attend college because he felt he could do a better job teaching himself what he needed to be successful in the real world.

His parents disapproved but he stuck to his guns, studied on his own and built the successful startup after attracting 3 million yuan in capital from Greenwood Asset Management in late 2013. The 24-year old doesn’t see much chance that colleges in China will change to better meet the shifting needs of China’s economy, he said, since demand is high, their business model is profitable and there’s little incentive to adapt.

“I just decided I knew how to develop my own career,” he added.

One the knottiest problems China faces as its economy slows is a mismatch between people’s education levels and the needs of an economy increasingly reliant on technology and innovation, the Organization of Economic Cooperation and Development said Friday in a report on China.

China’s productivity is decelerating and it’s important to reverse this “worrisome” trend given the nation’s rapidly aging population and the related prospect of slower rates of savings and investment, the Paris-based organization said.

“The knowledge taught and skills nurtured at school do not sufficiently match labor market needs,” it said. “Workplace training-based vocational education arrangements are woefully inadequate.”

While China has aggressively stepped up its spending on research, this isn’t translating sufficiently into innovation, the 34-member OECD said. China’s spending on research and development hit 2% of gross domestic product in 2013, which is above the European Union average, and has set a target of 2.5% of GDP by 2020. But innovation remains weak as measured by international patenting and trademark registration, the report said. “And the bulk of university research is not relevant for business,” the OECD said.

Many of China’s past gains in productivity were related to capital, but the country’s future focus should be on the economic benefits of better trained workers, said Angel Gurria, secretary general of the Paris-based group. “Productivity, productivity, productivity, it’s not a choice, it’s a must,” he said. “Without it, China’s not going to be able to continue growing at this cruising speed.”

China has targeted economic growth of 7% this year, a reduction from last year’s 7.4% which was its slowest pace in nearly a quarter century.

via China’s Coming Education Crisis – China Real Time Report – WSJ.

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