China, ‘world’s fac­tory’, lacks skilled work­force, govt think tank says

China Daily (Canada) - - BUSINESS - By ZHENG YANGPENG zhengyang­peng@chi­nadaily.com.cn

China’s skill gap could de­rail its eco­nomic up­grade, Long Guo­qiang, a mem­ber of a cab­i­net-level think tank, said.

Fill­ing the gap is strate­gi­cally im­por­tant forChina as it tries to leave be­hind its role as the “world’s fac­tory” and move up the global value chain, said Long, di­rec­tor-gen­eral of the gen­eral of­fice of the De­vel­op­ment Re­search Cen­ter of the State Coun­cil. Long’s com­ments came amid con­cerns that China is rapidly los­ing its com­par­a­tive ad­van­tages— such as be­ing a source of low­cost la­bor — that drove the na­tion to be the world’s sec­ond-largest econ­omy and big­gest mer­chan­dise trader.

The ad­van­tages have faded. Long cited an in­ter­na­tional study that showed that 20 years ago, Thai­land’s aver­age wage was 2.3 times that of China’s. By 2012, the sit­u­a­tion had re­versed. Thai­land’s aver­age wage was just 70 per­cent of China’s.

It’s good for work­ers. Mil­lions of man­u­fac­tur­ers in China have seen their in­ter­na­tional com­pet­i­tive­ness erode. They have re­lo­cated fac­to­ries to sites with cheaper costs or pro­duced less la­bor-in­ten­sive goods as a re­sult.

China’s prob­lem, Long said, is deep­en­ing glob­al­iza­tion. It’s in­creas­ingly dif­fi­cult for com­pa­nies to switch out­put, as Ja­panese firms did 40 years ago, from la­bor-in­ten­sive in­dus­tries such as cloth­ing or toy-mak­ing, into cap­i­tal-in­ten­sive, more value-added sec­tors such as chem­i­cals or cars.

Dif­fer­ent value chains in var­i­ous in­dus­tries have been es­tab­lished and are based on cross-coun­try col­lab­o­ra­tion, Long said.

“A firm should fo­cus on en­hanc­ing a spe­cific in­ter­na­tional value chain, mov­ing from man­u­fac­tur­ing, usu­ally with the low­est added-value, to re­search and de­vel­op­ment, or re­tail, mar­ket­ing and brand­ing,” Long said. “And to sup­port that task, China needs a qual­i­fied la­bor force.”

The re­al­i­ties are grim. A sur­vey by the Na­tional Bureau of Sta­tis­tics showed that among the 269 mil­lion­mi­grant work­ers in China — people who leave the vil­lage, town or city they are reg­is­tered in to seek a job — only 32.7 per­cent have re­ceived train­ing in the workplace.

A coun­try­wide man­u­fac­tur­ing com­pet­i­tive­ness study by Deloitte Touche Tohmatsu Ltd­showedthat in the eyes ofCEOsand­se­nior lead­ers around the world, China ranked first in man­u­fac­tur­ing com­pet­i­tive­ness. The coun­try lagged in la­bor pro­duc­tiv­ity, only scor­ing 14.2, while the United States scored 68.2 and Ger­many 43.3.

De­mand still out­strips sup­ply for lowskilled la­bor, Long said. It leads people to fre­quently change jobs. They sel­dom have time to hone skills and have lit­tle in­cen­tive to ac­cept em­ploy­ers’ of­fers of vo­ca­tional train­ing, Long said.

The Ed­u­ca­tion Min­istry plans to con­vert half of its higher-ed­u­ca­tion in­sti­tu­tions, about 600, to vo­ca­tional ed­u­ca­tion schools.

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