Crisis calls for change in growth pattern
The global economic crisis has made it all the more important to take a fresh look at China's human resources. The country's immediate challenge is to tackle unemployment, while in the long run it has to develop human resources to support a shift in its growth strategy.
The crisis has had a severe impact on China's real economy. The country's exports have plummeted, causing a drop in production and loss of employment for about 20 million workers, mainly migrant workers with low skills. Besides, about 10 million people migrating from rural areas to cities each year will no longer find it easy to land a job. Nor will many among the 6 million youths who graduate from colleges each year find jobs waiting for them.
The sheer number of the jobless is a daunting challenge in itself. True, the government's financial stimulus package will create new jobs, especially in infrastructure construction. The government is taking steps to encourage rural employment, create jobs for laid-off migrant workers and fresh college graduates, and stimulate small- and medium-sized enterprises. But given the huge number of jobs lost, short-term training and job creation have to be expedited and social safety nets for the unemployed improved.
The real challenge, however, lies in developing human resources to help the shift from export-led to consumption-driven economic growth. Rebalancing the growth strategy entails a shift in emphasis from traditional export industries to the service sector, including retail, financial services and domestic tourism.
More importantly, it needs a shift towards a knowledge-driven economy that requires higher levels of science, technology, added value and innovation. And that calls for a review of the country's human resource policies.
Three factors deserve attention in this regard. First, public expenditure on basic education has to be increased significantly. The government has increased spending on education markedly in recent years, but at 3.3 percent of GDP it is still low by international standards. Increased expenditure on education will strengthen the country's human resources base, provide an essential foundation for other levels of education and serve the need for a service- and knowledge-driven economy. It will help take the pressure off families to save, too, and thus free resources for consumption, which in turn will stimulate domestic demand and economic activity.
Second, the shift in growth strategy has to be supported by large-scale investments in vocational education and skill development. The country's growth has been based largely on low-cost labor, and most of the laid-off workers are masters of basic skills only. The global economic crisis has highlighted the need to upgrade and diversify the country's mix of labor skills and reallocate the workforce.
Hence, extensive short- and long-term training programs are needed to prepare workers for new types of jobs, and these programs have to be supported by employment services and labor-market policies to enhance their responsiveness and flexibility. And given that enterprises are the direct beneficiaries of such a change, there is considerable scope for creative public-private partnership.
Third, this is an opportune moment to upgrade technology levels and strengthen the economy's capacity to innovate. A recent Asian Development Bank study (ADB 2008, Education and Skills, Strategies for Accelerated Development in Asia and the Pacific) stresses the key role of higher education in middle-income countries.
Even before the global economic crisis set in, it had become clear that the days of growth based on low levels of knowledge and innovation were numbered. The crisis has only further highlighted the need to change that pattern.
An Organization for Economic Cooperation and Development report on higher education in China highlights the importance of expanding the pool of science and technology graduates, strengthening the role of independent research institutes and improving knowledge exchange between research institutes and enterprises. Closer links with the private sector and a stronger focus on providing practical knowledge, too, would improve the employment prospects of new graduates.
The global crisis poses big challenges. But it offers opportunities, too. The government has risen to the challenges with a sizeable stimulus package and announcement of policies. It has declared its readiness to shift to a more sustainable growth model. So it has to seize the chance now to implement the policies to support consumption-driven growth.
That's why quick and effective measures are needed to improve basic education, raise skill levels, create a flexible and responsive workforce, strengthen the functioning of the labor market, upgrade scientific and technological research and know-how, and encourage innovation. These measures will ensure that China has the competitive human resources to meet future needs.
The author is Asian Development Bank's country director for China.
(China Daily 04/09/2009 page9)
