Susan Mays, Ph.D., contact Globex Faculty Fellow, Peking University; Faculty, The University of Texas at Austin China’s Economy: Technology, Growth, and Global Connections China’s Talent Pool 北京大学工学院 PKU College of Engineering Globex

2 The shape of the S&T system from 1949, under central planning Three tiers of hierarchal S&T institutions with narrow specialties Separation of R&D from production and application (factories) Systemic changes from 1978 CCP’s ambitious new policies (re)emphasized S&T as part of economic development and “catching up” Existing elite S&T talent/infrastructure enabled both bottom up and top down initiatives Government approved new “S&T Enterprises” with special legal status and also established new technology “markets” in the 1980s Today’s industry and S&T leaders and managers have strong ties to earlier institutes and enterprises The Chinese leadership has long prioritized advances in the technical and scientific level of China’s human resources

3 China’s 10 th, 11 th, and 12 th 5 Year Plans ( ) prioritized and allocated greater funding for R&D Expenditures on R&D 1 Percent of GDP (1) Various reviews of China’s 11 th 5 year plan. For details on the national (governmental) organizations involved in S&T, see Michael Pecht, China’s Electronics Industry, 2007, pg 53–61. In 2012 China at 2.00% US at ~2.77% R&D is about half of total expenditures for education; R&D spending has grown more than overall education spending

4 Changes in higher education  Reform and expansion of universities (leading universities vs. others; PhD-educated professors) –100 key universities  Send students abroad; attract back overseas talent –“1,000 Talents Program” (3000?, more entrepreneurs than scholars) –Increase in returnees (due to numbers) –Open, competitive, peer-review for funding/promo to lure academics  Create special support programs for outstanding scholars and universities, especially in S&T –211 and 985 programs, other programs  Establish MBA programs (w/ international partners) and law schools Results:  College enrollment increased by 6x in the 2000s  Percent of workforce with “higher” education: 2010, 12.5%; 2020, est. 20% (OECD is >25%) –2010 = 120 million people –2020 estimate = 180 million  Are Chinese graduates less creative and independent? Moving to a “knowledge-based” economy In addition to R&D, China has reformed and expanded higher education to foster China’s talent pool See works by Wang Huiyao, Cong Cao, Denis Simon, and David Zweig. Wang and Zweig, “China’s Diaspora and Returnees,” conference “The Globalization of Chinese Enterprises”, Harvard, 10/08.

5 III The Exam-Oriented System Students studying abroad have increased dramatically; high schoolers and undergrads will majorly affect China’s talent pool Chinese students in the US

6 Post-secondary enrollment growth; 7+mm graduates in 2014 Enrollment in Postsecondary Institutions (1,000s)

7 However, Cao and Simon illustrate that qualified engineers may be far less than statistics indicate Problems include supply and quality, but also management and retention 1.34 million undergraduate engineers Minus short cycle programs Minus grad school Minus low- quality or mismatch Minus those “choosing ” (?) other job options / (1) Denis Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent, 2009, pg 275, Figure 7.3, authors research, and pg 98, Table 3.15, source Ministry of Education, Bureau of Development and Planning. Many Engineers Complete Short Cycle Programs 1

8 Chinese university graduate too often have a lack of technical training, inadequate English, and deficient soft skills, such as the ability to work in teams, critical thinking, and innovative flair. McKinsey and Co., research report 2013 International concerns with quality in China’s high-end talent pool….

9 (1)Cao and Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent, 2009, pg 102, Table 3.17 and pg , Tables 8.1a/c. Sources include: National Bureau of Statistics, National Development and Reform Commission, and Ministry of Science and Technology, (2)World Bank, data.worldbank.org., latest figures as of March By the numbers, China has had the world’s largest S&T labor force in the 2000s Still, employers comment on not finding tech-skilled professionals; this issue may grow in the coming 10 years Science and Technology Workforce in “High Tech” 1 S&T Papers Published China Number of Papers29,00074,000 US Number of Papers196,000208,000 World Rank12 Engineers and Scientists (as a Percent of Chart at Left) 1 Pharmaceuticals Air/space craft Electronic/communications equipment Computers and office equipment Medial equipment and measuring instruments Above, “High Tech” refers to:

10 Executives say new grads have decent skills, but middle & senior managers are lacking China’s mid-senior managers are “first generation;” have few role models and rely on guanxi May have background with SOEs, the Cultural Revolution, etc. In last 5+ years, Chinese have begun to take top posts in global firms Take a more Western approach to business and have Western-style career tracks Early 2000s, educated Chinese wanted to work in private and foreign firms, but from about 2009, anecdotal evidence of favoring state-affiliated orgs for stability and prestige…changes over the years Ongoing difference: “build trust in order to work together” versus ”work together in order to build trust” Managers: in years past, China has also had a shortage of mid/senior managers with “global” skills….changing? (1)McKinsey and Company, “Destination: China” and “Winning the Talent War in China,” (2)Cao and Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent, 2009, pg 224, Table 6.2, cumulative number of study abroad students is 1.2 million. China’s People’s Daily, article by Sheng Ruowei, March 16, However, an “age-wave” of experienced, capable Chinese (age ~35+) has arrived Local Example: –Graduate in 2001 in China, age 22 –Work in multi-national firms –In 2015, now age 36…middle manager Returnee Example: –Go abroad in 1995, age 24 –Return to China 2005, age 34 (PhD; 3 yrs work) –In 2015, now age 49…executive The current “age-wave” of Chinese professionals

11 Still, foreign firms with operations or offices in China often rely on returnees or overseas Chinese Returnees: In IT, telecomm, computers, bio-tech, media Initially, returnees were mainly scientists and engineers, but from 2000, in business & entrepreneurship  Businesspeople versus PhDs for econ growth? New PRC laws recognize private enterprises, so returnees can start firms Returnees’ management teams tend to be more accepted by the global business community Returnees and overseas Chinese can experience resentment, as they may have less experience with PRC business conditions (and thus not as effective) Returnees that go abroad prior to grad school are more global in their outlook and approach Returnees foster domestic Chinese firms while also supporting global businesses in China For further reading, see works by Wang Huiyao, Cong Cao, Denis Simon, and David Zweig. On brain drain, brain gain, and brain circulation, see A. Saxenian, R. Lucas, and J. Bagwati, respectively. Cumulative Number of Returnees 2

12 As China’s talent pool has grown, foreign R&D centers in China had increased to 1200 in 2007 with estimates of ~3000 today 1 12 (1) Cao and Simon, China’s Emerging Technological Edge: Assessing the Role of High-End Talent, 2009, pg 32, Table 2.2. Beijing Review, “Foreign R&D Centers in China,” 7/16/2012. These centers serve as training grounds for Chinese S&T personnel

13 China can no longer simply be considered “the world’s factory floor;” industries have moved into high-value-added activities Value-added Value Chain DesignMarketing Manufacturing

14 China’s talent pool is rapidly growing and also evolving to support a knowledge-based economy Questions going forward: Will China improve the quality of education and training? How will larger numbers of globally integrated professionals affect the competitiveness of firms in China? What career paths will Chinese professionals pursue (study tech vs business, choose state vs private firms, etc.)?