China Update

What Is a College Degree Worth in China?

Is a Chinese college degree important? It is if you want to shovel excrement in Wenzhou. The prosperous city in Zhejiang province this year advertised for college graduates to fill eight spots collecting “night soil.” More than 1,100 of them applied for the jobs. In these circumstances, skipping college to work as a migrant laborer looks like a smart career move.

So does joining the People’s Liberation Army. It wasn’t long ago that the military couldn’t attract degree-holders. No more. In 2009, 120,000 college graduates joined the P.L.A. That was three times the number in the preceding year and 12 times more than in 2006.

The People’s Liberation Army -- and the armies of night soil collectors -- have begun to attract college graduates because few promising opportunities are available for them in other fields. These days, they'd even covet jobs as domestic servants and nannies.

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There's a frustrating paradox in Chinese education. On the one hand, millions of college graduates cannot find a job -- at least a desirable job that pays substantially more than what a migrant worker makes. On the other hand, businesses that want to pay a lot more can't seem to find qualified employees.

Multinational companies in China are having a difficult time finding qualified candidates for their positions. According to a recent survey of U.S.-owned enterprises conducted by the American Chamber of Commerce in Shanghai, 37 percent of the companies that responded said that finding talent was their biggest operational problem. A separate study by McKinsey Quarterly found that 44 percent of the executives in Chinese companies reported that insufficient talent was the biggest barrier to their global ambitions.

The explanation: a test-oriented educational environment.

China invented the keju system, which used tests to select government officials. It was a great invention because it enabled talents from across the society to join the ruling class regardless of their family backgrounds. Hence, a great meritocracy could be created. But it evolved into a nightmare for China as the system gradually changed into one that tested memorization of Confucian classics.

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It is ironic that as China’s economy keeps growing, the degrees produced by its colleges seem to be rapidly losing their value. Investment in education and training are not paying off for many college graduates. Why? Does China not need knowledge workers?

In the past decade, Chinese higher education enrollment soared more than sevenfold, and the system now produces close to six million graduates a year. Shouldn’t these graduates be rewarded for their education credentials and qualifications and not be treated “as cheap as cabbages”?

The problem is due largely to a structural disorder in Chinese higher education.

Top Test Scores From Shanghai Stun Educators:

With China’s debut in international standardized testing, students in Shanghai have surprised experts by outscoring their counterparts in dozens of other countries, in reading as well as in math and science, according to the results of a respected exam.

American officials and Europeans involved in administering the test in about 65 countries acknowledged that the scores from Shanghai — an industrial powerhouse with some 20 million residents and scores of modern universities that is a magnet for the best students in the country — are by no means representative of all of China.

About 5,100 15-year-olds in Shanghai were chosen as a representative cross-section of students in that city. In the United States, a similar number of students from across the country were selected as a representative sample for the test.

Experts noted the obvious difficulty of using a standardized test to compare countries and cities of vastly different sizes. Even so, they said the stellar academic performance of students in Shanghai was noteworthy, and another sign of China’s rapid modernization.

China's skyscraper boom buoys global industry:

The 121-story Shanghai Tower is more than China's next record-setting building: It's an economic lifeline for the elite club of skyscraper builders.

Financial gloom has derailed plans for new towers in Chicago, Moscow, Dubai and other cities. But in China, work on the 2,074-foot (632-meter) Shanghai Tower, due to be completed in 2014, and dozens of other tall buildings is rushing ahead, powered by a buoyant economy and providing a steady stream of work to architects and engineers.

The U.S. high-rise market is "pretty much dead," said Dan Winey, a managing director for Gensler, the Shanghai Tower's San Francisco-based architects. "For us, China in the next 10 to 15 years is going to be a huge market."

China has six of the world's 15 tallest buildings — compared with three in the United States, the skyscraper's birthplace — and is constructing more at a furious pace, defying worries about a possible real estate boom and bust. It is on track to pass the U.S. as the country with the most buildings among the 100 tallest by a wide margin.

It's About To Get More Expensive For Foreigners To Do Business In China:

China is set to increase taxes on foreign companies Dec. 1 by doing away with an exemption to maintenance/construction and education taxes that has been in place since the nation’s sweeping 1994 tax reform. China’s State Council announced Oct. 18 that it would unify the City Maintenance and Construction Tax and the Education Surcharge for Domestic Enterprises, Foreign Invested Enterprises and Foreign Individuals.

The policy change will bring tax rates for foreign companies in line with the tax rates for domestic companies, and Chinese state media claim it marks the end of the period of special treatment for foreign business. While the tax will not drive foreigners away, it will add to the growing costs of operating in China, and the trend of ever-rising costs combined with political dangers will likely pose major challenges to foreign businesses in the not-so-distant future.

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Needless to say, foreign-invested businesses and foreigners living in China are not eager to pay any new tax. First, the tax itself will damage their bottom line; Chinese media quoted a source at a beer company as saying the tax would amount to about 29 percent of the company’s profits from January through September 2010. But on a deeper level, foreign companies are becoming more sensitive to ever-rising costs in China. Rising labor costs are perhaps the most widespread concern, but prices are also rising for raw materials, land, energy and other utilities. A recent report by the U.S.-China Business Council showed that higher taxes ranked second, after labor costs, as the top causes of rising costs.

Two Reasons India Will Overtake China By 2025:

To quickly summarise, I believe demography matters in the economic rival between India and China. As India is still much poorer than China, perhaps it also makes sense to say that the need for catch up will mean a faster growth in the years to come. For investors, perhaps you should take an extra look at India

Vast Hacking by a China Fearful of the Web:

As China ratcheted up the pressure on Google to censor its Internet searches last year, the American Embassy sent a secret cable to Washington detailing one reason top Chinese leaders had become so obsessed with the Internet search company: they were Googling themselves.

The May 18, 2009, cable, titled “Google China Paying Price for Resisting Censorship,” quoted a well-placed source as saying that Li Changchun, a member of China’s top ruling body, the Politburo Standing Committee, and the country’s senior propaganda official, was taken aback to discover that he could conduct Chinese-language searches on Google’s main international Web site. When Mr. Li typed his name into the search engine at google.com, he found “results critical of him.”

That cable from American diplomats was one of many made public by WikiLeaks that portray China’s leadership as nearly obsessed with the threat posed by the Internet to their grip on power — and, the reverse, by the opportunities it offered them, through hacking, to obtain secrets stored in computers of its rivals, especially the United States.

Extensive hacking operations suspected of originating in China, including one leveled at Google, are a central theme in the cables. The operations began earlier and were aimed at a wider array of American government and military data than generally known, including on the computers of United States diplomats involved in climate change talks with China.

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Still, the cables provide a patchwork of detail about cyberattacks that American officials believe originated in China with either the assistance or knowledge of the Chinese military.

For example, in 2008 Chinese intruders based in Shanghai and linked to the People’s Liberation Army used a computer document labeled “salary increase — survey and forecast” as bait as part of the sophisticated intrusion scheme that yielded more than 50 megabytes of e-mails and a complete list of user names and passwords from a United States government agency that was not identified.