Jake's View
PUBLISHED : Sunday, 20 April, 2014, 5:33am
UPDATED : Sunday, 20 April, 2014, 5:33am

Why going to college isn't the answer to China's hi-tech dilemma


Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.

Close to seven million Chinese this year will graduate from college, up from 1.1 million in 2001. By 2020, China’s college-educated pool is expected to number 195 million people, more than the entire labour force in the United States that year.

Bloomberg, SCMP, April 18


I think I have mentioned before that I am not the world’s biggest believer in education, certainly not the college sort that now wastes the key years of young peoples’ lives in a go-nowhere debt trap.

What I have in mind in particular at the moment is a book I am reading – the autobiography of Steve Wozniak, who designed the break-through Apple 2 computer and only got his college degree years later.

Why he bothered is a mystery, the college degree, I mean. He learned engineering from his father, refined his knowledge with his friends and there wasn’t much that formal education did for him other, I suppose, than help him learn to read, write and take an interest in numbers in primary school.

It was 10-year-olds he went to when he wanted to pass on his learning. But now college is to be the answer for China.

The problem, we are told, is that foreign companies have taken advantage of plentiful low-paid and unskilled labour to keep China in the cheap and nasty stage of industrial development.

That is why the world’s biggest producer of consumer goods still has so very few consumer brand names recognised around the world.

But now China is to have more college graduates than the entire US workforce in just six years and everything will change. The Chinese are now going to be the world’s hi-tech leaders. Someone obviously hasn’t noticed that the engineering and design facilities of big tech companies worldwide already employ a disproportionately large number of Chinese engineers.

They are already the hi-tech leaders, but outside of China. There is a reason for this, and it has nothing to do with education. The reason the country with the world’s biggest production of hi-tech wares is not also the place  where it is predominantly designed or branded has to do with market economics.

Simply put, if you cannot properly price the work you do relative to competing demands for the money you need, then you can never bring much innovation to your business. Someone else with little knowledge of what you do is making your most critical decisions.

And this is what is still happening in China. At its most critical, the state still decides  who will get what amount of money for what purpose and at what price. It also still plays a role in allocating who will get what physical resources at what price and what other commercial advantages they may be given. No one will ever turn a great idea like the Apple 2 into a commercial success in a system like this. The bureaucrats who make the critical decisions will never recognise it, are not able to recognise it, and will starve it of resources.

The money and the other opportunities will instead go to yesterday’s big ideas, not today’s, and nothing is likely to come of them because, by definition, they are yesterday’s and that’s in the past.

If someone in China does come up with today’s new Apple 2, he will probably have to develop it and look for the backing in the United States, as usual, returning to China only later for the mass assembly.

As I say, lots of Chinese people are at the leading edge of technology, but Chinese industry itself lags there.

The only workable prescription for fixing this and going upmarket in industrial effort is market pricing of that effort. If it involves export industry, as it does in this case, then it needs an open capital account and a free floating currency. In talk alone have either of these reforms really gone anywhere.

And now it looks like the authorities in Beijing are chasing the wrong remedy again. Their idea is to condemn Chinese youth to further boredom in that intellectual desert of academia under the illusion that a college ticket is worth the price of the wasted years.

If only college did anything else as well as it does alcoholism training.


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