For Beijing, this great challenge has only just begun. The McKinsey Global Institute report, entitled "Reskilling China: Transforming The World’s Largest Workforce Into Lifelong Learners”, examines just what the Xi Jinping administration will have to contend with in the coming years: reskilling the Chinese workforce, adapting it to the challenges of automation and digitalisation.
Over the past 30 years, incomes and labour productivity in China have both risen tenfold with a relentlessly rising GDP, yet the impetus behind the boom is now creeping quietly to a halt. The urbanisation process has in fact begun cooling down with a gradual decline in domestic migration from country to city. The country is also ageing (the average age in 2017 peaked at 76.47, the oldest ever) while the working-age population is decreasing. This reality is hardly helpful to a country aspiring to lead the world of tomorrow by becoming a bellwether in areas such as artificial intelligence or blockchain.
While Beijing's per capita GDP now stands at 27% in comparison to Western economies, a number of Chinese think tanks estimate that it could reach 70% by 2050. That would constitute a major step forward that would require an annual growth of 4.7% in GDP and 4.9% in wages. However, the real change has already taken place: The driving force behind the Chinese economy has shifted from investment and production to consumption, services and innovation, compounded by rising automation and digitisation processes within production.
220 million Chinese, or 30% of the workforce, may have to change jobs by 2030
A transition imposing three necessary challenges. The first concerns the job market: 220 million Chinese, or 30% of the workforce, may have to change jobs by 2030. The skills-related challenge then comes into play. Automation processes may lead to the redistribution of 516 billion working hours by 2030. The demands of the labour market have indeed changed: demand for physical-manual and basic cognitive skills is set to fall by 18% and 11% respectively, while demand for soft and technological skills is projected to rise by 18% and 51%. Yet the most difficult challenge may well be one of equity. The most disadvantaged groups, such as rural migrants, are at risk of slowly disappearing from the workforce under the present social safeguards in place, which systematically excludes them from healthcare, education and vocational training programmes. This demographic faces the greatest risk, particularly since 22% to 40% of their work, estimated at 151 to 277 billion working hours, could disappear due to automation. That sticks out as a huge problem for a society that could have up to 331 million rural migrants by 2030.
Education must therefore stand at the very heart of Beijing's revival. China's education system has become increasingly refined over the years, yet it still falls short in vocational training, where there is now a need to ensure that the entire Chinese population has the skills it needs. This means that three times as many people enrolled in the education system may need to refresh their skills by 2030.
There is a particular need to develop competitive vocational programmes and high-quality skills, and to expand the number and capacity of technology experts. Formal and informal pathways would be particularly useful, and private sector involvement might also be a key factor in filling gaps in the education system and widening access for all. The country's rather narrow training framework should also be broadened: the world of work may demand more cognitive, social and emotional knowledge, a skill set that differs significantly from what is taught today. This calls for changes in traditional textbooks and updates in curricula, especially concerning vocational training, which have fallen behind. The Chinese education programme also needs to expand geographically, as rural migrants often lack access to education and rural residents are at a greater disadvantage than city dwellers.
Beijing spent 56% of its global investments on education in 2019 alone
The Internet and new digital frontiers may prove to be instrumental allies in helping China rise to this challenge. The use of augmented and virtual reality alongside gamification platforms can greatly broaden the spectrum of school or learning programme users. Well over 900 million people, virtually everyone with access to the Internet, could get high-quality digital content to support their skills transitions.
An epoch-defining shift, which we are already seeing in part: Beijing spent 56% of its global venture-capital investment on education in 2019 alone. A further step could involve public-private partnerships that enable schools to improve educational pathways based on the needs of employers. An agreement that could potentially encompass as many as 300,000 companies, 11,000 vocational schools and nearly 27 million students.
The education system can be further refined both in terms of offering, by allowing high school students to go directly to university without sitting for the national entrance exam, and also in terms of greater cooperation between companies and vocational trainers, to address the required skills in their chosen fields, similar to the system in Germany.
China's focus is on developing a culture of lifelong learning. More support on career options and skills-development pathways could help approximately 220 million people face career transitions between now and 2030, helping them understand their options to develop the necessary capabilities. A “micro-credential system” beyond graduation would beyond a doubt be beneficial and could promote a culture of lifelong learning. Employers investing in training their workers would also benefit from the skills they need to increase productivity. Working on education and lifelong learning is the only way for the country to go from leading the manufacturing world to leading the digital world of tomorrow.