I was working in China last week and gave a talk to 1000 educators in Chengdu, a city of 14 million that is the capital of Sichuan Province in the South West of the country. Like most Chinese cities it is still a ‘work in progress’ with construction evident everywhere. The people are nothing if not ambitious for the future and have just built the largest building in the world, the New Century Global Centre with its own beach.
Looking at this bustling metropolis you might think that the future is self-assured. But maybe time to think again. China faces significant challenges from its growth now as the days of cheap labour are increasingly receding and the country faces the so called ‘middle income trap’ which afflicts all emerging economies where the advantages of cheap and abundant labour begin to decline. But as wage rates rise the initial attraction begins to fade. Additionally a lot of such manufacturing is outsourced work for companies in the west that design and sell the products. There is little that is native. Consequently there are few global brands from such countries that can take up the slack when fickle overseas investors decide to find somewhere cheaper to produce their goods.
It is difficult at any one time to see clearly what is happening with an economy, but certainly the Chinese are facing some of these challenges now as you see ‘on shoring’ of jobs back to the USA and Europe fuelled by cheaper labour costs in the home countries and cheaper energy too. This together with a new ethical voice about non exploitation of cheap overseas unregulated labour (think of the Bangladesh factory collapse with its appalling loss of life recently) is prompting western firms to rethink their overseas operations.
China faces additional uncertainties related to the speed of its growth and the comparative weakness of its banking system. Dramatic growth rates have been funded by equally dramatic rises in lending. The credit agency Fitch thought it unsustainable and downgraded its risk assessment of China in April. The reality is complex and who knows how all this will end. One thing is certain that countries that have made the jump out of the middle income trap (wages trapped at between $1,000 and $12,000 pa at 2010 rates), have pursued modernisation of their education systems.
Good examples of this are Singapore and South Korea. The up-skilling of children to embrace technical education alongside an understanding of the associated social skills needed to operate within a modern capitalist economy have yielded significant benefits. Yet school systems are not agile and mostly show very limited ability to rethink processes and systems. Project based learning with its richer engagement and outcomes is one part of this route.
Lastly, if you are reading this in an ‘advanced’ country you may sigh a sigh of relief and thank your stars that such places do not face such challenges. But you would be wrong as my next post will show!