‘Invisible China’: The hidden human capital crisis that threatens common prosperity

In recent months, a slew of wide-ranging regulatory crackdowns have raised questions about how Beijing is recalibrating its economic strategy. President Xí Jìnpíng 习近平 has called for a “common prosperity” that reins in capitalist excess to reduce wealth inequality and promote more sustainable growth. Yet common prosperity may be leaving out a crucial area of disparity, one which often falls under the radar but will have tremendous consequences for China’s economic future: the rural-urban education gap.

In an excellent and highly readable recent book, Invisible China: How the Urban-Rural Divide Threatens China’s Rise, Stanford professor Scott Rozelle and REAP researcher Natalie Hell draw on decades of fieldwork in rural China, an “invisible” space often left out of discourses about China’s growth, to shed light on the unfolding human capital crisis.

The book begins with an observation: for years, visitors to rural China would have been hard-pressed to find a working-age man who had not left for the city. Yet starting in 2016, the authors began to see a distinct turnaround: villages were beginning to fill with them. The trend is clear: low-skill manufacturing jobs that made up the backbone of Chinese growth for decades are disappearing, as wages rise and factories move abroad — and they’re not coming back. Yet while Chinese leaders have their sights set on a high-income economy, they will find that China lacks a labor force with the skills to take on high-skill work.

A new factory worker can be taught their job in minutes and reach maximum productivity in three days. In an advanced economy, workers need to be creative, work with new technologies, and most crucially, know how to learn. These are things only a high-quality education can give them.

Yet according to the book, in 2015, 70% of working-age Chinese have not finished high school, meaning it has education levels lower than any other middle-income country, and even worse than some poor ones. With such a limited education, their ability to learn is low, and most will be difficult, likely impossible to retrain.

This gets at a key argument of the book: China is in danger of falling into the middle-income trap, as an estimated two to three hundred million workers are projected to become structurally unemployable in the next few decades due to insufficient education.

But how can this be? Any visitor looking at the glittering skylines of Shanghai or Shenzhen will find it hard to doubt the country’s growth potential and innovation. China is already world-leading in some technological sectors, and its students are often seen as among the most diligent and high-achieving in the world.

But as the authors point out, even if China can stake its future on the brilliance of a small urban elite, high structural unemployment and mass disillusionment with future prospects will have devastating effects on social and political stability.

Even bigger challenges lie ahead. While there have been big improvements in expanding education attainment, with high school attainment for Chinese children reaching 80% by 2015, it will take time to undo decades of underinvestment. Importantly, the authors argue that the small group of economies that have succeeded in “graduating” to high-income status have one thing in common: they invested in high-quality education for all, long before it was needed.

A rural crisis

Rural and urban China have often been described as two countries existing in one. As the masses of migrant workers leave for the cities, the restrictive hùkǒu 户口 (household registration) system bars their children from local public schools, causing them to be left behind to enroll in rural schools or low-quality and costly urban private schools for migrant children.

A 2014 study in central China found that rural primary school students were more than two grades behind their urban counterparts in math. Many do not make it to high school, dropping out to take low-skilled jobs in the city. Much of this gap has to do with underlying factors that building more schools will not solve. This crisis is compounded by the demographic squeeze: about two-thirds of Chinese children — the bulk of the future workforce — is growing up with rural hukou.

What Rozelle and Hell found in their fieldwork is troubling. Rural children suffer from invisible health issues that have a devastating effect on their ability to learn. It is estimated that about 25% suffer from anemia (a lack of iron), while 40% of rural children in southern China have intestinal worm infestation. The cumulative effect is long-term fatigue, poor attention levels, and impaired cognitive development.

The problems start even sooner. According to the book, malnutrition and poor parenting practices are causing an estimated 50% of rural infants to be cognitively delayed and unlikely to reach an IQ of 90 in adulthood — in a normal population, only 16% fall below this threshold.

Some of these problems are relatively simple to fix. The authors’ research team found that providing multivitamins and deworming tablets did wonders for improving rural children’s test scores. Yet addressing the crisis will mean taking on more deep-rooted shortcomings in education policymaking and a developmental strategy that has long treated rural China as largely invisible.

The recent drive for common prosperity includes a commitment to boosting vocational education, but this has already been tried before. In 2002, Beijing embarked on a rapid expansion of rural vocational high schools aimed at offering an alternative to academic high school and help prepare China for the next stage of development. In reality, the authors found that students in these schools learned next to nothing, and dropout rates ran as high as 60% in some areas. Instead of the general academic skills they need to succeed in a future knowledge-based economy, rural students are being taught vocational skills for jobs that won’t stick around.

The authors argue that China’s leaders need to place a priority on improving rural children’s health and giving them a high-quality education on par with their urban counterparts. Doing so, the book emphasizes, would ultimately be to the benefit of both China and the world.