The Banking Executive Magazine - March 2021

Chinese Education System China’s leaders have radically changed their views on intervention. Now, the conventional wisdom is that the country owes its progress – and, indeed, its emerging global dominance – in some high-tech sec- tors to the state’s guiding hand. The true driver of China’s success, however, is its high savings rate – nearly 40% of GDP, or more than twice the rate in the US and Europe. This gives China massive resources for investment in establishing the fundamentals for technological lead- ership. Notably, the country has made enormous investments in im- proving both the quantity and quality of education. Regarding secondary education, China has already fully caught up with the West in attendance. And testing by the OECD’s Program for International Student Assessment suggests that Chinese secondary- school students are far better at solv- ing problems than their American or European peers. Moreover, tertiary education – the real key to technological leadership – has exploded in China over the last two decades. According to the US National Science Foundation, China now produces more than twice as many engineers, and more peer-re- viewed science and engineering publications, than the US. Similarly, it has surpassed the European Union in spending on research and devel- opment, and on current trends, it should catch up with the US over the next decade (some think it already has). The US is haunted by the specter of a technologically dominant China – and keen to ensure it never material- izes. And yet, given China’s funda- mentals, there is little the US could do to hamper, let alone arrest, its progress. Huawei is just one example of a firm that has capitalized on China’s pool of millions of engineers to develop new products. Even if the US manages to destroy Huawei, many other Chinese high-tech com- panies are destined to emerge, driven by the same talent. The so-called dual-circulation strat- egy that is set to shape China’s next Five-Year Plan is perfectly in line with the aforementioned fundamen- tals. As China’s economy grows and diversifies, it is naturally becoming less reliant on exports, and its newly minted engineers will master a grow- ing number of technologies. In other words, the government’s plans for the coming years would probably materialize, even without state inter- vention. By contrast, the US strategy – which begins with an economic “decou- pling” from China – has little chance of success. To be sure, the decou- pling itself might be feasible. But it would also be counterproductive. the BANKING EXECUTIVE 56 ISSUE 147 MARCH 2021