SHANGHAI: A shortage of well-trained graduates could hinder growth of the Chinese economy and prevent it from developing more sophisticated industries, according to a report by consultants McKinsey.
A lack of practical skills and poor English-speaking levels will make it hard for China to develop service-based industries such as the sort of information technology (IT) outsourcing that India has specialised in over the past decade, it says.
The study underlines the difficulties China faces trying to shift from an economy dominated by manufacturing into services and research-based industries, in spite of the many graduates produced every year.
McKinsey says multinationals will have an increasingly hard time recruiting good staff in China when growing numbers of foreign companies are expanding operations there.
Andrew Grant, director in McKinsey's Shanghai office and one of the report's authors, said: "It is a paradox of shortage among plenty. Few of China's vast numbers of graduates are capable of working successfully in the services-export sector."
The report is based on interviews with 83 human-resources executives who concluded that less than 10 per cent of graduates in China have the skills to work for a foreign company, compared with 25 per cent in India.
China will produce 3.1m university graduates this year compared with 1.3m in the US. But the report said the type of education many Chinese students received did not give them the practical and team-work skills global companies require.
"The universities have a theoretical, text-book, fact-based, learn-from-the-master approach," Mr Grant said. English teaching also had insufficient emphasis on conversational skills.
According to McKinsey, China produces about 600,000 engineers every year, nine times as many as the US. However, of the pool of 1.6m young engineers, only about 160,000 have the practical and language skills to work for a multinational, similar to the number available in the UK.
Not only are there fewer graduates available to multinationals than many companies realise, but they face fierce competition for them from local companies, given the expansion of the Chinese economy.
In a decade China will need 75,000 managers with some form of global experience, the study said. It now has about 5,000 such people.
Mr Grant said China had to improve the "connective tissue" between universities and industry so that graduates were taught the skills companies required. China could benefit from expatriates who have worked and studied in the US or Europe returning home. "The Chinese diaspora has the potential to be the most influential in the world."
FT Syndication Service