3.28.2022
Last Week
Invisible China
By Scott Rozelle and Natalie Hell
China's economic growth over the past few decades has been the envy of the world. However, the country also faces serious demographic challenges in the coming decades, among which include a skewed gender ratio, declining birthrate, and lack of immigration. Although China may one day have the largest economy in the world—which it may already have—it is possible that the well-being of the average Chinese citizen may soon peak. The end of Chinese economic growth, which is viewed as the fundamental contract between the party and the people, will have wide-ranging consequences on how the next few decades play out for not only China, but the entire human race.
On top of these worrying demographics, Rozelle and Hell add another: with its current trajectory, China is likely to succumb to a "middle-income trap" that may leave its economy permanently crippled. As part of the Rural Education Action Program, the authors and their associates have tracked over 500,000 people in the country since the 1980s. Based on their findings, they believe that China may ultimately be undone by a general lack of human capital as the country transitions from manufacturing to a skilled workforce.
The Middle Kingdom
The middle-income trap facing China has historical precedent. In examining the progress of countries since the 1960s, it has been found that few middle-income economies are able to grow into rich ones. With globalization, middle-income countries are unable to match neither the low prices of low-income ones nor the technological might of wealthy ones. The examples of Brazil, Turkey, and Mexico all offer cautionary tales—though all were at one point poised to become wealthy developed economies, they eventually fell suspect to stagnation, crime, and cronyism. Increased costs of welfare and policing deepened the cycle, diverting funds from education and technological development. At the same time, China's neighbors in Taiwan, Japan, and South Korea were all able to escape. The trick, according to the authors, was a high education rate that facilitated a transition from a blue-collar workforce to a white-collar one. Unfortunately for China, the overall state of education is relatively poor—just about a third of the current labor force has a high school education. With automation looming and manufacturing jobs shifting towards low-income economies, the unskilled labor pool in China is already beginning to feel the pain of unemployment. If left unaddressed, the "Chinese dream" may never become reality.
Country Driving
If the key to overcoming the middle-income trap is education, then China might be an exception—the sheer size of the population means that even a relatively small percentage of university graduates translates into a large raw number of them. But even if one might expect the educated to help the uneducated, the resulting socioeconomic divide may prove to be dangerous for the stability of the nation.
In examining educational inequality, the primary divide is not by wealth but rather by location. Though the majority of China's population is now urban, the hukou system of household registration prevents many rural migrants from obtaining the same benefits as urban natives. Among developing countries, China is exceptional in that it is the only one where the urban-rural divide is codified by law. For many migrant families, the only options for education are to leave their children in the countryside or to send them to lower-quality private schools in the city. The problem is exacerbated by higher birth rates in the countryside, which translated to three quarters of children being born of rural hukou in 2015.
For children left in the countryside, the conditions are vastly worse than in the city. It is among this population that the authors identify several "invisible" problems that have impeded development and education, producing an uneducated class that may present serious issues in the future, as they cannot be employed in the upcoming technology and services sectors that are anticipated to drive future growth.
The issues that the authors found in the countryside stand in stark contrast to the impressive progress seen in Chinese cities. Although rural schools are receiving better funding now, the problems that the authors identify focus on external factors. Traditional beliefs and folk knowledge have resulted in a third of sixth graders with uncorrected myopia, and a lack of nutritional knowledge has led to a quarter of children with iron-deficiency anemia. Rates of parasitic worm infection exceeding 40% have been found in several provinces. Combined, the authors estimate that 60% of elementary school children are afflicted by sicknesses that seriously impair cognitive function.
All three invisible issues have persisted not because of concerns over expense. On the contrary, they remain because villagers lack or reject the right information needed to treat them.
Glasses hurt children’s eyes,” they tell us. “Not wearing glasses make the eyes tougher, and they get better on their own.” Of course none of this is true. Instead of eyeglasses, most rural families favor a Chinese-developed practice of “eye exercises” popular since the 1950s. Every day in school, children are required to massage their temples and the muscles around their eyes to ward off vision problems. Researchers have shown conclusively that these eye exercises are clinically worthless. They do nothing to help students, and they distract from the solutions that actually work.
The folk wisdom about intestinal worms is also harmful to children’s health. When you ask adults in rural Guizhou why they don’t deworm their children, they frequently state outright that “worms are not bad for you.” Some even say something like “You need them to digest your food.” In a recent project, my team worked with local doctors to deworm children. We gave each child two high-quality, super-safe deworming tablets with simple instructions: “Take these two tablets before you go to bed tonight.” In no small number of our households, the caregiver had the child take one pill and throw the other away. Why? “Too many worms is not good, but everyone needs some of them,” they said. But if the deworming is not completed, the worms will almost immediately reproduce again in the child’s intestines, and the effort is wasted. Thus myths are preventing children from getting healthy.
Beyond immediate issues with physical health, the authors also found alarming practices in early childcare. Whereas mental stimulation is regarded as a basic routine for raising a child, Rozelle and Hell saw that rural children were often left alone or ignored while their caretakers finished chores. The practice was not a case of active neglect but rather the absence of fundamental knowledge. Interventions where the researchers went in and educated the villagers resulted in cognitive improvements translating to an increase of five to seven IQ points in adulthood. Despite these aids, it is estimated that most children in rural parts are so set back that they will never reach an IQ above ninety.
In rural China, babies are systematically missing out on the mental stimulation they need. When we asked rural families if they ever talked to their babies, we were met with blank looks or bemused smiles. “Why would I talk to my baby?” one young mother responded, giggling into her hand. “She can’t talk back!
The lack of good educational infrastructure pervades the entire education journey. Based on primary reports, the authors find that many vocational high schools have completely failed in their missions. In contrast to the typical perception of China as having a highly centralized control structure, the social services for health and education are highly decentralized. Rozelle and Hell argue that this lack of order fails to align the incentives for quality education properly—whereas the costs of schooling are borne by rural administrations, the benefits of education are realized nationally because more educated students are likely to migrate. Along with a political focus on short-term economic growth, the hukou system and decentralization of vital social services are the main causes of the human capital crisis in China.
The results showed that on average students in vocational high school are learning nothing. Across all schools, my team found that almost all students made no progress in math over the course of a year of vocational high school. In particular, 91 percent scored the same or worse after an additional year of schooling. Even in vocational skills—the official priority for these schools—students were not learning much. Students in the basic computing major were not learning anything about computers. No programming, no repair skills, not even how to use basic application packages like Word or Excel.
Crossing the Chasm
For decades, China has defied expert predictions of its demise. Although the urban-rural divide poses an enormous challenge, it is not completely intractable. Basic issues such as nutrition, eyesight, and infection are solvable with careful policies. Addressing cultural issues may prove harder but are not as difficult given the reach and scope of the government. However, the authors believe that even a best-case scenario involving immediate government action will not shift the education rate to a comfortable range.
Still, even in the best-case scenario, owing to China’s very low starting point, it will likely be 2035 before China’s labor force reaches an average high school attainment of even 42 percent—and remember, no country has avoided the middle-income trap with high school attainment below 50 percent. Thus it’s still likely, even at best, that growth rates will fall and much of China’s population will struggle to find formal employment for many years to come. Even if everything works out as well as possible, economic stagnation and the middle-income trap cannot be ruled out.
With an uneducated working force of 300 million people liable to become unemployed, China has a tricky problem to solve. Combined with a lopsided population pyramid and a skewed birthrate, it is not unlikely that crime and social unrest may increase to the point of becoming genuine threats. Even if a welfare system ended up supporting the uneducated, it would hardly be a solution but may intensify existing social divides. Without a job, workers will be deprived of a certain sense of dignity and responsibility, which may end up making things worse.
Whereas it's easy to find fault with the Chinese political system, it is more difficult to criticize the long-term progress that the country has set itself up for. Today, Chinese technology companies are increasingly relevant, Chinese universities are producing top-tier research, and Chinese students account for the majority of many foreign student populations. However, despite the view of the top, the gap at the bottom is undeniable. No country has escaped the middle-income trap with a high school graduation rate of less than 50%, but China's rate as reported by the authors is around 30%. The fact that over half of rural children suffer from severe cognitive impairments makes the issue an actual humanitarian crisis, and it will be interesting to see how the government decides to resolve it. Even if the party's best efforts go through, a sizable uneducated population will remain and pose an issue for the coming generation. Given China's sheer size, it's possible that it could prove an exception to the middle-income rule because it may be able to sustain a relatively self-sufficient mixed-income economy.
For a relatively technical book, Invisible China is written pretty clearly. The issue that the authors highlight is a worrying thing to consider. Although some important details, such as the hukou system, are not discussed in as much depth as I had hoped, the authors provide a well-reasoned take on a side of China that deserves more attention.
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