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March 16, 2013

China is spending $250 billion per year on Education

China is making a $250 billion-a-year investment in what economists call human capital. Just as the United States helped build a white-collar middle class in the late 1940s and early 1950s by using the G.I. Bill to help educate millions of World War II veterans, the Chinese government is using large subsidies to educate tens of millions of young people as they move from farms to cities.

The aim is to change the current system, in which a tiny, highly educated elite oversees vast armies of semi-trained factory workers and rural laborers. China wants to move up the development curve by fostering a much more broadly educated public, one that more closely resembles the multifaceted labor forces of the United States and Europe.

The recently released 2013 Human Development Index from the UN has some lagging metrics for China.

China was ranked at 0.699 which is at the top of the middle ranking of the human development index.

However, the life expectency, education years and GDP PPP per capita are below the actual situation.

The UN listed China's life expectancy at birth at 73.8 years. However, the The Chinese national bureau of statistics indicated life expectancy in China was 74.84 years in 2010. China is expecting to get to 75.8 years in 2015



Also, they are using the 2005 Worldbank pricing comparison basis for PPP for per capita GDP. The 2005 study was flawed and examined prices in 12 Chinese cities (Shanghai, Beijing etc...). This will result in a 20-50% upwards adjustment when that is corrected in 1-2 years.

Meanwhile the most accurate GDP PPP calculations are the Penn World Tables 7.1. Add 15% to the 2010 per capita GDP PPP,

The corrections in life expectancy and per capita PPP GNI and the rapid increase in how many years education should be expected for children who are five years old now means that China is now at about 0.73 on the human development index (not quite to the level of Mexico) and should achieve 0.80 in about 6 years. However, it may be 8 years before the UN officially recognizes those statistics. Achieving the 0.80 level would mean that China would be recognized as very highly developed (which also means a developed country). This also assumes that PPP income comparison by the World Bank adjusts China (and India) upwards when the the 2011 ICP (International Comparison of Prices) is published.

UN Human Development combines Life Expectancy, Education and per Capita PPP GDP

Here is the 2011 and onwards human development formula.




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