Microsoft Word EcRefChina Oct06. doc

A. Education and Training 
While most schools in China today are government operated, many schools are still 
affiliated with a firm. There is also a considerable number of schools operated by other 
non-government organizations or by private individuals through leasing arrangements 
(Chow and Shen, 2006). The emerging diversity of providers of education also seems to 
have increased the diversity of content and teaching methods in the country (Hannum, 
1999). Indeed, this diversity may be regarded as quite consistent with China’s generally 
experimental approach to economic and social reforms.
Before as well as after the initiation of the economic reforms, education policy in China 
has given priority to “Two Basics”: universal compulsory education and the eradication of 

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illiteracy among youth and adults. However, there are serious problems in the education 
system in China, in particular in poor areas. Observers seem to agree that the most 
pressing tasks are (i) to reduce the financial burden of schooling for low-income parents; 
(ii) to increase the number of students in secondary and tertiary education; and (iii) to 
improve the quality of education.
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These problems can certainly not be solved without a 
substantial increase in the GDP share of government spending on education. Indeed, the 
new Five-Year Plan presented in early 2006 explicitly states that government spending on 
education should be raised from 3 (in fact 2.7) to 4 percent of GDP. Of course, such 
expansion should not be seen merely as an element of 
social 
policies since it may also be 
justified with reference to efficiency concerns. 
When considering reform and expansion of the education system in China, a number of 
well-known choices have to be made, with some unavoidable trade-offs. One is to 
determine the number of years students should follow a single track and when (and how) 
students should be separated according to interest and ability (dual or multiple tracks). 
There is much international experience to draw on in this case. For instance, there is a 
rather general agreement among specialists in education that an early separation of 
schoolchildren (as, for instance, in Germany) into different tracks (in some countries 
already after the fourth grade) disfavors children from homes without an academic 
background. It is also likely that such a system will not provide theoretical skills (such as 
in languages and mathematics) to a large enough fraction of the population (from an 
efficiency point of view). The flexibility of the allocation of labor in response to future 
(unknown today) changing circumstances may also be weakened by early separation.
Other countries have instead chosen a single-track system that extends through the ninth 
grade or even further, thereby emphasizing theoretical training that prepares a large share 
of a cohort of youngsters (one-third or even half) for university studies. While problems 
associated with early separation are then avoided, the highly heterogeneous classes of 
students in the upper grades in the secondary school system have made it necessary to 
limit intellectual ambitions in theoretical education. At the same time, students who are 
more fit, and have more interest, for vocational (rather than academic) training often have 
difficulties following such highly theoretical education, with a large drop-out rate as a 
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See Ministry of Education (2004) for a brief description of various quantitative aspects of China’s 
education system. 

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result. One attempted remedy has been to teach vocational skills in schools. However, this 
has usually not been as successful as apprenticeship arrangements in firms combined with 
continued part-time schooling.
Another important choice is between basic abilities (in reading, writing and mathematics) 
and broader and vaguer “social competence” (including preparation for citizenship and 
leisure activities). Several countries that have chosen the latter approach now have serious 
problems with deficiencies in basic abilities among students as compared to countries that 
have emphasized the other approach (such as Finland). Again, China is well advised to 
draw on these experiences. It is from this perspective interesting to notice that today’s rich 
countries emphasized “basic skills” when they were poor 50 or 100 years back – largely 
for the purpose of boosting the ability of broad population groups in reading, writing and 
counting. 
It is probably a good idea to avoid extreme solutions on both issues – concerning the 
separation of students as well as and the choice between basic skills and more general 
orientation – when China is confronted with this unavoidable trade-off. 
Vocational training
in China is divided among SOEs, training centers affiliated with such 
firms, and schools affiliated with the Ministry of Education (MOE) and, to some extent, 
also with the Ministry of Labor and Social Security (MOLSS).
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However, there seem to 
be both serious deficiencies and huge variations in quality also in this system.
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Indeed, 
in many cases, these deficiencies may explain why many individuals have recently chosen 
to finance vocational training themselves.
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When considering reforms in vocational 
training, China is well advised to take inspiration from the German experience with 
apprenticeship work at firms combined with general education at school (i.e., two days a 
week in school and three on the job, or vice versa). This could be accomplished without 
very early separation of students into a two-track system. 
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See, for instance, Fleisher and Wang (2001) and Li (2004). There seem to have been nearly 11 
million participants in various training centers and training programs. According to Li, 1.9 million 
people were enrolled in schools connected with firms by the end of 2003. 
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For instance, Li (2004) reports many examples of poor supervision, considerable disorder and inefficiencies, 
as well as large mismatches between the demand for skills and the availability of training opportunities for 
different types of skills. The number of vocational schools has also fallen gradually – by at least 50 percent 
since the early 1990s.
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In a sample used by Li (2004), about a third of the individuals engaged in vocational training