BEIJING: China’s skill gap could derail its economic upgrade, Long Guoqiang, a member of a Cabinet-level think tank, said.

Filling the gap is strategically important for China as it tries to leave behind its role as the “world’s

factory” and move up the global value chain, said Long, director-general of the general office of the Development Research Centre of the State Council.

Long’s comments came amid concerns that China is rapidly losing its comparative advantages – such as being a source of low-cost labour – that drove the nation to be the world’s second-largest economy and biggest merchandise trader.

The advantages have faded. Long cited an international study that showed that 20 years ago, Thailand’s average wage was 2.3 times that of China’s. By 2012, the situation had reversed. Thailand’s average wage was just 70 per cent of China’s.

It’s good for workers. Millions of manufacturers in China have seen their international competitiveness erode. They have relocated factories to sites with cheaper costs or produced less labour-intensive goods as a result.

China’s problem, Long said, is deepening globalization. It’s increasingly difficult for companies to switch output, as Japanese firms did 40

years ago, from labour-intensive industries such as clothing or toy-making, into capital-intensive, more value-added sectors such as chemicals or cars.

Different value chains in various industries have been established and are based on cross-country collaboration, Long said.

“A firm should focus on enhancing a specific international value chain, moving from manufacturing, usually with the lowest added-value, to research and development, or retail, marketing and branding,” Long said. “And to support that task, China needs a qualified labour force.”

The realities are grim. A survey by the National Bureau of Statistics showed that among the 269 million migrant workers in China - people who leave the village, town or city they are registered in to seek a job – only 32.7 per cent have received training in the workplace.

A countrywide manufacturing competitiveness study by Deloitte Touche Tohmatsu Ltd showed that in the eyes of CEOs and senior leaders around the world, China ranked first in manufacturing competitiveness. The country lagged in labour productivity, only scoring 14.2, while the United States scored 68.2 and Germany 43.3.

Demand still outstrips supply for low-skilled labour, Long said. It leads people to frequently change jobs. They seldom have time to hone skills and have little incentive to accept employers’ offers of vocational training, Long said.

The Education Ministry plans to convert half of its higher-education institutions, about 600, to vocational education schools.—Asia News Network

Published in Dawn, May 18th, 2014