McKinsey view of China’s future

McKinsey is forecasting a worsening shortage of university educated and vocationally trained people in China by 2020.

According to new McKinsey research, at the lower end of the labor market, in 2020 there will be 23 million more people than jobs suited for their limited education (primary school or less). At the upper end, we project that Chinese employers will demand 142 million more high-skilled workers—those with university degrees or vocational training—or about 24 million more than the country will likely supply. Companies could fill this high-skilled labor gap with less-skilled workers, but this would result in productivity losses or poorer quality products and services. Other companies may leave roles unfilled, delaying the decision to grow or expand. McKinsey estimates that if China does not bridge this gap by 2020, the opportunity cost could reach some $250 billion (about 2.3 percent of GDP)—greater than the economic output of Hong Kong or Israel.

When needs are specific and proprietary, companies may be best served by doing it themselves. For example, Newport News, a ship-building company based in the state of Virginia in the United States, recruits students to its four-year Apprentice School program that teaches 19 different high-skilled trades. While they learn, students also work at the shipyard. The program breeds tremendous loyalty: 80 percent of graduates are still employed by the company ten years later, and a large percentage of senior management attended the program.

McKinsey Profiles a new generation of Chinese Consumers

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