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Years from now, when historians look back at April and May of 2010, what will stand out as the news with the biggest long-term implications? That the SEC strapped Goldman Sachs (GS) to the hot seat? Or volcanic ash disrupted flights and shipping routes around the world? Or an oil slick the size of Delaware was heading toward the Gulf Coast? Historians may very well pass over these headline-grabbing stories and instead focus on the news that China gave a $20 billion loan to Venezuela, cemented its status as the second-largest trading partner with U.S. ally Colombia, and received an increased voting share of 4.42 percent at the World Bank to become the third-largest voter after the U.S. and Japan with 15.85 percent and 6.84 percent of votes, respectively.
No matter where in the world you live or what sector you are involved in, you have to take into account China's rise. China continues to invest and buy things abroad in its drive to secure access to natural resources in places like Afghanistan and Australia and to exert power. True, China has far too many poor people, and its health care and social security systems still lag behind dozens of countries. Many analysts point to its poverty and a lack of military presence in different hemispheres ready to strike at will to argue foolishly that China is in fact a weak nation concerned with the potential collapse of its political and economic systems.
These analysts miss the main point. When China replaced the U.S. as Japan's and Brazil's largest trading partner last year (it was already the largest trading partner of Africa and the Middle East), its ability to help countries recover from the financial crisis gave it more power than the economically struggling U.S., albeit power of a different type. China's rise necessitates the need to redefine what a superpower is. Being a superpower is no longer about the ability to drop enough bombs to obliterate the entire earth. Economic power and the ability to launch chaos via cyber and financial warfare should define superpower status.
What is important is what kind of a superpower China will develop into. While it is clear from the Pew Center's data that 86% of Chinese people support the government, it is equally clear that China does not do as good a job with the rest of the world. The recent misguided attacks on it by people like New York Times columnist Paul Krugman and Senator Charles Schumer (D-N.Y.) about currency policy, Beijing's disagreement with Google (GOOG), and the criticisms over the arrest of Rio Tinto's (RTP) former China head Stern Hu show that China needs to get better at soft power. While the Confucius Institute (an organization under the Office of Chinese Language Council International that promotes Chinese language and culture by jointly funding programs with host institutions) and dizzying Chinese acrobatic tours show promise, more needs to be done to promote the China brand internationally.
China cannot just focus on securing access to commodities to build long-term strength. For it to emerge as a vibrant, long-term superpower and not just one made strong because it did not succumb to the financial crisis that crippled other major economies, it needs to go beyond brand building and address deficiencies in its education system.
Despite the commonly held belief that China continues to graduate top-notch engineers, the fact is that the education system is not adequately preparing its students for a global business world. Most of the top students go to the U.S. to continue their graduate studies at universities like Harvard and Stanford because it is difficult to get the training they need at home.
The proof of China's weak education system is that despite the number of college graduates increasing from 1 million per year 10 years ago to 6 million, one of the top concerns foreign businesses have in China is recruiting workers with the talent and skills to do their jobs, according to surveys that my firm, the China Market Research Group, conducts annually with hundreds of multinationals operating in China. This concern ranks higher than corruption or concerns of rising protectionism. In a country of 1.3 billion people, it should not be so hard to find talent to hire.
Too much of China's education system is based on rote memorization, large class sizes (sometimes students number in the thousands for a single class), and early direction of students into major tracks. For instance, students declare what specific major, like accounting, they will pursue when they apply to university and are often not allowed to change. How many 18-year-olds really know what academic disciplines interest them or which they excel at? At that age, I wrote on my college applications I wanted to become an anthropologist and live with tribes in the Congo for years at a time.
Instead, a more interdisciplinary, liberal-arts-style education system needs to be implemented with students being allowed to choose their majors after they enter a university and try different courses of study. Universities should also work with forward-thinking companies like Intel (INTC) and Apple (AAPL) to help devise course material that is useful for the students to help find jobs afterward.
Students themselves recognize the problem. Twenty percent of Shanghai white-collar professionals ages 24 to 28 that we interviewed said they were willing to spend 10 percent or more of their disposable income on extra training; 10 percent said one-fifth of their income. China has taken big steps economically to develop its position as a global power, but to truly become and remain a superpower it will need to work on how it presents itself to the outside world and, perhaps more important, needs to rework its education system to foster the abilities of domestic workers to create a truly competitive workforce as China shifts from a manufacturing base to a center of research and development and a service-based economy.