If China is to achieve its aim to become a global leader in technology and innovation by 2035, it will need plenty of people with skills in these areas. 

One problem: the country is facing what some describe as a chronic talent crunch.

The idea that China is experiencing any such deficit might seem strange, given its enormous population of 1.4 billion people. The country’s top leaders have made attracting and nurturing talent among the country’s top priorities for decades, hand-in-hand with its ambition to become a leader in science and technology.

“The country’s overall competitiveness [stems from] the competitiveness of its skilled personnel…National development depends on talent, and national rejuvenation depends on talent,” Xi Jinping reportedly said during a two-day conference in September, adding that China should strive to become a global human resources powerhouse.

Despite these priorities, China is suffering from a shortage of high-skilled labor that seems to be worsening, especially in the areas of science and technology. The issue, experts say, is not so much China’s quantity of human capital — it’s the quality. 

“Even though the population in China is very large, the number of candidates who bring the necessary mix out of hard skills as well as soft skills is small,” says Miriam Wickertsheim, general manager at Direct HR Group, one of the top recruitment firms in China. For companies large and small, recruiting and retaining candidates that have both sets of skills is “an absolute nightmare,” says Wickertsheim.

The talent crunch is particularly evident in the semiconductor industry, a sector the Chinese government has prioritized for development as it strives to become self-reliant in manufacturing chips. China’s semiconductor talent shortage doubled to 300,000 from 150,000 between 2014 and 2019, according to a report released this year by the China Institute for Educational Finance Research at Peking University. China’s own Ministry of Industry and Information Technology has identified a lack of required skills among job candidates in other industries such as AI and cybersecurity.

Such figures suggest China is at risk of falling short of achieving one of its key long-term policy objectives. 

“It’s impossible to separate China’s goals for innovation from the ability to develop sufficient talent to implement this vision,” says Jude Blanchette, the Freeman Chair in China Studies at the Center for Strategic and International Studies (CSIS). “Almost every goal China has among the spectrum of innovation outcomes — whether this is investments in a hard technology and deep technology or the practical implementation of them — requires a sufficiently talented and sufficiently skilled workforce.”

It’s impossible to separate China’s goals for innovation from the ability to develop sufficient talent to implement this vision.

Jude Blanchette, the Center for Strategic and International Studies

Developing enough people with the requisite skills alone in high-tech industries can take years, if not a decade. But employers also face challenges in finding enough job candidates with good communication and critical thinking skills, as well as a global perspective and English language fluency. 

Job seekers that do check all these boxes have so many potential employers fighting for them that it can become hard to even get them on a phone to talk about offers without them hanging up, says Wickertsheim. The fierce competition for talent is driving salary increases and premature promotions to encourage qualified candidates to stay, and job-hopping has become common.

“An employee, if he or she is just a little bit unhappy, can snap their fingers and they can have very good offers with a 25 percent salary hike or more,” Wickertsheim says. 

Since its economic reform and opening era began in 1978, China has worked to close its talent gap, in part by encouraging its people to study and hone their skills abroad. In the past, a resulting issue has been getting scientists and others back once they found success overseas. 

To address this, the Communist Party has set up an estimated 200 talent-recruitment programs aimed at both repatriating those who left and to attract foreign experts, according to a report released last year by the Australian Strategic Policy Institute. It further estimates that China has 600 stations overseas devoted to collecting information on scientists and talent recruitment. 

“More and more people are going back, there is no doubt about that,” says Denis Simon, a professor of China business and technology at Duke University’s Fuqua School of Business. “China became the land of opportunity. We started to see a steady increase in the number of people who wanted to go back. If you’re young, energetic and entrepreneurial and you do have some out-of-the-box thinking that you learned in the West, you can go back and be successful.”

Access to foreign talent and expertise is important to China because it can help the country rapidly acquire cutting-edge knowledge, suggests David Zweig, professor emeritus at the Hong Kong University of Science and Technology.

“They are competing against the foreigners so they really want to know what the foreigners are doing,” Zweig says. “If you’re a late modernizer, you want to leap stages. You don’t want to start creating something from the beginning.” 

Still, China has lacked success in recruiting and retaining foreign experts, as well as international students. Immigrants account for just 1 percent of China’s population, largely due to its restrictive immigration policies. By comparison, the U.S.’s immigrant population makes up more than 14 percent of its total. Although China relaxed its immigration rules somewhat in 2019, travel restrictions put in place during the pandemic have so far negated any positive impact. 

Some experts say Communist Party controls on discourse inside China hinder its talent development objectives. 

“The challenge they have is they have limits on intellectual inquiry inside China, which are set by political constraints. I think it provides a pretty strong disincentive for a lot of leading thinkers, especially at its very high levels of achievement,” says Ryan Hass, a senior fellow at Brookings and a former National Security Council director for China, Taiwan and Mongolia. 

Even so, China has found some apparent success in improving its domestic education system. The country has been graduating more doctorate students annually in science, technology, engineering and mathematics (STEM) subjects than the U.S. since the mid-2000s, and is on track to graduate nearly twice as many each year by 2025, according to a recent study by the Center for Security and Emerging Technology (CSET) at Georgetown. The study’s findings also suggest that the quality of STEM education in China has been improving.

Such improvements in high-level education are not yet reaching enough of the population, experts say. Only 30 percent of China’s labor force has been to high school, according to figures cited by Scott Rozelle, a development economist at Stanford University and co-author of Invisible China: How the Urban-Rural Divide Threatens China’s Rise — well below the level for other middle-income countries. 

Rozelle argues that China needs to draw more on its huge rural population, now equivalent to roughly one-ninth of the world’s population, providing people with better education and nutrition. 

“There are lots of untapped skills out there,” Rozelle says. “You probably will get almost as many geniuses and quasi-genius out of the rural areas as you have in the urban area now.”

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