'China's Engineer Dividend Is Paying Off Big Time'

An anonymous reader shares a Bloomberg column: Worries over China's '3D' problem -- that deflation, debt and demographics are structurally hampering growth -- are melting away. Instead, investors are talking about how the world's second-largest economy can take on the US and challenge its technological dominance. There is the prevailing sense that China's 'engineer dividend' is finally paying off. Between 2000 and 2020, the number of engineers has ballooned from 5.2 million to 17.7 million, according to the State Council. That reservoir can help the nation move up the production possibility frontier, the thinking goes.

In a way, DeepSeek shouldn't have come as a surprise. Size matters. A bigger talent pool alone gives China a better chance to disrupt. In 2022, 47% of the world's top 20th percentile AI researchers finished their undergraduate studies in China, well above the 18% share from the US, according to data from the Paulson Institute's in-house think tank, MacroPolo. Last year, the Asian nation ranked third in the number of innovation indicators compiled by the World Intellectual Property Organization, after Singapore and the US. What this also means is that innovative breakthroughs can pop out of nowhere.

More importantly, China's got the cost advantage. Those under the age of 30 account for 44% of the total engineering pool, versus 20% in the US, according to data compiled by Kaiyuan Securities. As a result, compensation for researchers is only about one-eighth of that in the US. Credit must be given to President Xi Jinping for his focus on higher education as he seeks to upgrade China's value chain. These days, roughly 40% of high-school graduates go to universities, versus 10% in 2000. Meanwhile, engineering is one of the most popular majors for post-graduate studies. It's a welcome reprieve for a government that has been struggling with a shrinking population.

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