China’s new 5-year plan stresses education, consumers and inequality

Shanghai, China

According to a new report from US-based business membership and research association The Conference Board, China’s twelfth five-year plan, encompassing 2011-2015, signals a new focus in the country’s development on “human factors” — from improving education to boosting consumer spending and reducing inequality.

The report, called Reading the Tea Leaves: The Impact of China’s Twelfth Five-Year Plan on Human Capital Challenges investigates the latest FYP, finding strategic planning and program implementation lessons for multinational corporations preparing for the Chinese economy and Chinese workforce of the future.

According to the report, China appears committed to maintaining its strict family-planning policies, keeping population growth well below world and Asiaaverages. Executives must thus plan for a rapidly aging population, with a particular reduction in the number of young workforce entrants in low-skilled basic manufacturing and basic service jobs.

Stable employment conditions remain a top priority to China’s leaders, the report said. To address predicted labor market needs, many Twelfth FYP programmes focus on creating urban industry and service jobs and shifting workers out of agricultural jobs.

Companies will need to carefully monitor short- and medium-term employment trends and urban-rural migration patterns to draw reasonable conclusions on labor supply, especially given the lack of good quality data in this area.

Increased education spending is one of the centerpieces of the Twelfth FYP. A deeper issue, however, may be talent “mismatch”: a mass of workplace entrants lacking many of the skills — in critical thinking, creativity and innovation, collaboration and teamwork, and professionalism — to match their credentials.

To this end, the Twelfth FYP prescribes aggressive teacher-education targets. But international employers should continue to take a more direct role in partnering with local educational institutions to shape curricula toward real-world business needs.

The Twelfth FYP proposes a considerable overhaul to China’s byzantine and often inadequate social safety net. Multinationals should expect mandatory costs to rise for pensions, healthcare, and social insurance programs; they may also consider proactively offering private plans as a way of attracting top local talent.

As a corollary of the emphasis on wages and social welfare programs, The Twelfth FYP calls for expanding the coverage of signed labor contracts and collective bargaining agreements. Human capital practitioners should begin preparing for stronger oversight of hiring, firing, compensation, and arbitration processes — with a potential of increased lawsuits.

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