Don’t get me wrong. Hobbits are extremely peaceful creatures. How China can make it to $25,000 on GDP per capita, effectively half of the Western standard, is the big question to answer for the Chinese Communist Party when it comes to the future of the Chinese economy. Today, even $12,500 looks like a lofty Chinese dream for the Chinese people thanks to the great and grand leadership of the Chinese government. There are a few possibilities, but I am focusing on the big two now: land privatization and vocational training.
Land privatization is important for traditional Chinese who seek the prosperity of their family lines, who are actually the majority of the Chinese. Traditional Chinese economy used to be propelled with a diverse and highly creative community of small and medium family businesses that normally would last more than a hundred years. Without land ownership and great visions to build for perpetual prosperity, Chinese people lack the instrument to grow and thrive in today’s global economy. Most Chinese people are very hardworking only when they are working for themselves. In fact, it is only part of human nature to do so. Who of us would keep our work in mind on a 24/7 basis until we actually own our business? This is why even in a corporate world, business ownership is vital to productivity. Employees need to feel that they own the business. It does seem that the Chinese Communist Party intends to keep land ownership to itself as a financial instrument. Meanwhile, the party does have to find a way to assure Chinese people that they will not take it back again through massacres, if they do wish to privatize their lands again. Of course, a quota must be set to prevent land and labor exploitation, which can be achieved through decades of massive land acquisitions, a well-known traditional technique used by those ancient evil landlords.
Vocational training is critical to improve the overall living standard of the Chinese community. It is not that China does not have the market, but that China does not have enough schools to train highly skilled workers. The recent pilot shortage is a good example. By founding massive vocational schools, the government ensures that the less academic Chinese high schoolers have the option to choose a different career path that still pays very well. By ensuring that those Chinese students who enter universities do so out of their passion for academic pursuits, the government improves the quality of student pools because they will tend to be natural talents for academia. Other than vocational schools, medical schools and engineering schools that are part of traditional academic disciplines need to be expanded. As the Chinese population is aging, more family doctors will be needed, who do not have to be as specialized. To preserve the value of their traditional PhD degrees, which is not too interesting outside of China anyway, the Chinese government may be a little more creative with alternative accredited credentials. This is largely a lessor concern, because most Chinese understand that a PhD in medicine is not the same as a PhD in philosophy. Besides, the rank of a school matters a lot, too. A much higher number of highly skilled workers will translate to more affordable services. For example, as the number of family doctors increases, the cost of family medical expenses will also be lowered to improve the living standard in China not directly measurable through GDP per capita alone. Therefore, nominal GDP per capita will improve very much due to much higher salaries while GDP per capita after PPP will be much higher all the more due to the prevalence of affordable services.
It seems that the Chinese government is counting on higher manufacturing capacity to improve the Chinese economy again, which is a known formula. However, if the Chinese Communist Party still does not understand the Chinese labor market and their own people, they will even have a hard time pushing their economy to $10,000 on GDP per capita, which is unimaginably low by Western standards. What a shame!