Why China’s school dropouts are a cause for concern for its economy

Every day after lunch, Qu Yexiu used to potter around her house in north west China doing housework and looking after her two-year-old grandson.

Now, every day after lunch, Qu and her grandson visit the newly opened early-childhood development centre in their village of Huangchuan in the mountains of Shaanxi province, where he can play with other toddlers.

“Things are better now that we have this village centre,” said Qu, 56. She looks after her two grandchildren while their parents work and live in nearby Anhui province. The other grandchild attends a preschool.


“My grandson has other kids to play with and I can chat to the other grandparents.”

Early-childhood development centres like the one in Huangchuan may be the answer to one of China’s biggest challenges – reducing the number of children who drop out of school in rural areas.

Children in rural areas, where around half of the population lives, have far lower cognitive and social skills compared to their urban counterparts, setting them on a path of dropping out of school before they can even say their own name.

Poor education was not such a problem for previous generations of Chinese who spent their lives on the farm or in factories but it could now have far-reaching consequences.

The government wants to push the country up the value chain, so the world’s second-largest economy needs a higher-skilled labour force if it wants to transition to a higher-value economy.

“This is the biggest problem that China faces that no one knows about. This is an invisible problem,” said Scott Rozelle, co-director of the Rural Education Action Program (REAP), a research and policy organisation based at Stanford University, which partners with Chinese universities.

“China has the lowest levels of human capital [out of all the middle income countries in the world today]. China is lower than South Africa, lower than Turkey. We think that’s related to when they were babies, they didn’t develop well,” Mr Rozelle said.

China’s National Health and Family Planning Commission is working with economists like Mr Rozelle and his colleagues to provide early childhood development opportunities to babies and toddlers in rural China.

Seventy-six per cent of China’s labour force did not attend high school, based on figures from the country’s last census in 2010, according to an academic paper co-authored by the Asian Development Bank and published last year in the China Quarterly, an academic journal.

The gap between rural and urban China is also big. Only 8 per cent of rural Chinese in the labour force in 2010 had attended any high school, compared to 37 per cent of urban Chinese, according to the China Quarterly article.

The disposable income of a person living in rural China was 6,562 yuan in the first half of 2017, compared to 18,322 yuan for someone in an urban area, according to China’s statistics bureau.

Data from China’s Ministry of Education shows 94.1 per cent of students graduated from middle school and 92.5 per cent of students graduated from high school in 2015.

The Ministry of Education declined to comment immediately when asked about the differences between their statistics and those based on the 2010 census data.

One factor slowing down a toddler’s development is the absence of their parents, education experts say. Millions of rural Chinese parents migrate to cities to live full time because they can earn much more than they could by staying in their home villages.

That’s where early development centres in China could help. Under the programme, there are 50 pilot centres in villages and towns in rural China where children from six months to three years old can experience books, play and interact with other children.

REAP thinks 300,000 centres are needed across China and the most appropriate entity to head this up would be the government.

Cai Jianhua, a government official at China’s National Health and Family Planning Commission, wants the government to allocate 0.1 per cent of its GDP – 70bn yuan – to roll out these centres across the country.

Cai says the government has not made a funding commitment, but it has stepped up investment in its youngest citizens in recent years with, among other things, free health checks and immunisations for babies.

Unless China has a significant number of Chinese with “broad experiences and deep knowledge”, China’s economy will struggle to develop.

“The reality is we need smart people if we’re going to be competitive in the 21st century,” said Cai.

To be sure, there are many reasons for low numbers of students…

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US’s Foxconn subsidies stir debate

Donald Trump shakes hands with Terry Gou in July after announcing Foxconn's investmentImage copyright

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Donald Trump shakes hands with Terry Gou in July after announcing Foxconn’s investment

Wisconsin, a state located in the middle of the US on the shores of Lake Michigan, has offered $3bn (£2.3bn) in subsidies to convince Taiwanese manufacturer Foxconn to construct a new plant there.

President Donald Trump and others say the investment will help spur a US manufacturing revival. But as state legislators debate the costs of the proposal, another question looms in the background: will it work?

Foxconn, one of the largest electronics manufacturers in the world, said it expects to invest $10bn over four years in the plant.

It will make liquid crystal display panels – screens for everything from televisions to cars and healthcare equipment.

The firm said it would employ 3,000 workers initially, with the potential for up to 13,000.

Wisconsin leaders say the investment is a once-in-a-century opportunity that will jumpstart a new electronics manufacturing industry in the US.

They see a bright future well worth the $3bn in subsidies that the state is offering in exchange for hiring and spending in the state.

“It is transformational and once in a while, I think it’s worthwhile for Wisconsin to do something to take that big leap,” said Robin Vos, who leads Republicans in the Wisconsin State Assembly.

The deal got a high-profile endorsement from President Trump, who announced Foxconn’s investment last month at the White House, claiming it as a victory for his push to revive US manufacturing.

“We have companies pouring into our country. Foxconn and car companies, and so many others, they’re coming back to our country,” he said at an event this month.

But critics say Foxconn and the president have histories of making big promises that don’t pan out.

They point to Foxconn announcements in places such as Pennsylvania, India and China that have not borne fruit. And they say the subsidy proposal does not have strong enough safeguards if the firm’s investment is smaller – and less transformative – than promised.

“How much Kool-Aid do you have to drink to believe that is going to happen?” asked Gordon Hintz, a Democrat, during the debate in the Wisconsin State Assembly.

What’s the case for the subsidy?

Foxconn, which employs about one million people globally, told the BBC it was “committed to all of the projects that have been proposed… and have invested billions more to ensure that those investments are realised”.

The firm, which works with US companies such as Apple and Tesla, has cast the investment as part of a global expansion that will place it in the heart of one of the world’s major markets. It expects to use the plant to create cutting-edge manufacturing systems.

Foxconn, which considered offers from other states before picking Wisconsin, said it always worked with governments on big projects because of the infrastructure needs involved.

“If we are to make large investments, in any location, we need a government partner who is able to commit the levels of support needed to make them economically viable for our company and, in many cases, also for the many other companies whose investments are attracted by the technology manufacturing hub we establish,” the firm said in a statement.

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Foxconn does much of its manufacturing in China

The subsidy package negotiated by Wisconsin Governor Scott Walker, a Republican, has won widespread support from business groups.

Despite fierce debate, it is expected to pass in the Republican-controlled state legislature, where advocates say the deal will help reverse decades of manufacturing job losses and have broad economic impact.

Supporters say benefits are already evident, as Foxconn announces partnerships with local ginseng growers and other companies. Glass-maker Corning is expected to follow Foxconn with an investment of its own.

Daniel Gouge, vice-president of sales at Triangle Tool Corp, says he expects his company to win work from Foxconn if the proposal moves forward and cannot believe the state would hesitate with this type of investment at its door.

“This is a huge win for Wisconsin,” he said. “Everyone should be on board.”


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Bosses Pay: Plan to name and shame fat cat companies could be on way, but will it work?

Things haven’t been going terribly well for the Government, capped this week by official figures making clear that, thanks to its mishandling of Brexit, it is presiding over the slowest growing developed economy, and one of the worst performing in the world. 

The reports suggesting that next week will see the arrival of a long awaited package of corporate reforms, including measures designed to crackdown on CEO pay, need to be seen in that context. It’s an attempt to get back on the front foot. A re-launch of Theresa May’s “country that works for the many not just the few”.  

If they are correct, on the table will be a plan to name and shame companies which have suffered shareholder votes of 20 per cent or more against executive pay. They will find themselves placed on a register. There may also be a requirement upon public companies to publish pay ratios. That is, the multiple between the chief executive’s pay and that of their average UK worker.

These reforms fall a long way short of what Ms May once promised. Opposition from the City, and the Chancellor Philip Hammond, has killed off putting workers on boards (a common and uncontroversial practice in Europe) along with forcing binding votes on executive remuneration were companies to suffer votes of 20 per cent or more against their remuneration reports. Mr Hammond is the dentist who has stripped the proposals of their teeth. 

A register of pay bad boys, a sort of corporate naughty step, will be convenient for watchdogs, and to people like me, because it will gather the rogues in one place and make them more visible. 

But anyone who wanted to can create something very similar could do so now simply by monitoring AGM statements, as organisations like voting advisor Pirc do. All the information is out there. 

Being on the list might not even be that embarrassing if there are lots of other companies on it with you. 

The enforced publication of pay ratios, to be fair, some businesses already do it, has  more potential. 

The idea isn’t without its flaws. The ratio of a business like Tesco, which lots of relatively modestly paid staff, could, for example, look very much higher than, say, a company like Barclays, which has a big investment bank full of highly paid staff, even if the CEO is paid a lot less. 

However, Stefan Stern, from the High Pay Centre, made a very good point when we talked the idea through. Since it has been around, he said, the ratio has helped re-establish in the public mind a link between the CEO and the average employee. A statutory requirement to publish could reinforce that. 

Now, readers of a certain age may remember how the former British Gas boss Cedric Brown acquired the unfortunate nickname of “Cedric the Pig” when his salary was hiked by 75 per cent at the end of 1994 as the company was sacking staff. After his raise he got £475,000, a bit above £750,000 in today’s money. 

By contrast, Iain Conn, who as the CEO of Centrica is the current British Gas boss, saw his pay bumped up by nearly 40 per cent last year, which took it to £4.15m, more than five times that figure. It’s not sacking staff that has British Gas causing controversy today. It is the way it has hammered the average family by hiking their electricity bills by 12.5 per cent. Who’s the pig now?

You could find similar examples by delving into the pay reports of almost any big British business that was around then and is still with us. 

In the intervening years, CEOs have come to be seen almost as alien super beings, perhaps like Star Trek’s Vulcans. The fact that their packages are utterly illogical (captain) when set against the fact that there is no evidence that they are justified by any measure of economic or business performance seems not to matter. 

What the ratio makes clear is that CEOS, and other execs, are not supermen or women, nor anything like it. They are not a different species, and they are not Vulcans with green blood and computer like brains. They are employees. Senior employees, but employees nonetheless. 

Mr Stern thinks it’s possible that that the widespread publication, and reporting, of pay ratios could, ultimately, moderate the behaviour of pay setting remuneration committees, although it will take time. There are, however, no guarantees. 

Ultimately, it will require a certain embarrassment and shame over paying one employee 200 or more time the average employee for RemCos to act more sensibly, plus a willingness to resist the demands of big time CEOs with big egos and little in the way of a sense of shame. 

And as the former TUC…

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BA attacks Border Force for ‘dreadful’ delays

ePassport gates at Gatwick AirportImage copyright
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BA has called out Border Force over closed ePassport gates causing huge delays to travellers

British Airways has criticised Border Force over “serious inefficiencies” that have caused both citizens and visitors to endure long delays at UK airports.

The airline is concerned that only a third of the 29 electronic passport gates are open at Heathrow Terminal 5.

BA says the gates shut prematurely at 23:00 while customers are still disembarking, causing huge queues.

The Home Office has said it strongly disagrees with BA’s remarks.

Back in 2015, when the electronic gates at Terminal 5 were opened, the Home Office said that the technology would help the Border Force to process a higher number of low risk passengers “more quickly and using less resources” to reduce queuing times.

The electronic gates were meant to help border control officers to focus on “more priority work” like cracking down on people trafficking and drug smuggling.

However, since many of the gates are often closed, families returning from holidays have been facing long queues to pass through immigration, particularly late at night.

‘Insult to injury’

“It is a constant frustration to us and to our customers that after a long flight they have to stand in queues, sometimes for over an hour, just to get back into the country,” said Raghbir Pattar, British Airways’ director of Heathrow.

“And it is a dreadful welcome for visitors to the UK… It adds insult to injury when you’re stuck in a queue but can see numerous gates which just aren’t being used.”

British Airways has submitted its concerns to the Home Office and hopes that action can be taken to reduce unnecessary delays.

Mr Pattar said: “We recognise some of the steps being taken by Border Force to improve the service they provide to travellers. However more focus must be put on operating in the most efficient and flexible way and ensuring that passengers’ needs are put first.”

Heathrow Terminal 5 currently only serves BA and Spanish airline Iberia.

A spokesperson for Virgin Atlantic told the BBC: “This hasn’t been a particular issue for our customers as all our flights land before 10pm.”

Dispute over eGates

The Home Office strongly disagrees with British Airways’ comments.

“This statement significantly misrepresents the experience of the vast majority of passengers arriving at Heathrow this summer,” a spokesperson said.

“More than 99% of British and European passengers arriving at Heathrow are dealt with within 25 minutes. For passengers from outside the European Economic Area, 87% of passengers have been dealt with within 45 minutes.

“Border Force and British Airways have an agreement to close the Terminal 5 ePassport gates at 11pm every evening. In recent months, Border Force has kept the gates open beyond 11pm – often to accommodate passengers arriving on delayed British Airways flights.

“The security of our border is paramount – which is why 100% of scheduled passengers are checked when arriving in the UK. While every effort is made to keep delays for passengers to a minimum, we make no apology for carrying out this important work.”

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Grab: Uber’s Asian rival spends $100m to expand in Myanmar and capture smartphone use surge

Grab, Southeast Asia’s biggest ride-hailing app, plans to invest $100m in Myanmar as it extends its battle with Uber to capture exploding use of smartphones.

Grab will invest the money over the next three years and work with local governments to expand ride-hailing to more cities and roll out services such as its in-app digital payment feature GrabPay, President Ming Maa said.

It will grow its workforce in Myanmar about fivefold to 200, he added.

“Myanmar is a very important focus for us,’’ Mr Maa said in a phone interview. “It’s a very large, rapidly growing mobile-first economy.’’

Since its debut in Yangon in March, Grab has grown to reach 25,000 bookings a day with more than 6,000 drivers.

Through its partnership with CB Bank and Wave Money, the company is enabling its drivers to open bank accounts and get access to other financial services in a highly cash dependent country.

Just six years ago, when Myanmar was emerging from decades of isolation imposed by its military dictatorship, mobile phones were an extravagance available only to the rich and well-connected.

After the launch of telecommunications services by Norway’s Telenor and Qatar’s Ooredoo though, almost everyone in Myanmar is connected now.


In 2015, Myanmar signed up more people for mobile phone service than any country in the world except China and India, countries with much larger populations, according to the Asian Development Bank.

Grab, which debuted as a taxi-booking app in Kuala Lumpur in 2012, has relied on its mantra of “hyper-localisation’’ and massive funding from SoftBank build its scale and gain an edge on Uber. The US company began its Yangon service in May.

Singapore-based Grab plans to introduce a corporate travel service in Myanmar, enabling companies to manage employees’ local and regional transport expenses digitally, according to Mr Maa.


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