Entry to University Is No Longer a Ticket to Privilege in China

“I may be a countryside pig, but I want to eat the city cabbage” was how one graduate from a top high school in North China’s Hebei province expressed his determination to overcome a humble background by acing the college entrance exam.

His comments on a talk show created a stir on the internet, winning supporters and detractors. I am not writing to offer my opinion on his statement, other than to say he greatly overestimates the importance of the exam. A high exam score and a place at a top university do not guarantee smooth sailing in life.

I’m in my middle age. Over the years I’ve witnessed escalating anxiety among modern Chinese youth. One reason is the declining rate of return on investments in human capital. But a much deeper factor at work is slowing social mobility. Breaking this vicious cycle requires certain macro-level measures: better income redistribution and accelerated education reform.

China in the 1980s and ‘90s

Assuming everything else is equal, the faster a country accumulates human capital, the faster its long-term economic growth. The problem is with measuring the pace of human capital accumulation. Human capital refers to the quality of a labor force. Traditionally this has been roughly measured by a population’s average lifespan and average education level. Investment in human capital can also be measured by the ratio of national GDP to education and health care expenditures.

I think for a more telling indicator of the pace of human capital accumulation, we can look at a country’s low- to moderate-income (LMI) families: What is their ratio of education expenses to household income? But then, the question arises: Why look at LMI families rather than all families? Because nearly anywhere in the world, high-income families are more capable of investing a higher proportion of family income in their children’s education. On the other hand, the educational investment of LMI families varies significantly.

In China, for a long time after the launch of reform and opening-up, LMI families were enthusiastic about educational investments, devoting a large chunk of total household expenditure on children’s schooling. Why? In economic terms, LMI families could expect a high rate of return on such investments.

For example, let’s imagine a rural Chinese family with three children a few decades ago.

The family members lead frugal lives to support the education of the most-gifted child. Finally that child is admitted to a key university. Back in the day, attending a key university didn’t cost all that much. There were subsidies available.

Upon graduation, the child could land a decent job at a government agency, state-owned enterprise or foreign-invested company. Thus the child was able to successfully change his or her class status: from a common rural household to the urban middle class. A key point here is that after the child begins working in the city, he or she will do everything possible to bring his or her siblings there too, improving their status and income in the process, thus effectively moving the entire family up the social ladder.

Economically speaking, the return on the family’s investment has been high: Investing in just one child has benefited the entire family.

Zooming out, we can see that this was a time of high class mobility in general. Children from humble backgrounds only needed family support and hard work to leap up the ladder, and possibly even bring the entire family with them. There were two common sayings at that time for such a success story: “knowledge changes destiny” and “the carp jumps through the dragon gate.”

To assess a country’s class mobility, we can measure and compare the parents’ educational level versus their children’s. The greater the generational difference in level of education, the higher a country’s class mobility, and vice-versa.

As the table shows, Latin American countries have the lowest social mobility. Nordic and Western European countries like Denmark, Great Britain, Northern Ireland, Finland and Norway have a higher social mobility. Interestingly, social mobility for rural China ranks second. It is worth mentioning that the data in the table covers 1994-2004. This suggests that, at least during this period, China had high social mobility, which ensured high return on LMI families’ investments in their children’s education.

This leads to a more penetrating question: Why was China’s social mobility so high after the launch of reform and opening-up?

In fact, there is an inseparable link between this phenomenon and the 10-year catastrophe of the Cultural Revolution. Many among the social elite were brought down during 1966-76. Some even lost their lives. After the Cultural Revolution, there was a period when an elite, educated class almost didn’t exist.

Deng Xiaoping and other leaders responded to the situation, leading the Chinese government to adopt the college entrance exam as a means of selection and cultivation of talent. At that time, the exam was relatively fair to children with different family backgrounds. Regardless of family income, young people could earn a seat at university via a high exam score. College students were in short supply at that time. As long as they got into university, they could usually secure a good job after graduation and realize a class transition. Thus, despite the overall disaster of the Cultural Revolution, there were some positive side-effects, one being an improvement in China’s social mobility.

The college entrance exam constituted a fair system offering young people from humble backgrounds an opportunity to change their fate. They could improve their social status simply through their own hard work. This increased the rate of return on LMI families’ investments in education, making them willing to devote a large portion of their family income on children’s schooling.

China after 2008

Unfortunately, things changed significantly following the 2008 global financial crisis.

Again, let’s take a rural family as an example. A child from rural China works hard and passes the entrance exam to enter an ordinary university.

You may be wondering: Why our hard-working rural child in the 1980s example succeeded in entering a key university, while the hard-working kid in the current scenario is only able to get into an ordinary one?

The cruel reality is that, several decades into the reform and opening-up period, a large gap has emerged between urban and rural schools. The educational standard in rural areas has improved only slightly over the decades, but that of the urban areas has skyrocketed. This gap has significantly lowered the success rate of rural students in getting admission to key universities.

Data on the family backgrounds of Peking University students from 1978 to 2005, compiled by Liu Yunshan, a professor in the university’s Graduate School of Education, show approximately 30% of fresh students there came from rural families between 1978 and 1998. However, that figure dropped to about 10% between 2000 and 2011. Even though the proportion of rural students among college freshmen nationwide has increased to 60% since 2000, the proportion of rural students entering key Project 985 or Project 211 universities has decreased.

Moreover, for rural students, entering university is merely the beginning of a sad story.

In China, tuition fees at key universities is generally much lower than that of ordinary universities. Once a rural student is admitted to an ordinary university, his or her family may have to borrow money for the tuition. But once he or she graduates, it may be difficult to find a good job due to an oversupply of graduates from ordinary universities. Under such circumstances, it’s hard for the rural students graduating from these institutions to support a family, and even harder to repay their college loans.

In spite of these challenges, however, our rural child has worked hard and secured a good job, settled in the city and married an urban resident. Now, will he or she be able to selflessly support his or her siblings as university graduates from rural areas did in the 1980s and 1990s? Even if there is intent to lend a hand, the pressure entailed will be much higher. In many TV series depicting urban family relations, a husband from a rural area is called a “phoenix man,” and is often the subject of others’ ridicule or criticism. But it is these phoenix men, able to comprehensively support their original households, on whom the continuation of human capital investment depends. If parents find that the investment in one child’s education does not bring benefits to other family members, they will lose their will to live frugally in order to make such investments.

Despite a lack of specific data, various cases over the past decade reveal a significant decline in LMI families’ motivation to invest in children’s education — and thus in the proportion of LMI spending on education. This phenomenon is most likely the result of a dramatic decline in China’s social mobility.

The above example is meant to illustrate the increasing difficulties a child from the countryside will encounter as he or she strives to climb the social ladder. There is a buzzword these days to describe the decline in class mobility — “pin die” (literally a fight of fathers, meaning competition based on family backgrounds). The term is a true reflection of the younger generation’s huge dependence on their parents’ generation when it comes to their class identity.

As explained earlier, the Cultural Revolution created an unnatural absence of social stratification in the early years of reform and opening up. The government then adopted the college entrance exam as a relatively fair mechanism for identifying talent for higher education. The exam allowed many people from rural areas to stand out and advance, facilitating strong social mobility across the nation in the first three decades of reform and opening up. However, once a new elite class formed, social benefits became more fixed, leading to a new trend of increasingly consolidated power and declining social mobility.

As shown in the second table, China ranks 45th among 82 countries in the latest global social mobility rankings released by the World Economic Forum in 2020. This standing is worth our attention. It’s also worth noting that the top seven countries are all Nordic or Western European countries.

In general, a more imbalanced income distribution means lower social mobility. Therefore, China’s ongoing decline in social mobility is also closely related to income inequality. The Gini coefficient is typically used to evaluate a country’s income distribution (where zero indicates perfect equality). From 2003 to 2018, China’s Gini coefficient fell from 0.479 to 0.468, according to official reports from the country’s National Bureau of Statistics (NBS). In other words, although it remained above the international warning level of 0.40, the period saw a general improvement in income distribution.

This data obviously deviates from our perception.

The key reason for such deviation is that estimating the Gini coefficient requires accurate statistics on the income of Chinese households, but their actual income is difficult to ascertain by NBS questionnaire alone — especially for high-income families. Here I can offer two well-known cases of alternative Gini coefficient estimations. The first is from a Southwestern University of Finance and Economics team led by professor Gan Li. Their calculations, based on a residence registration survey, suggest that China’s Gini coefficient was as high as 0.61 in 2010, and that 50% of China’s total savings deposits were held by 5% of households. The second estimate comes from a Peking University team led by Professor Xie Yu. According to their calculations, China’s true Gini coefficient was around 0.52 in 2012, but if calculated according to household net assets rather than income (the traditional basis), the figure would be as high as 0.73. Their study tells us that China’s richest households — the top 1% — own 35% of all private wealth. The root cause of the inequality in wealth, for most people, lies in ownership of real estate, while for a small number of people, it lies in finance.

Equalizing opportunity

How to address such inequality? First, the Chinese government should implement a more robust income redistribution policy with a range of progressive property taxes such as inheritance tax, property tax, capital gains tax and so on.

For now, the major tax levied on most Chinese residents is the individual income tax. The income tax is a regressive tax collected according to each person’s level of income. In other words, the higher the income, the lower the tax burden. Whereas entrepreneurs have various means to evade the tax, wage-earners have no choice but to pay it in full. If we are to truly reverse China’s imbalanced income distribution, progressive property taxes are an unavoidable measure. That way, the amount of taxes paid will reflect a person’s income.

Through a progressive tax on property, the government can begin to effectively redistribute income and reduce the imbalance between income and property ownership. Tax revenue can then be used for public welfare targeting low-income groups. Implementation of a well-designed income redistribution policy would help revitalize China’s social mobility.

The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China last year clarified long-range objectives of basically achieving socialist modernization by 2035, the first of which is “to achieve more substantial progress in common prosperity for everyone.” This indicates that in the next 15 years, “common prosperity” will be a “key word” for a variety of national policies.

Second, education reform must be advanced — particularly in terms of vocational education development and access to education.

We’ve witnessed an interesting phenomenon in China’s labor market over recent years — structural unemployment. On the one hand, a flood of college graduates cannot find jobs; on the other hand, there is a severe shortage of high-quality blue-collar workers. Every year, China faces an ironic situation wherein it is short of tens of millions of senior technicians but has trouble recruiting people in technical fields.

In January 2019, the State Council issued regulations for the establishment of 50 high-level higher vocational schools and cultivation of 150 key majors in the next five to 10 years, which would institute a standardized vocational education system covering most industrial fields of an internationally advanced level.

In developing vocational education, we can learn from the successful experience of Germany, Switzerland, Japan and other countries. For example, German statistics show that less than half of junior high school graduates choose to go to university after attending high school; the majority choose vocational education. In Germany, technical workers have relatively high salaries and social status, as well as smooth channels for promotion to the senior technician level or to middle and senior management positions.

Apart from the development of vocational education, China’s education reform should focus on improving the access to education and international collaboration. Despite a large number of key universities (i.e. Project 985 and Project 211 universities) in China, none are joint China-foreign or privately run institutions.

Every year, many Chinese families choose to send their children away to receive education in Europe or the U.S. But we can actually bring these elite schools here to China, encouraging them to establish branch campuses where students can access the same education and obtain the same diplomas as those attending the schools overseas. Branches of foreign schools can also fire up competitive awareness among our own top universities and drive them to further improve teaching quality. If we begin to see more high-quality private colleges and universities emerging in China, then our public colleges and universities will be expected to make better use of their advantages to improve fairness and inclusiveness in education.

Author: Zhang Ming, Caixin Global