In an age of technological acceleration, with AI threatening to upend the job market, those countries that rapidly instituted mass higher education will inevitably experience higher graduate unemployment. Other factors, such as a slowing economy and economic restructuring will only intensify the mismatch between a university education and the skills demanded by industry.
The most important virtue of a college and university is not job training. Nevertheless, households that pay tuition fees, companies that need skilled employees who can also innovate, and students who aim to secure lifelong stable employment expect their institutions of higher education to have a high level of external efficiency with the labour market.
This is especially true for a country such as China, with the world’s largest labour force. China is transitioning from mass to universal higher education amid an economic slowdown, with over 60 per cent of its young people entering higher education. That is challenging enough. Even a thriving economy would be lucky to absorb more than 12 million college graduates a year, and China is addressing the mismatch between graduate skills and jobs.
More-developed higher education systems, such as the US and the UK, could learn from China’s approach.
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To address the issue, China has one advantage that liberal economies shun. The state can adjust the mismatch. For example, in an era of geopolitical instability and supply chain disruptions, the government suspended enrolments in 2,220 programmes and phased out 1,428 others out of a total of 62,800 programmes in 2023. Then, in 2025, its universities added 29 new undergraduate majors and 1,839 new programmes.
China relies heavily on STEM and vocational skills to build a high-tech economy, drive consumption, raise the standard of living of the population, and bolster the country’s global stature as an innovator and producer of quality goods and services. State investment includes excellence initiatives at top-tier research universities with a heavy emphasis on STEM, as well as application-oriented undergraduate courses across the entire higher education system. STEM and skills (both hard and soft) are the curricular bedrock across higher education, which integrates graduates into a national system of innovation essential for China’s growth.
China’s colleges and universities are under increasing pressure from enterprises, households and the government to correct the mismatch with the job market. It could be fatal if graduate unemployment rates continue to rise.
Nevertheless, Chinese companies often complain that they can’t find enough highly skilled graduates. The manufacturing sector was short 20 million technical workers in 2020. By 2022, about 44 per cent of companies reported hiring difficulties as a major challenge. A 2023 report from the Social Science Academic Press estimated a nationwide shortage of about 25 million to 30 million digitally talented graduates. In 2025, many enterprises found a lack of candidates with the sophistication of skills required and competition for the same talent.
Second- and third-tier institutions support process knowledge with internships and application-oriented undergraduate programmes in applied science and technology. These build the practical capacity to progressively scale up new industries. Becoming highly competitive in a broadening assortment of strategic technologies has pushed China to rely on a multilevel system of colleges and universities to nurture highly disciplined students capable of adapting to rapid changes in manufacturing. That is why Apple’s China business can bring in hundreds of highly trained workers at short notice. Since the turn of the century, more Chinese workers have become exposed to world-leading manufacturing processes used by Caterpillar, General Electric and Tesla. The capacity to scale up these industries rests on the quality of the talent, including from second- and third-tier colleges and universities.
To further strengthen the connection between higher education and industrial enterprises, education authorities have issued lists of key tasks. Pilot programmes have been set up in advanced rail-transit, shipbuilding, marine engineering and aerospace equipment. Industry-academic communities have expanded into advanced manufacturing and high-tech sectors, including energy electronics, bioengineering and robotics. The practical experience of acquiring concepts and skills through internships constitutes the process knowledge that can help make the country a tech innovator.
As more high-tech products hit the market in Belt and Road countries, China hopes to export this brand of skills-based training. There are already 20 government-backed vocational-technical training centres – known as Luban workshops, named after the revered ancient inventor – in Belt and Road countries. All this helps to explain why many colleges and universities, both public and private, have shifted towards application-oriented bachelor’s degree programmes and higher vocational-technical education diplomas.
The 20th Party Congress in 2022 already proposed to strengthen the collaborative innovation in vocational education, including higher education and continuing education. Rather than build separate sectors, the emphasis is on integrating vocational and general education and integrating industry and education to build a strong workforce. In November 2022, the Ministry of Education and other departments implemented a diversified investment mechanism to attract more funds to vocational education. In December, the Central Committee and the State Council outlined a dual strategy to expand demand and promote the improvement of vocational education and technical education. This included regulating the development and management of private vocational and technical higher education. This led to exploration of a new mechanism for local governments and social groups to invest in expanding undergraduate vocational education.
In 2023, eight government departments, including the National Development Reform Commission, announced a programme to improve the integration of industry and vocational education. This included 19 policies to promote the integration of talent cultivation and industrial development.
As China moves to the forefront in emerging technologies such as AI and quantum computing, its biggest economic gains come from its vast and sophisticated manufacturing workforce. It is here that the rapidly expanded higher education sector has become more pivotal in introducing students to the concept of process knowledge, a key part of innovative manufacturing and service productivity. The quality of the entire higher education system will determine the skill level of the next generation of industrialists, entrepreneurs, factory workers, soldiers, nurses, scientists, artists, civil servants, teachers, diplomats and more.
After experiencing breakneck expansion, China’s higher education sector is going through a period of highly planned readjustment. Total factor productivity (TFP) – that is, capital and labour – contributed almost half of China’s growth in output over the first 30-plus years after 1978. Yet, productivity peaked in 2015, and TFP has since deteriorated. While the quality of higher education is only one factor in TFP, it will become increasingly important as the country invests more in creating the world’s largest higher education system to drive tech innovation and economic development.
Gerard A. Postiglione is emeritus professor, honorary professor in the Faculty of Education at the University of Hong Kong. His latest book is Higher Education in China: Domestic Demands and Global Aspirations (Johns Hopkins University Press, 2026).
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