McKinsey Global Institute

Addressing China's looming talent shortage

Despite China's apparently vast labor supply, multinational companies are finding few graduates have the necessary skills for service occupations.

Despite China's enormous pool of university graduates (3.1 million in 2005 alone), MGI research suggests that fewer than 10 percent of Chinese job candidates, on average, would be suitable for work in a foreign company, and the fast-growing domestic economy absorbs most of those who could.

China is facing a shortage of home-grown talent for multinational companies.

Indeed, far from presaging a thriving offshore services sector, MGI points to a looming shortage of home-grown talent, with serious implications for the multinationals now in China and for the growing number of Chinese companies with global ambitions.

To avoid this talent crunch and to sustain the economic ascent of the past 20 years, China must produce not just more graduates but more suitable ones.

Reforms in the educational system—including greater emphasis on practical and language skills—will help the country fill its skilled-labor gap.

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