China Engineers Its Next Great Leap

Milwaukee Journal-Sentinel ^ | 12/31/03 | John Schmid

[ninenot]

China engineers its next great leap

By JOHN SCHMID
jschmid@journalsentinel.com

Posted: Dec. 30, 2003

Last of a four-part series: Made in China

Beijing - While the United States focuses on China's export prowess and cheap labor, Beijing is investing in a new generation of sophisticated "knowledge workers" to carry the nation to the next stage of its industrial revolution.

Made in China

Photo/Gary Porter

Office towers glow in the night in a view from atop the Di Wang Center, the tallest building in downtown Shenzhen, China. Many of the offices are occupied by China's new generation of "knowledge workers." The country wants to outgrow its reputation for copying things and move toward industrial self-sufficiency.

More photos

The New Industrial Revolution

Manufacturing,
one of the staples of Wisconsin's economy, is being reshaped by forces originating halfway around the world. As China races into a leading role in the global economy, the effect on families, companies and communities here is profound.

THE SERIES:

DEC. 28: More and more companies are turning to China to produce their goods as China becomes "the world's factory floor."

DEC. 29: When China Inc. targets a particular segment of business, its combination of cheap labor and entrepreneurial hustle can virtually dominate an industry overnight.

DEC. 30: We used to build factories to last 100 years. What happens when a huge one doesn't last five?

DEC. 31: China is taking big strides to build beyond its manufacturing base. And in some key areas, the United States already lags.

About the logo

Gary Porter's
Photo Essays

Journal Sentinel photojournalist Gary Porter narrates slide shows of photos taken for this project in China and Wisconsin.
GO TO SHOWS

Day 4
Related Coverage

Consumers: American drive to buy for less has a price
New Berlin: Firm plans to make tools in China but add engineers at the home office
Beijing: Hutong is home, but for how long?
Editorial: The challenge from China
Notes: Fast facts and viewpoints
Graphic: Dam construction: Engineers in high places
Graphic: Education: In China, ranks of educated workers swell
Graphic: Auto sales: Growing market

Dam construction: Engineers in high places

Photo/Gary Porter

Bicycles are the most popular way to get around campus at Tsinghua University in Beijing. Tsinghua, founded in 1911, has a motto: "To act is better than to speak." At Tsinghua, considered by some the Chinese equivalent of the prestigious Massachusetts Institute of Technology, 100% of graduates are placed in jobs. Other top Chinese schools boast similar placement rates.

We're teaching our students to satisfy the needs of the global
economy.

- Zhang Yao Xue,
who runs the nation's university system as director general at the Ministry of Education.

Photo/Gary Porter

Freshman industrial engineering student Betty Cheng of Ecuador works on an experiment in a chemistry lab at the Milwaukee School of Engineering. MSOE reports placing 80% of its graduates in jobs six months after graduation - down from 98% just a few years ago. The University of Wisconsin-Madison also has seen a significant drop in job placement.

The nation's 1,300 schools of higher education are critical to China's grand social engineering plan to lift itself up by first becoming the world's manufacturing base, then its knowledge base.

Already, China has pulled way ahead of the U.S. and the rest of the world by one key measure.

China graduates in excess of three times more engineers - electrical, industrial, bio-chemical, semiconductor, mechanical, even power generation - with bachelor's degrees than the U.S. university system.

"We're not creating enough in math and science and engineering," said Don Davis, chairman and chief executive of Rockwell Automation Inc., a manufacturer that has remade itself into a multinational corporation based on knowledge work. "And in my mind, that's an enormous problem."

A wave of young software experts, industrial engineers and bio-technology graduates has flowed out of China's fast-growing, industrial-strength university system and assumed key posts in China's ascendant society.

The exponential increase in applied-science graduates mirrors the nation's overall export expansion. Around the time that engineering graduates peaked in the U.S. in 1983, China was just getting going on its "Four Modernizations" - a movement launched 25 years ago this month to promote four key sectors of the economy: science and technology; agriculture; industry; and the military.

Today, the result lives up to its original billing as "The Second Revolution."

China consistently has graduated more engineers than the U.S., Japan and Germany combined every year since 1997, according to figures collected by the National Science Foundation in Washington.

In the U.S., the number of engineering graduates has declined almost yearly from 77,572 at its mid-'80s peak to 59,536 in 2000.

If China has more than three times as many industrial-technology graduates, China theoretically also has more than three times as many folks to percolate ideas - or possibly even a three-times better chance of thinking up the next "killer application."

Intel Corp. Chairman Andy Grove marveled that the lopsided trend has caused remarkably little debate in the U.S.

"We haven't even articulated the problem," Grove said.

As China becomes a low-wage global manufacturing base, and other so-called "developing countries" compete for the same mass-production work, wealthy societies that prospered as industrial powers - the U.S. foremost among them - find themselves in the throes of a radical restructuring.

Just as the industrial society replaced the agricultural society of the 19th century, the knowledge-based society is edging out the industrial society.

As it evolves, the labor force changes. Creativity and inventiveness drive the economy. In the parlance of the times, "knowledge capital" becomes key.

"This used to take hundreds of years," said labor force expert Paul Strassmann. "Now it's instant and visible."

Planting 'seed corn'

U.S. business leaders call for new education initiative

China's labor force is changing, as well.

"China is catching up, not because of cheap labor, but because they are getting very smart," Strassmann said.

The only realistic public-policy solution is to emulate China and increase spending on education and retraining, Grove and other business leaders argue.

In a major speech in October beamed via satellite to software executives in Washington, Grove issued a strident plea for a new education initiative. Speaking from California, the high-tech pioneer proposed taking 1% to 2% of U.S. agricultural subsidies and spending them instead on university grants.

If anything, statehouse lawmakers are going in the other direction as the pressure of high deficits forces them to cut education budgets. In the last 10 years, Wisconsin has devoted a shrinking share of its tax revenue to university education, said John Stott of the state Legislative Fiscal Bureau.

Stanley V. Jaskolski, dean of Marquette University's College of Engineering, said the U.S. is producing fewer innovators and new ideas - what Jaskolski calls "seed corn."

"We have gotten somewhat complacent," Jaskolski said.

But the "weightless" digital economy leaves little room for complacency.

"We're dealing here with some very powerful forces," said Strassmann, an engineer, consultant, author and former adviser to the U.S. Department of Defense and NASA.

"We're living in the most revolutionary period in human history, ever, in terms of magnitude and speed. Nothing in human history is comparable to the present."

'Symbol manipulators'

As labor force evolves, split in society feared

One of the most colorful descriptions of the modern knowledge worker comes from Robert B. Reich, an economics professor at Brandeis University and former U.S. labor secretary. He calls them "symbol manipulators."

These are educated people who work with speech, numbers and icons, often in abstract ways. They invent markets, niches, products, designs and services. Their ranks include investment bankers, marketers, hedge-fund managers, consultants, merger-and-acquisition lawyers, industrial engineers and software programmers. These people often train themselves to stay ahead of the knowledge curve.

According to Reich, they are the elite who constitute about 20% of the U.S. population. In the last 15 years, they have seen their inflation-adjusted incomes increase 9%.

The other 80% of the work force includes people with more conventional jobs, along with lower-skilled workers who gravitate toward more modest or even minimum wages.

Reich reckons that that 80% has seen its inflation-adjusted income decrease 11% in the past 15 years.

The former U.S. labor secretary, who is finishing a book on post-industrial economies, sees a long-term risk if the split between the top 20% and the bottom 80% widens. The nation could cease to be a single cohesive society, he warns.

Alan Greenspan, who is chairman of the Federal Reserve Board, wants America to move decisively toward "an economy of ideas."

"The economy is becoming increasingly conceptual," Greenspan testified in a July Senate hearing. "I think that's good, not bad, for the economy as a whole. But if you're a maker of stuff, it isn't." The comment triggered a barrage of criticism from congressmen and business groups in states that make "stuff."

But the Chinese, while concentrating for now on making "stuff," likely would have embraced Greenspan's comment.

Western experts note that China for centuries has valued education and culture. The country prides itself on inventing the printing press, paper and rocketry.

China aims to outgrow its reputation for copying things, as it moves toward industrial self-sufficiency and then shows the world that its engineers can innovate with the U.S., Japan and Germany.

Investing in education

China triples college enrollment in five years

Beijing hews to a market-driven education policy, one that unabashedly aligns the curriculum with supply-and-demand economics. It compels its professors regularly to step outside the halls of academia and work directly inside factories, improving the plants' quality and productivity.

"We're teaching our students to satisfy the needs of the global economy," said Zhang Yao Xue, who runs the nation's university system as director general at the Ministry of Education.

Some 60% of all students are enrolled in science and engineering disciplines, he said.

"This mandate is done by the market," said Zhang, smiling.

Zhang sipped flower tea in a conference room at the ministry while going through a roster of government grants, science foundations, science parks and industry zones.

The goal is "to transfer the research into the market," he explained. "We established 36 schools or institutes for the life sciences, for bio-tech, medicine and agriculture."

The momentum reflects considerable spending on education. China has 17 million students enrolled in its colleges and universities - including graduate and undergraduate, full-time and part-time - up from 5 million students five years ago.

"That's more than the U.S.," Zhang said.

The United States has 15.3 million students enrolled in colleges and universities, both public and private, according to the latest figures from the U.S. Department of Education.

"We also need the knowledge workers," said Zhang, who keeps a post as computer-science professor at Beijing's elite Tsinghua University.

China nearly has caught up with the U.S. on the number of master's and doctoral degrees awarded annually in engineering, according to figures from both governments. China also is making huge strides in other science and technology disciplines. And at U.S. universities, there are more Chinese students earning doctorates than students from any other foreign country, according to the National Science Foundation.

University programs, Zhang explains, routinely are judged by their ability to place graduates into jobs.

Tsinghua, considered by some the Chinese equivalent of the prestigious Massachusetts Institute of Technology, boasts a 100% placement rate for its graduates, school officials said.

It's the same story at the respected Shanghai Jiao Tong University, which places 97% of its students: The other 3% don't get jobs because they go on to earn additional degrees, according to the school's placement center.

At the Milwaukee School of Engineering, about 80% of May's MSOE engineering graduates had landed jobs six months later, said Kenneth McAteer, vice president of operations and a placement associate. A few years ago the placement rate was at 98%, he said. Corporate downsizing has left "a lot of experienced engineers out there who are competing with the college graduates," McAteer said.

The Milwaukee School of Engineering briefly considered a partnership arrangement with Shanghai Jiao Tong University in the mid-'90s. It passed on the chance, however, in order to manage its other sister-university partnerships abroad.

At the University of Wisconsin-Madison, which has the state's largest engineering school, only about half of the December 2002 and May 2003 engineering graduates had job offers by early May. "That's a huge decline," said Sandra Arnn, assistant dean of the university's College of Engineering and director of engineering career services.

Nationally, the placement average in China lies below 100%, but not due to a weak economy. The Ministry of Education said the system grew so quickly that it hiccuped in absorbing all its graduates. Beijing, however, says the numbers are part of its plan: The government is creating incentives to send its newly minted engineers into the poor western provinces to help invigorate industry there - a sort of reverse labor migration.

The global impact of China's universities will surprise anyone who associates authoritarian one-party states with academic suppression or who remembers the "lost generation" that endured Mao Tse-tung's repressions of the 1960s.

The Communist Party elevates technocrats into the highest possible positions.

The new president, Hu Jintao, studied hydraulic engineering; his predecessor, Jiang Zemin, graduated as an electrical machinery engineer. Premier Wen Jiabao launched his career as a post-graduate geologist; his predecessor, Zhu Rongji, trained as an electric-power engineer.

The wonkish elite makes no small plans. As they build an industrial superpower, Beijing brushed off protests from the international community and environmental groups over the construction of the giant Three Gorges Dam - a project that gouges a lengthy section of the Yangtze River valley, flooding cities and displacing 2 million people in the process. Dubbed the biggest public-works project since the Great Wall, the Three Gorges, when complete, will provide hydroelectric power to help fuel the industrial revolution.

Far from eschewing academia, China has created what can be called an "Educational-Industrial Complex."

"The links between the professors and the enterprises are very strong now," said Zhang at the Ministry of Education.

Lucent Technologies, Microsoft, IBM, Texas Instruments, Hewlett-Packard and a host of multinational companies work directly with the universities to develop talent and incubate new technologies.

In nominally communist China, even academics celebrate capitalist success. Tsinghua University incubates many of the technology companies now listed on the Shanghai Stock Exchange.

"Mathematics and physical fundamentals for Tsinghua are much stronger than in other nations," said Zhang Lin, dean of the university's information technology department. "We have a solid foundation in theory. It's our duty to contribute to the economics of the nation."

Zhang's department, with 500 master's students and 300 doctoral candidates, has hatched the Chinese standard for flat-screen televisions, software for anti-terrorist facial-recognition, and speech-recognition programs.

Across campus, Su Wu runs Tsinghua's department of industrial engineering. Three years ago, only 30 Chinese universities offered such a discipline; now, 109 do.

"China wants to become a global manufacturing center," the professor said. "This is one of our goals."

Rockwell Chief Financial Officer Mike Bless is well aware of that commitment. "It's one of the few nations in which industrial automation is one of the accepted areas of major study," Bless said.

Rockwell reinvents itself

Milwaukee company moves toward 'knowledge work'

The big questions for the world's advanced economies is: Can China innovate? Will it match American ingenuity?

Rockwell's Don Davis, who earned his mechanical engineering degree from Texas A&M University, believes Chinese entrepreneurs are inherently innovative. The Milwaukee-based company works directly with Tsinghua, Shanghai Jiao Tong and the nation's 16 most cutting-edge universities. It develops talent, ideas and technologies, and it hires the cream of the crop.

Those partnerships, which Rockwell carefully cultivates from a central office in Beijing, have helped Rockwell reinvent itself. A decade ago, Rockwell's automation business manufactured industrial equipment hardware - it made "stuff." Today, CEO Davis says half of Rockwell's 21,000 employees are knowledge workers: engineers who consult and develop manufacturing solutions.

"The labor content in our products is very low," Davis said.

Rockwell maintains a corps of Chinese-educated engineers all over China. Its Chinese operations fit perfectly into the new structure: Up to 60% of Rockwell's 330 full-time staff do technical or engineering work, said Scott Summerville, head of Rockwell's Asian operations. Rockwell entered China in 1986 and has 11 facilities in nine cities.

"One thing you can say about China is that change is incessant, and it's rapid, and it's deep," said Michael Byrnes, Rockwell Automation's chief representative in China.

U.S. is 'comfortable'

China continues to build factories, ports, schools

Those peering into the crystal ball see two views of a brave new post-industrial future. The owlish Greenspan is among the optimists.

In a separate House hearing in July, angry congressmen lashed out at Greenspan's free-market views at a time when the U.S. was bleeding manufacturing jobs. Won't the nation's economic security be compromised if its manufacturing base corrodes, the lawmakers demanded to know.

Greenspan's answer: It doesn't matter, as long as Americans can import whatever they need.

"If there is no concern about access to foreign producers of manufactured goods, then I think you can argue it does not really matter whether or not you produce them or not," he said. "The main issue here is the question of the security of supply of those essential types of goods, which will always be required by human beings - food, clothing, shelter and the like."

Labor economist Joel Popkin is less sanguine. In a report last summer commissioned by the National Association of Manufacturers in Washington, Popkin concluded:

"If the U.S. manufacturing base continues to shrink at its present rate and the critical mass is lost, the manufacturing innovation process will shift to other global centers. Once that happens, a decline in U.S. living standards in the future is virtually assured."

China, for its part, continues to evolve, building new factories, new ports and new universities.

"We've gotten comfortable," said Marquette's Jaskolski, a former member of the National Science Board, which monitors national education. "We're importing the techie stuff. We're no longer generating enough of it on our own."

"Do I think we can take this back?" he asked. "Absolutely, I think we can take this back. But it's a long, hard road, and we've got to be committed."

Rick Romell of the Journal Sentinel staff contributed to this report.

From the Dec. 31, 2003 editions of the Milwaukee Journal Sentinel

[ninenot]

Average Americans don't really engage in geo-political discussions every day. They recognize a threat when it comes literally to their doorstep, though.

PRC's been getting a LOT of bad publicity lately, along with their major domestic ally, ChinaWal-Mart. Bush is doing his best to ignore it, but the Upper Midwestern congresscritters/Senators are being bombarded by nastygrams from 'average American' unemployed industrial workers.

The wake-up call is being heard. Just takes a while.

YOU (being a Russian) and a few others recognize that PRC is, in fact, an enemy. They have a large bunch of military on the Russian border, and would enjoy taking the Eastern portion of the old USSR, along with the Sakhalin Peninsula, and Taiwan--leaving Japan to fall into their hands like ripe fruit.

Maybe General Powell understands this--he was educated enough to know what MacArthur said about the Pacific Rim. But Powell certainly is NOT talking about it.

[RiflemanSharpe]

I go to College two nights a week and work full time.

[RiflemanSharpe]

Lets pray they hear it soon.

[SC Swamp Fox]

We need to push technical educations to the youth of this country.

Why would I do that? My step-son just finished high-school, he had been considering an engineering degree. No more.

Why would I push him into a career path of low pay, unemployment, out-sourcing....

He is now considering becoming a pharmisist.

[RightWhale]

So do I. Soon I will qualify for the geezer tuition exemption. Then if I have any steam left I may choose a major and go for some more degrees. I watch my fellow students as much as listen to the lectures anymore. Try to pick out the few who are getting it, usually about 4 in 30. It's great to see a light suddenly go on halfway through a course, because that means there are now 5 getting it. If 1 of the 5 is an American, that would be a plus; usually it is foreign students who are getting it, esp. in advanced courses such as math and tech.

What do you see?

[WI Conservative 4 Bush]

Good post. You can't 'out-educate' a country that pays it's workers 20-50 cents and hour. Our companies can't compete with that.

What we can do is try to make it easier for US companies to succeed. Tort reform and de-regulation are good places to start. I loath protectionism. However, if China is part of the WTO, the WTO should enforce basic human rights regulations on China.

[RightWhale]

Your comments are right on target. These are solid ideas, but not sexy enough to appeal to many voters. So as campaign issues they won't win elections, yet they ought to continue to be the primary tasks in the legislatures.

[chimera]

There is a drastic, indeed, catastrophic decline in U.S. manufactures. Who needs engineers to design stuff which won't be made? If the Chinese communists were openly 'bombing' our factories, Silicon Valley, and our technical universities...Congress would declare war. But because this is all WTO-manipulated 'free trade' we aren't supposed to notice what is going on.

The real problem, long term, is that this nation is in the process of placing its technological future in the hands of outsiders, and it never ceases to amaze me how many FReepers either fail to grasp that, or, if they do, seem to cheer it on, all from a seemingly slavish devotion to some abstract concept ("free" trade). Right now there are any number of basic, valuable industries (no, not buggy whip manufacturers or ice delivery trucks) that have disappeared, and along with them the technological expertise necessary to make important and useful things. And if we ever have the notion to try to re-build that infrastructure, for whatever reason, we will have to depend on outsiders to help us do that. And if those outsiders are not inclined to do so, we will have no option, because the home-grown talent, the intellectual capital, will have vanished along with the industries and professions.

[RightWhale]

Who needs engineers to design stuff which won't be made?

That's where Bush's new cis-lunar space initiative comes in. If the program is big enough to matter there should be a boom in enrollment at technical schools. Not that any of the 300,000 laid off during Nixon's admin would want to come back or be in a position to do so.

[ninenot]

You Russkis are smart: copying Ronald Reagan's move.

After his tariffs on Japanese cars, all the Japanese auto builders opened plants in the USA.

Works quite well, eh?

Dosvydanya!

[ninenot]

Yeah, but what a wonderful opportunity for laid-off tax CPA's (India), or Java IT types (India), or tool-and-die makers (China)!!!

They can all become Aerospace Engineers and work for NASA.

[RightWhale]

We'll see. I am afraid the new goals won't be so significant. Some new hardware, not a lot. 7% budget increase for NASA. It won't be the big deal it should be.

[EagleMamaMT]

RussianConservative, once again you have the best post of an entire thread. God bless you, sir, for your keen insight and wisdom. Would that our American leaders would hear and heed what you say.

[XBob]

23 - "A newly minted engineer/programmer must get 3 years experience in the latest stuff to become really employable. However at that point your salary is no longer at the entry level and you begin to be subject to downsizing and offshoring. If the technology shifts, you don't get retrained, you are dumped and you have to start all over with the newbies' catch 22 of trying to get a job without the needed 3 years of experience so that you can gain experience needed to get a job. The repeated layoffs and large amounts of unpaid overtime greatly reduces one's actual pay to well below the rate they think they are getting. "

You got it (I am sure you learned from experience), there is now a true 'Catch 22' in our economy, and I feel sorry for the young people of today.

I see no way out of the downward spiral, but at least I recognize it for what it is, which many/most of the rabid unrestrained capitalists on these threads are too blind to see.

And to solve a problem, we must first recognize that it is a problem.

[XBob]

40 - "There are agents from PRC who post on FR and I'm sure on other US web sites. How do I know this? A very unusual exchange happened in FR once."

More than once. I also got into something similar a year or two ago, about the time the knocked down our spy plane.

[XBob]

41- bttt - how true:

"While all these goodies have reduced the requirement for both direct and indirect factory labor, what's really happening in PRC is that all the capital the USA invested in getting to this point is being HANDED to PRC when a US transnational opens a plant over there--by requirement of PRC, of course. "

A 5 cent person can push a button and make something of equal quality of a 5 dollar person pushing the button.

[ZeitgeistSurfer]

And to solve a problem, we must first recognize that it is a problem.

This problem will not be solved because we have changed so drastically as a nation. I was young in 1956 when Sputnik was launched and the Feds created a raft of science and engineering programs in response. That initiative was responsible for the explosion of scientific and technical creativity that happened over the next 40 years. So what is the response of the government today to the obvious threat of China, Russia, and India surpassing us in technical capability - to encourage that shift even more. That is why I say if you're in college now, go into the law and prepare for a life of torts if you want to make a good middle class living.

[XBob]

48 - "Are average America so stupid not to see own future written on walls?"

You see it, but most Americans don't see it, but many feel it (yet don't understand). More things are seen by foreign eyes than by local eyes.

You did an excellent job of laying out the facts and the future. We (America) are like the proverbial frog in the pot on the stove. Put a live frog into a pot of boiling water, and he promptly hops right out. Put a frog into a pot of cold water then turn on the heat, and he cooks, gradually.

Our liberals and liberal media are pretty stupid here, and most people just follow them. A few, like some of us here on the Free Republic understand what is happening, and join you in your march holding up the sign.

We are not learning from history, and therefore condemned to repeat it.

[XBob]

65 - "What do you see?"

I see that 90% of the students in the techonological courses in our local college (Lamar), which few Americans have ever heard of, are foreign students.

I wonder how so many foreigners hear about this school, when so few Americans know about it.

[JoeSchem]

Demand American made. I do.

Too bad Americans don't make anything any more. We'd rather sue each other and take drugs than make things.