The ultimate Chinese competitive advantage
It’s a cliché but human capital is the answer
There are many analyses and discussions about the economic, trade, and military competition between China and the US. I wrote many pieces about GDP, trade war, overcapacity, tech competition, mil tech, and industrial policies such as Made in China 2025. The underlying factor for China’s progress along all above is also China’s ultimate competitive advantage – its human capital.
At the end of the day, a nation’s strength is the collective sum of the strengths of the people living and working in the land – their intelligence, skills, diligence, productivity, entrepreneurship, and resilience.
Another key Chinese edge over the US is the competence of its government, also a result of its human capital advantage. This will be the topic of another piece.
Without getting into controversial debates over average IQ scores and other racial traits, which readers can easily look up online and is actually quite illuminating (at least the results published by some quite credible sociologists and statisticians in the early and mid-20th century before the topic became too politically sensitive), I’ll dive into a set of modern-day statistics to make the case.
As I wrote in the earlier essay about the rare earth and the chip wars between China and the west, the key to success comes down to control over technology and innovation – essentially a human capital competition.
At the end of the day, it takes more than government and businesses throwing money at the problems. The quality and quantity of talents will decide the outcome.
As I wrote, there is not a single university program in the US focused on rare earth mining and processing while dozens exist in China. Regardless how many millions Pentagon invests in mining companies like MP Materials, where will they find the specialized engineers, geologists, chemists, metallurgists to develop the relevant mining, separation, refining and processing technologies?
When China accounts for 70% global mining and 90% refining production, where do you expect the expertise and the talents reside?
Such human capital gap exists not just in rare earth production. It is a major reason why the US is having a hard time reshoring manufacturing. One of the most basic requirements for manufacturing prowess is the availability of qualified mechanical engineers.
While China graduates more than 350,000 mechanical engineers each year, the US produces fewer than 45,000. As I quoted before in the article about iPhone production, Tim Cook famously said, “there may not be enough tooling engineers to fill a conference room in the US. You can find enough to fill several football fields in China”.
Mechanical engineers are foundational to manufacturing. They design the systems, troubleshoot the integration, and connect software to physical execution.
China’s investment in mechanical engineer education includes universities, trade schools, and government-backed apprenticeships, a national pipeline that builds scalable industrial capacity that are increasingly automated ad software-defined.
This capability enables China to take over industry after industry from ship building, automotive, green energy to aerospace.
This is not just about jobs. It’s about maintaining strategic capacity, accelerating productivity, and securing long-term economic resilience.
On a broader level, according to the US National Science Board, the US graduates 132,000 engineering students, including Bachelor’s, Master’s and Doctoral degrees. In contrast, China produces 1.4 – 1.5 million engineering graduates a year.
According to a 2020 report by the Center for Security and Emerging Technology (CSET), 41% of college graduates in China studied STEM subjects while 20% in the US. Total annual Chinese STEM graduates amounted to 3.57 million in 2020 vs. 820,000 in the US (including roughly 100,000 non-US residents).
In more recent years, the gap is widening. By 2024, total Chinese college graduates reached 12 million, with 46% or 5.5 million STEM graduates. The US total and STEM graduates numbers remained largely unchanged from 2020.
In short, China’s STEM graduates now outnumber the US 6:1. In the current tough employment market, even more Chinese college entrants are studying STEM subjects for better job prospects.
China doesn’t just produce more STEM students. They are top ranked in academic performance, according to a 2023 ranking by the Center for Excellence in Education (CEE).
Same as natural resources and infrastructure, human capital is a foundational national advantage and is China’s ultimate competitive edge.
China is a civilization. The US is a colony. Chinese leaders think not in terms of election cycles, but in in terms of historical legacy. Chinese economists do not think in terms of dollars, but in energy, labour, and resources. China compares itself to great powers like Russia and white empire while India compares itself to its own rump.
Human capital is a product of wealth and nurturing. It's doesn't belong exclusively to anyone. People who believe they are superior will decline due to arrogance and complacency. Genetic mutates over time. Given the required resources and nurturing any society will achieve the human capital for success. The law of very large numbers dictates this outcome. The difference in human capital between the West and China can be measured with these two metrics. The Chinese put more value in education, and they put more resources into it as a family. The West spends more public money, while the Chinese spends more privately. When adding public and private spending, the Chinese spend more than the West on human capital. Private spending has a greater result because it shows the greater nurturing environment needed for educational success. When one combines this with the law of compounding interest and China's huge population, China's human capital will be greater than any country in the world. We are seeing this in the numbers of STEM graduates and the increasing trade surpluses.