They Invested in Minds. We Printed Degrees.

Part 3 of 5: Learning from China without Losing Our Soul

In 1949, when the People’s Republic of China was founded, roughly 80 per cent of the population was illiterate. In rural areas, the figure exceeded 95 per cent. Elementary school enrolment was below 20 per cent.

When India became a sovereign democratic republic on January 26, 1950, we were also in a similar situation, facing severe educational and social challenges after nearly two centuries of colonial rule. As per the 1951 census, only about 18.3% were literate, and rural literacy was around 12.1%.

Since my blog posts began comparing the progress trajectories of both nations from the 1990s, let’s return to that benchmark. In 1990, China and India had roughly similar literacy rates, research outputs, and university systems. Both nations were poor. Both were populous. Both had grand ambitions.

By 2010, China had achieved near-universal literacy. Today, Chinese youth aged 15 to 24 have a literacy rate of 99 per cent. The country has conferred over 240 million degrees since 1990. More than 60 per cent of high school graduates now attend university, up from 20 per cent in the 1980s.

India’s story is different. We have made schools more accessible, and now over 90% of children aged 6 to 14 are enrolled. But being in school does not always mean real learning, and the data here is troubling.

The Annual Status of Education Report (ASER) 2024, which surveyed nearly 650,000 children across rural India, found that only 27 per cent of Class 3 students can read at the expected level (surprisingly, the first significant improvement in 20 years!). Less than 30 per cent of Class 5 students can do basic division. Even in Class 8, only 46 per cent can solve arithmetic problems meant for Class 5.

This is not about natural talent; Indians lead global technology companies, run the world’s best universities, and win Nobel Prizes. The difference is systems: what gets built, what gets funded, and what gets prioritised.

China made education and innovation the centrepiece of its national strategy. India made speeches.

The Education Gap Starts Early

Numbers do not lie, but they can be ignored. Here is one that should keep every Indian policymaker awake at night.

China spends approximately 6% of its GDP on education. India spends 4.6%. The per-student gap is even starker, roughly $1,800 per Chinese student compared to $264 per Indian student. These are not minor differences. They compound across decades and generations.

The outcomes reflect the investment. China achieved near-universal literacy at 97%. India remains at 81%, with persistent gaps between rural and urban areas, between boys and girls, and between states like Kerala and Bihar.

But literacy is the floor, not the ceiling. The real question is what students actually learn. Here, the picture is uncomfortable.

Students from Beijing, Shanghai, Jiangsu, and Zhejiang in China ranked first globally in the 2018 PISA assessments in reading, mathematics, and science. Critics rightly point out that this sample represents wealthy provinces, not rural China. Fair enough. But India’s response to PISA tells its own story.

India participated exactly once, in 2009. Students from Tamil Nadu and Himachal Pradesh, two of India’s better-performing states, ranked 72nd out of 74 countries. The government’s response was not to fix the problem but to withdraw from the assessment entirely, citing “socio-cultural disconnect.”

We have built schools everywhere. What happens inside them is a different matter.

The University Problem

The 1999 Plan for Revitalising Education in China triggered a massive expansion of higher education: the number of colleges doubled, and student enrolment quintupled in a decade.

China’s higher education system now enrols 48 million students with a Gross Enrolment Ratio of 61%. This represents an extraordinary transformation; in 1990, China’s GER was 3.4%. India’s 43 million students represent a GER of only 28%. The National Education Policy 2020 targets 50% by 2035, but we have made this promise before.

China invested strategically in creating world-class research universities. Project 985 (named after the date it was announced: May 1998 (98/5), during Peking University’s centennial celebration) poured 113 billion yuan into 39 elite institutions.

Project 211 was another Chinese government initiative, started in 1995, to develop around 100 key universities to world-class standards, focusing on high-level talent and research for national development. The “21” signifies the 21st century, and the “1” represents the goal of 100 institutions. This gave 70% of national research funding to 116 universities.

The successor, “Double First-Class,” initiative now supports 147 universities in their efforts to achieve global competitiveness by 2050. Tsinghua University declared itself “fully established as world-class” in 2020. Whether that claim is entirely justified, the ambition is instructive.

The Chinese system is not perfect. The gaokao, China’s national college entrance exam, puts a lot of pressure on students and values test scores over creativity. There are still regional differences. Still, the system delivers results.

India’s approach has been different. The IITs and IIMs produce globally recognised graduates: 23 IITs offer 18,160 B.Tech seats annually, and 21 IIMs offer about 6,000 MBA seats. The problem is scale. Only 1% of JEE Main applicants reach the IITs. Elite education touches a tiny fraction of the population.

For most people in India, higher education means crowded colleges, absent teachers, outdated course material, and degrees that employers often do not value. The University Grants Commission controls many aspects, but not quality. Our system is both over-regulated and underfunded.

The government knows this. The National Education Policy is a genuine reform. But policy and implementation are different, and India’s track record of implementing education reforms is not encouraging.

The R&D Chasm

If education creates the foundation, research and development build the house. Here, the divergence is most stark.

In 2006, China published its National Medium and Long-term Programme for Science and Technology Development, a fifteen-year plan to master 402 core technologies. The list included everything from intelligent automobiles to integrated circuits to high-performance computers.

This was not just a goal. It was put into action.

The programme triggered a coordinated national effort across government, industry, and academia. R&D spending increased by 20% annually from 1999 onwards, exceeding 100 billion US dollars by 2011. The number of science and engineering graduates exploded: 1.5 million in 2006 alone. By 2017, China had surpassed the United States in the total number of scientific publications.

China’s R&D intensity reached 2.68% of GDP in 2024, up from 2.1% a decade ago. This translates to $500 billion annually, second only to the United States globally. India’s Gross Expenditure on R&D has been stuck at 0.64% of GDP since 2009-10. In absolute terms, China invests roughly 30 times as much as India.

These numbers show up everywhere. China filed 1.8 million patent applications in 2024; India filed 77,000, a ratio of 23 to 1. China holds 5.7 million patents in force; India holds 228,000. On the Nature Index, which measures high-quality scientific publications, China’s share exceeds India’s by a factor of 21, though India’s growth rate of 14.5% now slightly outpaces China’s 13.6%.

The structural difference matters as much as the quantum. In China, 79% of R&D funding comes from business enterprises, mirroring that of advanced economies such as Japan, South Korea, and the United States. In India, the government contributes 64% of all R&D funding. The private sector provides just 36%.

This is not because Indian companies are incapable of innovation. Reliance Jio, Tata Group, and the IT majors demonstrate otherwise. The incentive structure simply does not push companies toward research. Government contracts favour the lowest bidder (it’s always the L1, sir!), not the most innovative. Tax benefits for R&D exist but are underutilised. The entire system is oriented toward cost arbitrage, not technological leadership.

India’s researcher density of 262 per million population falls far below China’s approximately 1,500 per million and well under the global average of 1,352. We do not have enough researchers, and those we do have are often trapped in bureaucratic institutions with insufficient funding and excessive paperwork.

Technology Transfer: China’s Hidden Strategy

China did not build its technological base from scratch. It systematically, deliberately, and legally extracted it from foreign companies desperate to access the Chinese market.

Beginning with the 1979 Law on Equity Joint Ventures, Beijing required foreign companies to partner with domestic firms, limiting foreign ownership to 50% in strategic sectors. The automotive sector’s “50% plus 2” rule meant Volkswagen, General Motors, and Toyota transferred designs, manufacturing processes, and know-how to Chinese partners in exchange for market access.

Research quantifies the impact. Worker flows from joint ventures to domestic firms explained 54% of technology spillover. Nearly 27% of joint venture employees eventually moved to affiliated Chinese companies, taking their knowledge with them. By 2012, 85% of US-China Business Council members expressed concern about technology transfer requirements.

This policy was only liberalised between 2017 and 2022, after China had already climbed the technology ladder. Tesla became the first foreign automaker to be permitted a wholly-owned factory in 2018. By then, Chinese companies no longer needed the training wheels.

The results are everywhere. Huawei, founded in 1987 with 21,000 yuan, now generates $118 billion in annual revenue, supplies 70% of global 5G base stations, and holds over 150,000 patents. BYD, a 1995 battery startup, sold 4.27 million electric vehicles in 2024, 20% of global plug-in sales. CATL, founded only in 2011, commands 38% of global EV battery production. DJI dominates 70-80% of the worldwide consumer drone market.

These companies did not exist thirty years ago. Today, they define global industries.

India has adopted a similar approach through Production-Linked Incentive (PLI) schemes, which provide subsidies to manufacturers. The method is different: instead of requiring technology transfer, India pays companies to make products here. Early results in electronics are promising, but we are still about thirty years behind.

India’s IT Success: The Exception That Proves the Rule

Before this becomes entirely depressing to read, let me give you some good news. India did get one thing spectacularly right: IT services.

The $224 billion IT services export industry, employing 5.8 million workers, is the world’s largest technology services sector. TCS, Infosys, HCL Tech, and Wipro serve global enterprises across every sector. This success was not planned; it emerged from a convergence of circumstances.

The Y2K opportunity in 1998-2000 opened doors. Global demand for COBOL programmers meant Indian firms earned $2.3 billion from Y2K work alone. English fluency enabled seamless client communication. IIT graduates provided technical credibility. Time zone differences with the US enabled follow-the-sun development. The STPI scheme offered 100% export orientation and tax incentives.

But look at what India created: services, not products. We wrote software for other companies, but did not build our own platforms, chips, or devices. In contrast, China developed companies like Alibaba, Tencent, and ByteDance to serve its own market first, then expanded worldwide. Alibaba makes $130 billion in revenue. Tencent has 1.41 billion WeChat users. ByteDance, worth $480 billion, grew TikTok to 1.6 billion users.

India’s most valuable technology company is TCS, with a market capitalisation of approximately $170 billion. Respectable, certainly. But TCS writes software for clients. ByteDance owns the platform.

The Semiconductor Wake-Up Call

Nothing illustrates the gap better than semiconductors.

China’s SMIC achieved 7nm chip production despite US export controls cutting off access to advanced lithography equipment. The Huawei Mate 60 Pro’s Kirin chip, produced by SMIC in 2023, shocked Western analysts. China’s Big Fund III, launched in May 2024 with $47.5 billion, targets semiconductor equipment, EDA software, and materials, the chokepoints that sanctions exposed.

India had no semiconductor fabrication capacity until recently. The India Semiconductor Mission, launched in December 2021 with a $10 billion allocation, has approved projects totalling approximately $18-$19 billion. Tata Electronics is constructing a fab in Gujarat with first operations expected by the end of 2026. Micron’s $2.75 billion ATMP facility represents America’s bet on diversifying chip packaging away from China.

This is real progress, supported by global politics and decisive government action. However, India is only now building its first chip factory, while SMIC in China is already making 7nm chips. It could take decades to catch up, if we ever do.

One exception deserves mention: ISRO. Operating on approximately $1.5-1.9 billion annually, one-tenth of China’s space budget, ISRO achieved the lunar south pole landing for $75 million. Mangalyaan reached Mars orbit on the first attempt for $74 million. The December 2024 SpaDeX mission demonstrated spacecraft docking capabilities. ISRO proves what Indian institutions can do when given clear mandates, consistent funding, and freedom from bureaucratic interference.

The Demographic Wager

Ask any Indian employer about their biggest challenge, and the answer is consistent: finding skilled workers.

The India Skills Report 2026 found that only 56.35% of Indian graduates are ready for the job market. This is better than a 34% rate around 12-13 years ago, but it still means more than half of graduates do not have the skills employers want.

China addressed this systematically through vocational education. Technical and vocational schools were expanded alongside academic institutions. The system was designed to produce workers with specific skills for specific industries. It was not glamorous, but it worked. Chinese factories are staffed by workers who can operate sophisticated machinery, maintain quality standards, and adapt to new processes.

India has Skill India, launched in 2015 with the ambitious target of training 400 million people by 2022. That target has quietly disappeared from policy documents.

Both nations have working-age populations of approximately 990 million in 2025, but the trajectories could not be more different.

China’s median age is 40.6 years. Its fertility rate of 1.0 means the workforce will shrink by 239 million by 2050. India’s median age is 29.5 years. The demographic dividend window extends to approximately 2055.

A young population only matters if it is educated, skilled, and employed. Currently, India’s youth unemployment rate stands at approximately 16% among 15-24-year-olds. Female labour force participation is 24.6% in India, compared to 70.8% in China. Despite similar total populations, China’s effective labour force of 748 million significantly exceeds India’s 488 million because more Chinese women work.

China’s vocational system enrols 35 million students across 11,000 institutions, producing roughly 10 million skilled workers annually. Over 70% of new manufacturing workers come from vocational schools. India’s 15,000 Industrial Training Institutes have a capacity for only 2.57 million students, with actual enrolment of just 1.44 million, 48% utilisation.

Only 4.1% of India’s workforce has received formal vocational training. Compare that to 52% in the United States, 80% in Japan, and 96% in South Korea. We are not preparing our workers for the jobs of tomorrow. We are not even preparing them for the jobs of today.

We are issuing certificates, not building capabilities.

The demographic dividend that many economists praise could turn into a disaster if we do not address these issues. We have the world’s youngest population, but if they are unskilled and cannot find work, this becomes a problem instead of an advantage.

Germany offers a model: 1.22 million apprentices, 342 recognised trades, 400,000 participating companies, and youth unemployment of just 6%. Neither Asian giant has replicated this.

The Brain Drain Question

India’s diaspora of over 17 million, the world’s largest, includes 3.12 million highly educated migrants representing 65% of global skilled migration. Approximately 33% of IIT graduates leave India annually. Some 1.8 million Indian students study abroad, with 85% choosing not to return. Annual spending on overseas education reached $44 billion in 2024.

China actively recruits its diaspora back. The Thousand Talents Program and its successors offer returning scientists substantial research funding, housing, and professional support. Between 2010 and 2021, approximately 20,000 Chinese-born scientists left the United States, many returning to China amid visa restrictions and political tensions. China is experiencing “reverse brain drain” while India’s outflows continue.

What does India get in return? In 2024, India received $129 billion in remittances, the most in the world. Some call this a ‘brain bank’ rather than a brain drain, but this money mainly goes toward spending rather than research or innovation.

What Would It Take?

India’s demographic dividend window closes by 2055. That gives us three decades to transform the human capital base or watch the dividend become a disaster of unemployed youth.

The arithmetic is unforgiving. Creating 10-12 million non-farm jobs annually requires consistent 8% GDP growth. That growth requires a workforce capable of running modern factories, writing advanced software, conducting research, and competing globally.

This means spending at least 6% of GDP on education, not just 4.6%. It means raising R&D spending to 2% within 10 years, with much greater private-sector involvement. It means training 100 million young people, not just 14 million, and making sure training matches what employers need.

It means improving primary education, so children actually learn to read. It means building vocational programs that employers trust. It means creating research universities that generate real knowledge, not just hand out degrees. It also means having immigration policies that attract talent, not just send it away.

The National Education Policy 2020 is a genuine attempt at reform. The India Semiconductor Mission shows what focused industrial policy can achieve. The PLI schemes are beginning to deliver manufacturing jobs. These are not nothing.

But this gap is the result of decades of investment. Closing it will take more than just new policies—it will require large-scale action, sustained by different governments and not affected by election cycles.

China’s education transformation did not happen by chance. It came from steady investment, clear goals, and holding people accountable for results over forty years. China invested in education at every level. In India, we often celebrate a few successes and ignore the bigger problems. The gap between our best and our average is not a sign of excellence, but a sign that we are neglecting most students.

India has the same potential. We have a younger population. We have a more open society. We have the English language advantage that matters in a globalised economy. We have diaspora networks that connect us to the world’s leading universities and technology companies.

What we are missing is the steady focus needed to turn our potential into real results.

In my next article, I will look at how China built its manufacturing dominance; the factories, SEZs, and industrial policies that made ‘Made in China’ a global reality, and why ‘Make in India’ has been harder than the slogan suggests.

Previous: Part 2 – The Hardware State                          Next: Part 4 — The Industrial State

Sources and Credits: This article draws on data from the Ministry of Education (India), the Ministry of Science and Technology, the World Intellectual Property Organization (WIPO) Patent Indicators 2025, the Nature Index 2024 Research Leaders report, UNESCO education statistics, ASER 2024 from Pratham, NASSCOM Strategic Review 2025, the Press Information Bureau, Hurun China 500 Most Valuable Private Companies 2024, and academic research from Stanford’s China Economy program (SCCEI). Chinese vocational education data from China’s State Council English portal. German apprenticeship statistics from BIBB (Federal Institute for Vocational Education and Training).