From classroom investments to groundbreaking innovation, China’s education strategy offers a blueprint for nations seeking economic transformation.
Why should you care about the launch of yet another AI model?
Here’s why: on Monday, January 27th, following news that a Chinese startup had launched a powerful new artificial intelligence model, approximately $1.0 trillion was wiped off the Nasdaq. The longer-term implications are even more profound. The United States, which has long held a technological edge—and, by extension, an industrial advantage—may be watching that edge erode in real time.
The startup behind this breakthrough, High-Flyer, developed the Deepseek Ai platform with less than $6 million and a team of fewer than 200 young professionals, all educated entirely in China. None were graduates of Ivy League or other prestigious Western universities. Yet, Deepseek matches—or even surpasses—top U.S. AI models like ChatGPT, Llama, and Gork across various benchmarks. Remarkably, the platform is entirely free and open-source.
This achievement underscores the immense power of China’s education system. In the mid-1990s, China allocated just 2.5% of its GDP to education. By 2010, this figure rose to 3.48%. reaching over 4% in 2012—a target set by the government. By 2022, public spending on education was sustained at 4.02% of GDP.
China initially focused on elevating elementary and secondary education to international standards. Vocational training, a system robust even during Mao’s era, also received substantial investment.
China’s education reforms have been measured through initiatives like the Programme for International Student Assessment (PISA), which evaluates 15-year-olds’ reading, mathematics, and science competencies. While China’s participation in PISA has been selective—focused on affluent regions like Shanghai, Beijing, Jiangsu, and Guangdong—the results have been exceptional. In 2018, these regions outperformed every other country, with even the most disadvantaged students scoring better in reading than the average student in OECD countries.
It is important to note that these results reflect China’s top-performing regions, not its entire education system, nevertheless, they provide a glimpse into the capabilities fostered by focused investments in education.
As China’s economy evolved, so did its emphasis on tertiary education. Today, among the top 10 STEM universities globally, four are in China. Crucially, the Chinese view education not as a welfare expense but as a strategic investment in their economic future. Rankings like ShanghaiRanking’s Global Ranking of Academic Subjects (2023) confirm the dominance of Chinese universities in STEM fields.
This commitment to foundational education has propelled China to its status as the world’s second-largest economy. Its investments in higher education are now driving unprecedented innovation, as evidenced by breakthroughs like Deepseek AI.
We see a similar trajectory in Vietnam, another nation prioritizing education as a driver of economic transformation.
Renowned economist Ashoka Mody has noted, “There is virtually no economy that has transformed without first getting its primary and secondary education right.”
Mody highlights Japan’s mass education efforts during the Meiji Restoration, which laid the groundwork for it to become Asia’s first industrialized nation. He points to similar transformations in Taiwan and South Korea. In contrast, he critiques India’s underperformance, which he attributes to the neglect of primary and secondary education.
According to Mody, Indian policymakers disproportionately prioritized elite institutions like the Indian Institutes of Technology (IITs) and Indian Institutes of Management (IIMs), which benefited only a small fraction of the population. While these institutions gained global recognition, the majority of India’s population lacked access to quality basic education. The neglect of foundational education for the masses has perpetuated inequality and limited social mobility. Poor educational outcomes, especially in rural and marginalized communities, have constrained India’s ability to build a broad-based and productive workforce. Mody links the inadequacies in education to India’s inability to achieve consistent high growth. The lack of a well-educated labor force has led to low productivity and limited the country’s capacity to industrialize effectively.
Economist Paul Romer’s endogenous growth model adds another perspective. Romer emphasizes the role of knowledge and human capital in driving sustained economic growth. He argues that ideas and innovation are non-rival goods: the more they are shared, the more value they create.
As Romer famously said “Human capital is the engine of growth. Investing in people is the best way to ensure prosperity.”
China’s strategy aligns with Romer’s insights. By prioritizing widespread access to education and fostering homegrown talent, China has built the knowledge base necessary for breakthroughs like Deepseek AI.
For nations like Pakistan, this serves as a wake-up call. Without a strong foundation in primary and secondary education, no country can compete in an increasingly knowledge-driven global economy.
China’s success today reflects political and societal choices made decades ago. These decisions shaped its economic policies, not the other way around. The lesson is clear: education must be the cornerstone of any national strategy for economic transformation.
The rise of Deepseek AI is a testament to the power of education, innovation, and long-term investment in human capital. It is a call to action for nations worldwide: prioritize education, especially in STEM fields, and build ecosystems that foster collaboration, inclusivity, and innovation.
The world is changing rapidly, and the rules of economic competition are being rewritten. The question is not whether we can afford to invest in education—it is whether we can afford not to.
