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To illustrate the worst-case scenario for China in the near future, Scott Rozelle pulls up a picture from Mexico. It's a completely barren manufacturing warehouse, abandoned after wages in Mexico rose to more than four dollars per hour.

Following its manufacturing moment in the 1980s, Mexico has been struggling to create jobs in part because 40 percent of its workers lack a high school education, the Stanford University Professor of Economics said.

Contrast this to South Korea, where almost the entire workforce has attained a high school degree. After manufacturing jobs left South Korea in the 1980s, he said, well-educated workers were able to upgrade to technical jobs like chip manufacturing and computer assembly.

The question for China is: South Korea or Mexico? Rozelle said.

With rising labor costs, China is under pressure to upgrade from low-cost manufacturing to high-tech production. But it's still an open question as to whether China's labor force will have the education levels to take on these new roles, or if the jobs will move elsewhere as they did from Mexico in the last few decades.

The odds are stacked against China. In some parts of the country, China's labor force more resembles Mexico's than South Korea's, with about 40 percent of workers in the poorest rural areas (China's 592 "nationally-designated poor counties," as deemed by China's anti-poverty authorities) lacking a high school education, Rozelle said.

Furthermore, the financial hurdles to attaining higher education are the highest in the world, illustrated most recently by a series of studies conducted by the Rural Education Action Project (REAP)—an umbrella group that includes Rozelle's Stanford University, Tsinghua University, the Chinese Academy of Sciences, Peking University and the Xi'an-based Northwest University.

In one REAP study of 62 nations, China claimed the highest tuition price for public rural high schools: $160 per student per semester, not including costs like housing and everyday living expenses. This is nearly three times the world's second-highest tuition in Indonesia, which also fully subsidizes the education costs of children under the poverty line.

It's also a stark contrast to the fact that the vast majority of nations—93 percent of those studied—fully subsidize education, including places like Brazil, India and Kenya.

The high costs of education will become even more problematic, Rozelle said, once China's economy begins to restructure towards higher-value production. If the skill levels of the labor force cannot keep up, China will be caught in a middle-income trap, he said, possibly leading to high unemployment and social strife—not unlike what is plaguing Mexico now, he said.

Even a small subsidy could push thousands of students into high school. In REAP's most recent study, Rozelle and his colleagues took 250 junior high classes in Shaaxi Province and selected the two poorest students from each, providing one with a 1,500 to 2,500 yuan subsidy. The survey revealed that 51 percent of students who had received the subsidy were admitted to high school in the fall of 2010, while only 38 percent without the subsidy enrolled.

To some degree, the Chinese government has recognized the importance of limiting the costs of education. In 2009, officials enacted a policy to reduce high school tuition costs, providing 20 percent of students in central regions and 30 percent in the China's western parts with scholarships ranging between 1,000 and 3,300 yuan annually.

But the policy has proved somewhat illusory: In its 2011 survey of more than 3,000 students in Shaanxi Province, REAP discovered that less than five percent of the targeted students had actually received the subsidies.

The origins of intolerance toward Indonesia's Muslim-minority sect Ahmadiyah go back to the early twentieth century, says Jeremy Menchik. In a Jakarta Post op-ed, he unearths the connections between the Indonesian government and anti-Ahmadiyah sentiment, and makes suggestions for how the country can prevent future violence.

Since opening its doors to the world in 1978, China has pursued a sometimes erratic but reasonably steady course leading to increasing global economic and political interaction. Its interests now extend from Pyongyang to New York and Sydney to Riyadh. U.S. President Barack Obama’s announcement of a new “pivot” toward Asia, recent events on the Korean Peninsula, and China’s upcoming leadership transition provide additional reasons to seek greater understanding of China’s goals and interactions with other nations.

Thomas Fingar, Stanford’s Oksenberg-Rohlen Distinguished Fellow, is leading a new multiphase Shorenstein Asia-Pacific Research Center (Shorenstein APARC) initiative to explore the nuances and complexity of China’s foreign relations and domestic issues. The China and the World research project aims to contextualize and better understand China’s regional and global interactions, both from the perspective of China itself and from that of other countries. Beginning with Northeast Asia, the project will analyze China’s relations region-by-region throughout the world, and will involve experts from Stanford, China, and the regions studied. It kicks off with a Shorenstein APARC-organized workshop held Mar. 19 and 20 at the new Stanford Center at Peking University.

Fingar discusses the development of China’s foreign relations since 1978, and describes the project and workshop’s background.

In the three decades since Deng Xiaoping enacted his 1978 Open Door reforms, what have been the main trends in China’s global engagement?

The general trend since 1978 has been for China to become increasingly active and engaged in a growing number of places around the world. There have been a number of phases to this.

The “honeymoon period” of U.S.-China relations (1979–1989) was a period of essentially no competition to China’s interaction within the U.S.-led world economic system. China concentrated on the OECD countries—especially the United States, Japan, and Western Europe—that had money to invest and willingness to trade.

After the 1989 Tiananmen Square Incident, China’s international options became more constrained as its relations with the developed world plateaued. It began to reach out to the places that would deal with it: Southeast Asia and particularly Africa. This was in part diplomatically motivated, and in part a search for new markets for the low-end goods it was beginning to produce. It was also the beginning of its search for energy.

Around 2000, China transitioned from building a more modern economy towards being one—beginning the era of its “rise.” China’s demand for resources went up, as did its capacity to supply more markets and its ability to invest more of its growing foreign exchange earnings. It became globally active, proclaiming that it had a new, less exploitative model than what the United States and Europe offered.

What Northeast Asia issues do you think China will focus on this year, especially as it plans for a major leadership transition?

North Korea’s stability and China’s growing investments in the DPRK. Beijing is acutely interested in whether Kim Jong Un will prove a viable leader and whether the regime will be able to manage its new challenges. China is concerned about possible North Korean provocations that might trigger responses by South Korea and/or the United States, putting at risk the peaceful regional and international situation China needs for its political and economic development.

The second issue is answering the question: what does the U.S. pivot toward Asia mean? What does it mean in terms of security, economics, and relations with Japan and Korea? China is the largest trading partner for each of these countries. They value it as a market, and as a source of resources. Yet they also worry about being excessively dependent on China. They appear not to have worried about this quite so much when their dependence on the U.S. market was comparable.

Two full workshop sessions will be devoted to Japan and South Korea, both countries with close U.S. ties. What are the most important factors with regard to China’s rise for these two countries? What about for Southeast Asia?

One of the reasons for our upcoming Beijing workshop is to develop a general template of questions we can ask for each region. We want to avoid focusing the questions too narrowly on Northeast Asia.

For Japan and Korea, one factor has to do with economic opportunities and with their own vulnerabilities. The other has to do with the security challenges of China’s rise, and the uncertainty of its military aspirations. Japan and Korea do not want to be drawn into U.S.-led activities, but they still value the United States for protection. They are concerned about managing the decoupling of economic and security dependence, about no longer being dependent on the same country for both.

Many regional issues are interrelated, such as maritime territorial claims and naval expansion. China is an economic player in Southeast Asia, and the Philippines and Thailand have an alliance with the United States. Indonesia is a rising county in Southeast Asia, and India is an outside player in the region. The U.S. 7th Fleet currently defends the shipping lanes to Northeast Asia that go through Southeast Asia, which probably is not the long-term solution.  

Russia played an important role in shaping the political ideology in the early days of the People’s Republic of China, and the politics of both countries—especially Russia—have changed so much. What is their relationship like now?

Correct and limited. The West imposed a military hardware embargo on China after Tiananmen, so Russia is a limited alternative for that, and it is also a source of energy and other resources. It is fair to say China has something close to disdain for Russia, for what it sees as political confusion and economic mismanagement. The idea of a strategic triangle—using Russia to balance U.S. influence—is something China sees as unviable.

As you move forward with this project, what is the ultimate goal?

The goal is to understand the dynamics of interaction—to understand the bigger picture. Other countries have objectives and concerns with regard to China, while China has objectives and concerns of its own. It is about identifying things such as where they see the same and different kinds of opportunities; what concerns they have about third country interests or involvement; and how they evaluate the success of policies to date.