Investing in People: Why Human Capital Is Becoming the New Engine of Global Growth

China is adjusting its economic strategy in response to a changing global environment. For many decades, growth in China and in many other fast-developing economies was driven largely by investment in physical assets: roads, factories, housing, ports, industrial zones and infrastructure.

That model created extraordinary expansion. But the world is now entering a different stage. As productivity slows, technologies change faster and populations age, countries can no longer rely only on buildings, machines and industrial capacity to secure long-term growth.

A new priority is emerging: investment in people.

This means investment in education, healthcare, skills, lifelong learning, social protection and the ability of citizens to adapt to a fast-changing economy. The idea is simple but powerful: the future of growth will depend not only on how much a country builds, but on how well it develops human potential.

This theme will be one of the important areas of discussion at the World Economic Forum’s Annual Meeting of the New Champions, also known as “Summer Davos”, which will take place in China from 23 to 25 June 2026 under the theme of scaling innovation for impact.

From Physical Capital to Human Capital

For many years, investment in physical capital was the main engine of development. Governments and businesses built highways, bridges, factories, real estate, power plants and industrial parks. These investments helped countries urbanise, industrialise and increase employment.

But over time, this model begins to produce weaker results.

When a country already has enough basic infrastructure, each additional road, factory or building delivers a smaller economic return. In some cases, excessive physical investment can create overcapacity, debt pressure, underused assets and weak productivity growth.

This does not mean that infrastructure is no longer important. It remains essential. But physical investment alone is no longer sufficient.

The next stage of competitiveness depends on people: their knowledge, health, creativity, digital skills, professional flexibility and ability to work with new technologies.

A modern economy needs not only more factories. It needs better engineers, teachers, doctors, managers, programmers, technicians, researchers, entrepreneurs and service professionals.

Why the Shift Is Happening Now

There are several reasons why investment in people is becoming a global priority.

The first reason is slowing productivity. Many advanced and emerging economies are finding it harder to generate strong productivity gains. Machines and infrastructure matter, but the real difference increasingly comes from the quality of the workforce. Countries with educated, healthy and adaptable people are better able to absorb innovation and create value.

The second reason is rapid technological change. Artificial intelligence, automation, robotics and digital platforms are transforming the labour market. Skills that were valuable ten years ago may become outdated much faster today. This makes lifelong learning not a luxury, but a necessity.

The third reason is demographic change. Many countries are ageing. A smaller working-age population must support a larger retired population. In this environment, every worker must become more productive, and this requires better education, better health and better skills.

The fourth reason is weak consumption. In many economies, households save too much because they are uncertain about income, healthcare, pensions and future employment. Stronger public services and more reliable social protection can help people feel more secure and spend more confidently.

For these reasons, countries are beginning to understand that human capital is not only a social issue. It is an economic strategy.

China’s New Growth Logic

China’s economic transition is especially important because of the scale of its economy.

For decades, China’s growth was powered by industrialisation, exports, construction, infrastructure and urban expansion. This model helped lift hundreds of millions of people out of poverty and turned China into one of the world’s largest economic powers.

But today China faces a new stage of development.

Its population is ageing. The real estate sector is no longer the same growth engine it once was. Global trade is more uncertain. Technology competition is intensifying. Domestic consumption needs to become stronger. Productivity must increasingly come from innovation, not only from investment volume.

That is why China is moving towards a more balanced model: investment in both physical assets and people.

This does not mean abandoning infrastructure or industry. It means recognising that roads, factories and technologies create the greatest value when they are matched with educated, skilled and healthy citizens.

China’s 15th Five-Year Plan for 2026–2030 reflects this dual approach: continuing strategic investment in physical capacity while placing greater emphasis on people, innovation and long-term human development.

How Investment in People Creates Growth

Investment in people supports economic growth in several important ways.

1. It Raises Productivity

A better-educated and healthier workforce can use technology more effectively. Skilled workers are able to operate advanced equipment, manage digital systems, improve processes and create new products.

Human capital allows physical capital to work better.

A factory without trained workers is only a building. A data centre without engineers is only hardware. A hospital without doctors and nurses is only infrastructure. Technology becomes productive only when people know how to use it.

Countries that successfully moved into high-income status usually invested heavily in education and skills before becoming major innovation centres. The United States, Germany, Singapore and South Korea all demonstrate the deep connection between human capital and technological competitiveness.

2. It Strengthens Consumption

People spend more when they feel more secure.

If households fear unemployment, healthcare costs, weak pensions or unstable income, they tend to save rather than consume. This limits domestic demand.

Investment in healthcare, education, childcare, social protection and stable employment can reduce uncertainty. When people believe that their future is more secure, they are more willing to spend on services, culture, travel, entertainment, education, sport, digital products and quality of life.

This is especially important for economies that want to rely less on exports and more on domestic demand.

3. It Supports Industrial Upgrading

Advanced industries need advanced skills.

The development of high-end manufacturing, artificial intelligence, biotechnology, clean energy, digital services and modern logistics depends on the availability of specialised talent.

Companies cannot upgrade if they cannot find qualified workers. Innovation slows when there is a shortage of engineers, researchers, technicians, designers, managers and digital specialists.

By investing in people, countries create the talent base required for industrial transformation.

This reduces recruitment costs, improves business confidence and allows companies to move into higher-value sectors.

4. It Makes Labour Markets More Resilient

Technological change creates disruption. Some jobs disappear, others change, and new occupations emerge.

Without retraining, workers can become trapped in declining sectors. This creates unemployment, social tension and wasted human potential.

Vocational education, re-skilling, up-skilling and employment support help workers move from old industries into new ones. This makes the labour market more flexible and reduces the social cost of technological change.

In this sense, investment in people is also investment in stability.

The Global Meaning of Human Capital

The shift towards investing in people is not only a Chinese issue. It is becoming a global question.

Every country is facing the same basic challenge: how to create growth in a world where capital, technology and labour are changing at the same time.

Advanced economies need to renew ageing workforces and maintain innovation.

Emerging economies need to avoid the middle-income trap.

Ageing countries need to raise productivity per worker.

Young countries need to educate large new generations.

Technology-driven economies need constant re-skilling.

Developing economies need stronger healthcare, education and labour systems.

The conclusion is clear: human capital is becoming one of the most important forms of national wealth.

Natural resources can be exhausted. Buildings can lose value. Machines can become obsolete. But educated, healthy, creative and adaptable people can generate new value again and again.

The Challenges of Transition

However, moving from a physical-investment model to a people-centred growth model is not easy.

The first challenge is demographic pressure. Ageing populations increase spending on pensions, healthcare and social support, while reducing the number of workers. This makes investment in productivity even more urgent, but also more financially difficult.

The second challenge is fiscal pressure. Governments must decide how to finance education, healthcare and training while managing debt, infrastructure needs and social demands.

The third challenge is inequality. If investment in people benefits only large cities or elite groups, it can deepen social divides. Human capital strategy must therefore reach rural areas, smaller cities, low-income families and vulnerable workers.

The fourth challenge is the quality of training. It is not enough to spend more money. Education and vocational training must match the needs of the modern economy. Schools, universities, employers and government institutions must work together.

The fifth challenge is external uncertainty. Trade tensions, technology restrictions, geopolitical fragmentation and weak global demand can affect how quickly human capital investment translates into growth.

For these reasons, the transition will be gradual. No country can change its growth model overnight.

From Infrastructure Economy to Human Potential Economy

The central economic lesson of the new era is that growth must become more human-centred.

The twentieth-century development model often asked: how much can we build?

The twenty-first-century model asks: how much human potential can we unlock?

Physical infrastructure still matters. But the most important infrastructure of the future may be intellectual, social and institutional: schools, universities, research centres, healthcare systems, digital skills platforms, social trust and lifelong learning systems.

The countries that understand this will be better prepared for the future.

They will not only build cities. They will build capabilities.

They will not only expand industry. They will upgrade people.

They will not only chase growth. They will create resilience.

Conclusion: People Are the New Strategic Asset

The global economy is entering an age in which people are becoming the most important strategic asset.

China’s move towards investing in both physical assets and people reflects a broader global shift. Around the world, countries are recognising that long-term competitiveness depends on human capital: education, health, skills, creativity, adaptability and confidence.

The next stage of growth will not be driven only by concrete, steel and machinery. It will be driven by knowledge, trust, innovation and the ability of people to adapt to change.

This is why investing in people is not a soft social policy.

It is one of the strongest economic strategies of the future.

The countries that develop their people will develop their economies.

The countries that fail to do so will discover that even the best infrastructure cannot compensate for underused human potential.