Yang, a Manchester student from China, emailed me some interesting observations about education signaling in China.  Reprinted with his permission.

Professor Caplan, 

Your signalling model is illuminating. Allow me to furnish you with some data from China. 
secondary schooling, students in China compete for placements in higher
education by participating in Gaokao. The number of universities you
can apply to is limited. To someone who has done pretty good on the
exam, the following options are presumably open: 
a. Enter a lousy and useless department in a big name university. 
b. Enter a renowned department in a specialised and less famous university.  
In terms of attraction, a>b will correspond to the signalling model, a<=b will confirm human capital theory.  
In reality, a completely destroys b. 
someone who have experienced both Chinese and Western higher education,
my impression is that a Chinese university education is even more
useless generally in terms of job relevance. Even more severe than the
heavy taxpayer subsidy for higher education in America, we have a
nationalised higher education system which exercises stringent price
control. The result is more and more students graduate into
And I agree with you, technology is not going to solve this.

In a later email, Yang adds:

A bit more of my observation: on the employers side, I am more
familiar with the hiring behaviour of ‘Shiye Danwei’, a form of
non-public institutions which are controlled by the state (For example
almost every newspaper and tv station in China is organised in this way)
and the good old state-enterprises. Excluding many who get in these
institutions through back door, the qualification requirements are
usually high. Good university degree is a must. And a master’s degree is
increasingly becoming a must, too. I am guessing a mixture: signalling,
heads of these units competing for prestige, and general culture
reverence for learning? 

Signalling: The quality of master programs,
especially that of liberal arts, is just non-existent. HOWEVER, to be
chosen onto a master program, you have to sit a national exam, the
preparation of which entails more than a year of memorizing and
preparing. That means even if you sit through the three years, you have
already proven yourself a super hard-working, super conforming person by
getting there.