Every year, 40,000 factories shut down across China. The country's economy has been built on the back of unskilled labour and now that wages are rising, jobs are moving elsewhere. In recent decades there has been a huge investment in infrastructure, but today there is almost nothing left to build. A middle-income country with 600 million uneducated rural poor, China faces a crisis of human capital. Without better skills and education, it risks not only economic stagnation, but also a surge in corruption and organised crime. And as its unskilled, heavily male population grows restless, the only way to stave off social unrest may be an ever greater reliance on militaristic nationalism. China has experienced unprecedented growth and deeply embedded itself in the world economy, but it has missed a vital component in securing its future. The implications should worry all of us.