This paper deals with educational issues in the People's Republic of China and potential economic development due to investments in the education system. In the period from 1998, there was a big growth in education which was accompanied, among other things, by positive growth in gross domestic product. The crucial importance of investing in education is providing a competent workforce which is a pillar of a successful modern economy. There is a difficulty of the proper allocation of resources and the reform of education is the hukou system in China, which restricts people to live and work in a certain location which is an obstacle for people to freely move and equal chances for education. So far, the discrepancy between rural and urban hukou has been noticed, with urban hukou recording a higher percentage of educated people, as well as a proportionally higher income, while rural hukou is lacking opportunities for further education. For China to achieve the planned economic growth, it is evident that it must reform its education, the focus of which would be on improving human/knowledge capital as well as set aside a higher percentage of gross domestic product for investments in education.