Transcript Foreign R D in China:   Drivers, Dynamics, and New Directions

Foreign R&D in China:
Drivers, Dynamics, and New Directions
Prepared for the Conference on
“Global R&D in China”
Nanjing, PRC
May 27-30, 2005
by
Kathleen A. Walsh
Consultant
Evolution of Foreign High-Tech
R&D in China
• Drivers
• Dynamics
• Strategies (PRC and Foreign Investors’)
• Implications
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Official Figures Show a Steady Rise
in Foreign R&D in China
750
800
700
600
600
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400
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300
200
100
120
148
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0
1998
US DOC
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PRCG
2001
2002
PRCG
2003
2004
PRCG
2005
PRCG
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Rise in China R&D Appears Tied
to IT Industry Boom … and Bust
35
35
Year 1st R&D facility announced
30
26
25
19
20
15
13
10
9
10
6
4
4
5
1
1
2
2
0
87
19
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Source: Stimson Center Study (2003)
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There Have Been Several Distinct Stages
of Foreign R&D in China
1990
Exploratory &
Strategic Partnerships
1995
2000
Expansion
Consolidation
Explosion ?
2005
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Source: Stimson Center Study (2003)
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Evolution of Foreign R&D in China
Phase 1
~ late 1980s–mid/late-1990s
Exploratory and Strategic Partnerships
• Sino-Foreign Joint Ventures
Stokes’ Matrix
• University Partnerships
• “Show R&D”
Quest for
Fundamental
Understanding?
Deliberate Use
Walsh - Conference on Global R&D in China
N
Y
Y
Bohr’s
Quadrant
Pasteur’s
Quadrant
N
?
Edison’s
Quadrant
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Evolution of Foreign R&D in China
Phase 2
~ mid- to late 1990s
Expansion
• Contract R&D / outsourcing – particularly to
universities
• Training centers added
• “Go West” emphasis and incentives
• Product development: localization, upgrades, &
system and standards integration
Note: Took place during IT Industry boom; pre-WTO
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Evolution of Foreign R&D in China
Phase 3
~ late 1990s-early 2000s
Consolidation
• WFOEs – more centralized facilities
• More advanced R&D objectives – moving
toward “R” v “D”
• Closer relations with parent company
• MNC concerns over increasing costs
Note: Took place during IT Industry bust; post-WTO entry
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Evolution of Foreign R&D in China
Phase 4
~ 2003-2005 +
Explosion (?)
• Rising numbers of R&D investments gaining
attention of PRCG and others … leads to interest
in more statistics being gathered
• PRC and MNCs seeking new ways to exploit
commercial R&D in China
• Rising cross-regional R&D collaboration, with
China serving as hub
• Concerns grow over funding for basic R&D
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Implications for the Future
China’s current foreign R&D investment trajectory is
likely to remain positive, but it’s slope is dependent on
several factors:
• Absence of a significant political / economic
disruption
• Continued high economic growth rates
• Continued high levels of FDI to allow greater
focus on basic R&D funding
• China’s Western development strategy
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Implications for the Future
Phase 5 ?
~ 2005-2010
• China achieves 2.0 % of R&D/GDP by 2010
• “Go West” campaign resurges
• East Asian R&D consortium emerges as competitive force
• Greater levels and advanced forms of Chinese R&D appear
overseas
• Increased emphasis on civil-military integration causes
concerns abroad
• China gains recognition for innovation; wins first Nobel Prize
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