R&D Expands in Chinese Research Parks/Patent Filings Soar

There are three trends at work in the growth of R&D in China. The first is that R&D spending has been growing significantly for many years. For 2022, gross expenditures on R&D in China were expected to reach $551.1 billion (or 2.10% of GDP), according to R&D Magazine’s 2022 Global R&D Funding Forecast. (This number is on a PPP or purchasing power parity basis—an attempt to create a fair comparison to U.S. prices.) China has R&D goals laid out in the National Medium- and Long-Term Plan for the Development of Science and Technology. This is a 15-year plan, originally published in 2014, which is updated on a regular basis.

Of importance, the plan outlines ways to assimilate and then improve upon Western innovations. Methods include significant investment in domestic manufacturers along with patent laws that favor Chinese companies. The result has long been pressure on foreign firms to transfer technology into Chinese joint ventures in order to capture sales within China. Over the long term, this has enabled China-based companies to compete head-on with foreign firms by taking advantage of foreign design, research and engineering. These objectives have created significant controversy in other nations. In particular, the Trump administration was a highly vocal critic of Chinese research and development ambitions.

Second, many Chinese companies have seen significant success in the global marketplace. Telecommunications equipment makers such as Huawei Technologies, computer hardware makers such as Lenovo Group (which purchased the IBM laptop brand) and a host of companies like them found increased investments in research to be key to their continued growth. In the case of Huawei, the firm maintains major research facilities around the world, including a $90 million facility in Helsinki. At the same time, Chinese firms are increasing their investments in product design and factory automation in order to create products in very high volume suitable for the rapidly growing number of middle-class Chinese consumers.

Next, hundreds of non-Chinese companies of many types have set up serious research labs in China. This includes leading companies such as Microsoft, Nokia, Nortel and Roche. GE alone has more than two dozen labs in China. Major computer research facilities include the IBM China Research Laboratory and the Intel China Research Center. Research in China is driven by multiple factors, including relatively low operating costs and salaries, the large base of engineers and scientists coming out of Chinese universities and the desire to have labs in close proximity to Chinese manufacturing centers and business markets.

China produces hundreds of thousands of electrical engineering graduates on the bachelor’s level yearly. Also, China is going out of its way to lure home thousands of Chinese-born scientists and engineers who have been working in the U.S. and elsewhere abroad.

The result is a growing perception of Chinese technical expertise as among the best in the world. While China grew in strength for many years as a low-end manufacturer of items like apparel and toys, it now attracts buyers both at home and in the West for its telecommunications equipment, mobile devices and online services.

Chinese research facilities tend to be located in the same districts as the high-tech manufacturing centers that cater to foreign markets: the southern and eastern coastal regions. For example, on the eastern coast near Beijing, you’ll find the Zhongguancun Science Park and the Tianjin High-Tech Industrial Park, as well as the Beijing Frontier International AI Research Institute. Further down the coast, near Shanghai, you’ll find the Caohejing and Zhangjiang High-Tech Parks. There are also major research parks near the nation’s leading universities, such as the major science park next to the world-class Tsinghua University in Beijing. In addition, the city of Nanjing (located less than 200 miles north of Shanghai) has developed a 134 square-mile research park that is home to dozens of major tech companies and startups.

Chinese technology sectors are quickly expanding well beyond consumer electronics and computer and telecom hardware where China has long had strength. For example, the semiconductor fabrication and chip design industries are developing rapidly there. This is part of the Made in China 2025 initiative, which also focuses on 5G, artificial intelligence (AI) and electric vehicles.

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