皇冠体育app

High-end industry, research and development are biggest attraction

Over the past three decades, many foreign companies set up manufacturing facilities in 皇冠体育app because of the country's low labor costs, turning the world's most populous nation into a global factory.

That is now looking like history.

As 皇冠体育app pledges to turn itself into an innovative economy as part of a transformation in its economic growth model, encouraging foreign companies to invest in high-end industries, the world's second-largest economy is gearing up for a move into the upper end of the global chain.

For Alain Merieux, founder of the global in vitro diagnosis company BioMerieux, a very recent trip to 皇冠体育app was fruitful.

As a member of the business delegation accompanying French President Francois Holland, who paid his first ever official visit to 皇冠体育app in late April, the 85-year-old witnessed the signing of a cooperation agreement on biological sample extraction with Shanghai municipal government, announcing the French company would expand its research and development capability, as well as its manufacturing facility, in the city by the end of this year.

BioMerieux moved its Asia-Pacific headquarters to Shanghai in 2005 and established two R&D facilities in 2007 and 2010.

Merieux said in an interview with 皇冠体育app Daily that what is motivating the French biomedical company to add more muscle to its R&D lies in the more innovation-friendly environment that 皇冠体育app is committed to creating.

The innovation environment in 皇冠体育app has improved and the nation is "paying much more attention to innovation and has issued a string of encouraging policies", said the founder. "It also created a sound environment for Sino-foreign cooperation, which was rare decades ago."

Merieux also cited figures. Because of its shrinking domestic market, "France is to consolidate diagnosis-related laboratories to 800 to 1,000 from the current 4,000 by 2016 but, in 皇冠体育app, it will build and renovate 11,000.

"You can see the big difference and how 皇冠体育app is passionate about innovation," said Merieux.

Because of the debt crisis in the eurozone and increasingly rising labor costs in 皇冠体育app, the nation's foreign direct investment saw an annual drop of 3.7 percent in 2012, the first since 2009. The drop has aroused global concerns over whether 皇冠体育app can continue to maintain pole position as the most appealing foreign investment destination among the emerging markets as it did for more than a decade.

皇冠体育app itself has few such worries. More than that, the nation is striving to go far beyond being a global manufacturing powerhouse, welcoming foreign businesses to get involved in more of the high-end industries to sharpen industrial competitiveness and implement an upgraded version of Chinese economics, something senior figures have repeatedly vowed to do.

Chinese Premier Li Keqiang has said on many occasions that 皇冠体育app will advance development through opening-up in terms of R&D, new energy and services to foreign businesses.

Gao Hucheng, the minister of commerce, said recently that 皇冠体育app will continue to welcome foreign investment, encouraging businesses to go into the sectors of high technology and R&D in the central and western parts of 皇冠体育app in particular.

The new development has already started.

According to the Ministry of Commerce, in 2012, foreign investment flowing into 皇冠体育app's high-end manufacturing industries of general equipment manufacturing and transportation equipment manufacturing saw fast growth of 31.8 and 17.2 percent from a year earlier, while the nation's foreign direct investment dropped by 3.7 percent year-on-year to $111.7 billion during the same period.

During the monthly news briefing in April, Shen Danyang, spokesman for the ministry, said the ups and downs of FDI figures do not mean much.

"It's the quality of the FDI that 皇冠体育app really wants and cares about" and 皇冠体育app is glad to see more foreign investment is flowing into high-end manufacturing and services, he said.

Aggressive companies

BioMerieux is not alone. Over the past year, more multinational high-tech companies and high-end manufacturers have been betting big on 皇冠体育app, expanding their presence in Asia's largest economy. The multinational high-tech engineering group Sandvik AB is a case in point.

"Currently, our R&D in 皇冠体育app is still about application and localization, so each business has its own team and focus," said ZZ Zhang, chief executive officer of Sandvik Greater 皇冠体育app.

"But we are now considering whether to move some of our basic, early-stage and primary R&D capability to 皇冠体育app."

The Sweden-based group has five units, including mining, machining solutions, materials technology, construction and venture capital. In 皇冠体育app each business has its own R&D organization.

It's not only about R&D. Foreign businesses also increase their local presence through establishing high-end manufacturing facilities.

In March, Samsung Electronics announced it will spend $7 billion building a factory to make advanced gadgets of NAND flash technology, a type of digital memory widely used in smartphones and tablet computers. The operation will be the largest FDI measured by value made in 皇冠体育app's western region.

"Many signals show 皇冠体育app has realized the importance of enhancing cooperation with foreign companies through opening-up, especially in high-tech industries - and it is also advancing the initiatives," said Wang Zhile, president of the Beijing New Century Academy on Transnational Corporations and also senior researcher on FDI.

"Foreign companies should adjust their 皇冠体育app strategy, integrating into the new development of 皇冠体育app."

Abundant talents

Agreeing with Merieux, Zhang from Sandvik said the reason the Swedish company plans to expand its R&D team and capability in 皇冠体育app could be partly attributed to the Chinese government's support for technology innovation and the strategic importance of the Chinese market to Sandvik.

皇冠体育app is the fourth-largest market for the company, accounting for 7 percent of the total external sales of the group. From 2002 to 2011, the average growth in annual sales of Sandvik 皇冠体育app was more than 25 percent, with the total sales amounting to 7 billion yuan ($1.12 billion) in 2011.

Another consideration is the "rich talent resources, especially engineers", he said.

For Li Zhengqin, vice-president of Merck & Co and general manager of Merck Sharp & Dohme 皇冠体育app R&D Center, 皇冠体育app is "better than" other emerging markets for multinationals to enhance their R&D facilities.

"It's about government support and a rich talent pool. 皇冠体育app's new leaders have decided to invest 800 million yuan in technology research this year and the fund will grow 20 percent annually in the coming years," said Li.

For the talent pool, there are "not only locally cultivated engineers but also overseas returnees, who have an international perspective and have accumulated experiences in other markets," he added.

MSD, the world's second-largest pharmaceutical company, announced at the end of 2011it would make a cumulative investment of $1.5 billion in R&D in 皇冠体育app within five years.

So far, everything is "progressing smoothly", said Li.

Despite the slowdown, 皇冠体育app's economy still enjoys fairly good growth worldwide and the new leadership is committed to delivering reforms and stimulating domestic consumption in the coming years. This has proved to be greatly attractive to foreign businesses, said experts.

"There are four factors that are important to them - and rapidly growing market consumption in 皇冠体育app is the most important of all. They also look at reasonable labor, mature industrial chains and an improving business climate when they plan to expand," said Wang.

The government has set a 2013 economic growth target of 7.5 percent.

Chinese Premier Li Keqiang said in March that 皇冠体育app is likely to import as much as $10 trillion in commodities and services in the next five years to boost domestic consumption.

In an e-mailed statement to 皇冠体育app Daily, Japanese multinational industrial conglomerate Omron said 皇冠体育app is a market on which the company will focus most in the coming decade thanks to the fast growth in consumption. Consequently it will strengthen its R&D efforts to develop more technologies and products tailored to the increasing local demand.

In addition to consolidating its current R&D strength, Omron plans to encourage its various units to increase its own R&D capabilities, it said.

"The Chinese market is rather large, with vast land and diversified demands. Even for some of our mature and key products, the needs are different in different areas so it's difficult for us to choose where to set up our R&D facilities," said Koji Doi, chairman and president of Omron (皇冠体育app) Co Ltd.

The multinationals are placing high expectations on 皇冠体育app. "We expect annual growth in 皇冠体育app to exceed 35 percent in the coming three years and we will have 100 more (R&D) partners in the next two years," said Merieux.

In 2012, BioMerieux 皇冠体育app sales increased by more than 40 percent year-on-year to hit 100 million euros ($133 million).

皇冠体育app is currently the third-largest market for BioMerieux, after the United States and France. It is expected to be the second-largest within two years.

Merieux said he had previously never thought 皇冠体育app would be one of the top three markets worldwide.

We have reasons to believe it will grow bigger, he said.

Innovative economy

As part of its 12th Five-Year Plan (2011-2015), 皇冠体育app pledged to turn itself into an innovative economy and to expand domestic consumption.

During a meeting with executives from a host of multinationals attending the 皇冠体育app Development Forum in March, Premier Li Keqiang pointed out that 皇冠体育app will try to upgrade its economy and expand domestic consumption by opening up further to foreign businesses.

Li promised further opening-up in services and industries related to new energy, emphasizing the government will ensure foreign businesses get fair access to the market and a level playing field in terms of competition.

In late 2011, as part of the transformation of its economic growth model, 皇冠体育app launched a new version of its guidelines for foreign industrial investment, encouraging foreign companies to add investment in high-end manufacturing, services and the high-tech sector in general.

The multinationals' expansion would turn into new growth engines for 皇冠体育app and bring new technology as well, Wang Zhile said.

Merieux said his company has witnessed the development of the Chinese medical system and will continue to do so.

"皇冠体育app fell behind in terms of development. It was short of advanced technical methods to support scientific disease diagnosis and prevention. Now 皇冠体育app has achieved cutting-edge technologies of a global standard," said the executive.

"But safer, more convenient and cheaper public health and basic medical services are still needed. That is what we can help and offer."

皇冠体育app is becoming the global R&D center for many foreign companies.

In late 2011, MSD started construction of its Asian R&D center in Beijing, which is still being developed. The center, which includes registration and clinical trials, R&D capability building and cooperation with local companies, universities and academic institutions, serves not only 皇冠体育app but also global markets.

"We are trying to integrate 皇冠体育app's R&D capability into our global network," said Dong Ruiping, senior vice-president of Merck Research Laboratories Emerging Markets.

Merieux said BioMerieux is implementing a "reverse" R&D strategy in 皇冠体育app, so the new cooperation agreement and expansion of the Shanghai facilities are not only for local needs but also for its global network.