Foreign companies eye new 'opening-up'(2)

Abundant talents

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

China 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 China 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 China R&D Center, China is "better than" other emerging markets for multinationals to enhance their R&D facilities.

"It's about government support and a rich talent pool. China'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 China within five years.

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

Despite the slowdown, China'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 China 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 China 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 China Daily, Japanese multinational industrial conglomerate Omron said China 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 (China) Co Ltd.

The multinationals are placing high expectations on China. "We expect annual growth in China 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 China sales increased by more than 40 percent year-on-year to hit 100 million euros ($133 million).

China 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 China 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), China 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 China Development Forum in March, Premier Li Keqiang pointed out that China 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, China 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 China 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.

"China fell behind in terms of development. It was short of advanced technical methods to support scientific disease diagnosis and prevention. Now China 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."

China 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 China but also global markets.

"We are trying to integrate China'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 China, so the new cooperation agreement and expansion of the Shanghai facilities are not only for local needs but also for its global network.