Global business mammoths, which previously loathed binding requirements of technological transfer for direct investment in China, are now eager to move their research and development facilities to the world's biggest and most energetic market.

In response to the latest encouragement for advanced foreign know-how, many multinationals have made China one of their priority locations for research and development centers.

Dr. Li Wanlin, senior vice president of Siemens (China) Telecommunication Ltd., said in an exclusive interview with Xinhua News Agency that establishment of Siemens China R&D centers is a vitally important strategy for the German company's future development.

"If we only manufacture and sell our products in China," said Dr. Li, "Chinese would never take us as trusted partners."

Moving R&D centers to China is not only an instrumental measure for shortening the duration from R&D to technology commercialization, but also a touchstone for our confidence of China's economic prospect, Dr. Li said.

Rich in highly qualified engineers, Dr. Li said, China has already developed their own edging technologies in many advanced fields, such as mobile telecommunications and servers.

Lu Zheng, a recognized economist who heads the Chinese Academy of Social Sciences' Institute of Industrial Economics, said, "By attracting more and more localized foreign R&D centers, China substantively becomes higher in the hierarchy of global economy."

A Ministry of Commerce survey showed that by June 2004, multinationals, including GE, Intel and Microsoft, have set up more than 600 R&D centers in China, with expenditures of more than US$4 billion.

The establishment of these foreign-owned R&D facilities, with its employees flowing freely in the Chinese job market, stimulate technological upgrades of Chinese companies as well as help improve innovative capability of indigenous engineers.

Even for Siemens which is always optimistic about future of China's economy, the decision of moving their R&D centers to China was hard to make.

"Why do we need to transfer our R&D centers to China and what do we do without sufficient research and development capacity?" many senior German colleagues asked Dr. Li, who is German-educated but strongly supports the idea of the China-bound global re-deployment.

Getting go-ahead from Siemens top leadership, Dr. Li kicked off 1998 in Beijing the first Siemens R&D center, which collaborates with Datang, a leading Chinese company in mobile telecommunication, to work for third-generation standards for mobile telecommunication, or TD-SCDMA.

The Siemens center is now leading all others in developing new technologies based on the TD-SCDMA standards, which are masterminded by Chinese and may be prevailing in the huge Chinese market in years to come.

"Siemens headquarters have no longer satisfied with mandating peripheral R&D missions to the Chinese centers, but core and the most advanced technologies instead," Dr. Li said.

Siemens has now a total of four Chinese R&D centers in Beijing, Shanghai, Nanjing and Hangzhou, all in China's booming cities.

More than 1,000 Siemens engineers and specialists are focusing on network solutions, technological applications, hardware and software, and the most sophisticated technologies superior to the 3-G's.

According to statistics, Siemens applied in 2005 for about 5,700 patents, with a year-by-year increase of 15 percent and most of which were new inventions.

The good performance of innovation largely reflected the huge R&D investment in 2005, 5.2 billion Euros which accounted for 7 percent of the company's total revenues.

"Innovation should not be carried out only by engineers. Every one might have new ideas every day," Dr. Li said.

The most innovative German company gradually schemed an innovation-friendly environment for all its employees. Siemens prepares tens of millions of euros worth of innovation funds to finance 30 innovative ideas. Some of the 30 annual innovative ideas were commercialized into successful products.

The enthusiasm about innovation of Siemens and its peers spurred Chinese companies to allocate more money into R&D.

One of China's leading telecommunications infrastructure manufacturers, Huawei, spends annually 10 percent of its revenues in research and development, owning 1,028 patents.

Statistic showed that from 1991 to 2003, the R&D outlays of China's large and medium enterprises are between 0.4 percent to 0.8 percent of their revenues, much lower than the 3 percent rate in developed countries.

According to the state's medium- and long-term development plan of science and technology, China's overall R&D outlays are to reach 2.5 percent of its gross domestic product by 2020, and China encourages domestic enterprises to assume a key role in the innovation.

(Xinhua News Agency January 24, 2006)