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Reports on China issued by Samsung Economic Research Institute

Assessment of Innovation Capabilities of Chinese Industries

Assessment of Innovation Capabilities of Chinese Industries

LEE Sung-Ho

Apr. 10, 2012

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In 2011, China overtook Japan to become the world's second biggest investor in R&D, following only the US. China is expected to further expand its R&D investments which will rival that of the US by 2020. In terms of quantity, China's R&D already boasts a world-class level. For example, China has become the world's second biggest publisher of papers on basic science, thanks to the aggressive R&D investments. But, China still has a long way to go in terms of quality. The nation's spending on R&D as a percentage of GDP is less than 2%. Worse, it lags far behind advanced nations in terms of the R&D labor pool as a percentage of the entire population. Similarly, it falls behind its advanced counterparts when it comes to papers covered in international journals in the global top 10%.

Global companies have begun to open their eyes to the sheer power of the innovations of emerging nations. To them, China has emerged as the world's innovation base. Global companies such as Siemens and Nokia have taken advantage of emerging nations' technologies to develop new products and sell them in the global market. Through reverse innovation, China's emerging companies such as Mindray, Huawei, and Haier have joined in the ever-intensifying competition to take the lead in the global economy. Global companies prefer China as their R&D base because it gives them an opportunity to dominate the nation's expansive domestic market and take advantage of China's cheap R&D workforce and government support. Also, they are able to develop technologies complementary to those of Chinese companies.

For their part, Korean companies need to tap into the Chinese market more aggressively by expanding their R&D centers in China. Also, they should hire China's outstanding talents and harness them for tasks with higher value. Moreover, they should recognize that China's universities produce more graduates than required by the nation's industries, and make more efforts to attract them.

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