Wednesday, 26 January 2011

Unleashing Chinese innovation

Two factors are currently spurring Western chemical companies to commit ever-increasing innovation investment to China. One, the country is now the world's largest market for chemicals (according to Cefic figures), and two, the government is shifting the focus to domestic demand to drive growth, rather than it being export-led.

Dow Corning's new China Business and Technology
Center in Zhangjiang Hi-Tech Park, Pudong, Shanghai,
illustrates the company's faith in innovation to support
market growth in Greater China.
Also, as I pointed out in an earlier post on this blog, Chinese innovation as measured by patent filings is maturing rapidly. To win a share of the still-fast growing Chinese market - GDP was around the 10% mark yet again last year - companies are having to bite the bullet on how they can innovate for the local market.

But before investing in research and technical centres in China, fears about intellectual property theft and copy-cat plants and issues surrounding recruitment and retention of talented researchers all need to be assessed and overcome.

Many of these issues were debated in a recent ICIS Roundtable on specialty chemicals and China, held in Frankfurt in association with Booz & Company.

The subject has also recently been discussed by Gordon Orr, a director in McKinsey’s Shanghai office in an article entitled "Unleashing innovation in China". He argues that China's success in innovation has been at best patchy to date but adds that: "There is no reason China shouldn’t aspire to... innovation... The evidence to date shows that, given the right incentives, Chinese scientists, engineers and entrepreneurs are eager to rise to the challenge of developing products for the global market." The challenge will be unleashing this innovation through changes in state policy.

In the meantime, it puts Western players in a strong position to innovate for the local Chinese market as well as using their research base in China as part of their overall global innovation network. Collaborating with the huge Chinese institutes and universities is a good way to tap into the Chinese capacity for innovation. It is no wonder we are seeing major investments now going forward.

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