Lack of intellectual property protection is dissuading many foreign companies from letting their China R&D operations participate in strategic research, according to a survey by the American Chamber of Commerce in Shanghai.
“While many companies have established an R&D presence in China, most are reluctant to bring their core technologies, and some companies have recently closed or scaled back their R&D investment,” the report noted.
The survey included responses from 52 member companies, 10 of which are from the biotech and pharmaceutical sector and 22 of which engage in advanced manufacturing. The chamber noted that one in 10 respondents have already invested $100 million in their China R&D operations.
China is the world’s second largest market, after the U.S., for many types of products, including pharmaceuticals, but only a third of respondents have made China the location for their second or third most important R&D center worldwide. For the majority of foreign firms surveyed, China is either one of many R&D locations or of marginal importance to their research efforts.
The most effective way for China to attract more corporate R&D would be to improve intellectual property protection, according to nearly six out of 10 survey respondents. Almost one third also said that improvements to the Chinese legal system would spur them to give China a second look.
In spite of the restraint, the R&D efforts of foreign companies in China are having a significant economic impact. About half of the sales of new products launched in Shanghai in the first eight months of 2017 can be traced back to work done at foreign-invested R&D centers in China, the chamber noted.