Helen  Rong

J.D. Power & Associates

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Is it time for companies to establish global R&D centres in China? Is it time for "Designed in China, for global markets"?

While lots of companies say how much they are committed to the China market, there is still the US (or Europe) centric approach when it comes to product developments. The consumer market here offers a test ground for most advanced ideas for almost every industry. So is it time to start a new product from China, rather than throw a product to China to make people here swallow it? What's holding companies from shifting the R&D centre to China? Do we have ample talents from within China to drive global product innovations? Is IPR protection the main roadblock?

  • May 6 2011: Greetings Helen
    What’s a holding company from shifting the R&D canter to China?
    1. China must be seen as providing an economic or intellectual advantage to research and development groups.
    2. China is often perceived in the west as being led by two separate and sometimes corrupt governments, rightly or wrongly, the party and the military seem to act at odds with each other, neither having much control over the other. This leads to corruption and the occasional disappearance of people who disagree with government policy. Whatever Chinas decisions are regarding intellectual property rights they must be seen as monolithic and consistent foreign companies will not invest talent or money where they may be lost at a bureaucrat’s whim.
    Is IPR protection the main roadblock?
    1. Yes china must be seen as the world leader in the protection of IPR rights if it wishes to attract foreign research and development, this is the number one thing China can do to attract research and development. Companies are motivated almost solely by profit any research that’s coopted by a government or criminal organization is an unacceptable loss of profit.
    2. The secondary consideration is that any government regulation of a given field must be one stop shopping, bureaucrats and red tape are the eternal enemy of innovation. Government regulation and or interference must be kept to a minimum.
    So is it time to start a new product from China, rather than throw a product to China to make people here swallow it?
    1. China is more than innovative and capable of starting it’s owe new products the question is will the best minds in China stay in China or go somewhere with better IPR protections.
    2. It is important to note the western companies often develop products for western markets only, and for many companies China is a secondary market that is often an afterthought. This is not malicious it is in most cases a matter of economic necessity R&D develops what a free market demands first.
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    May 7 2011: Just curious
    Why China itself is not investing in R&D being powered with it's talent & economic boom and conquer. Self help is the best.
    Or it's there just behind thick curtain to surprise us all suddenly.
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    May 5 2011: What I know is yes most companies thinks so but they cann't immediately shift because of 3 reasons

    1) Still US & European market is too big for them comapred to China (it's offering high growth but you know if the base is too low , high growth can't offer big dollar value that other mature and big market like US & EU can offer having a much bigger critical mass though growth is low)

    2) China still has got big regulatory variations at different regional and provincial level, and regulatory processes are pretty sluggish and bureaucratic.

    3) Confidence level of protecting Intellectual Proprietary Right might be another question mark.

    With availability and quality of talent there is no question mark definitely......
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    May 5 2011: Great Question..I have nothing to add to this but really look forward to watching this grow and to learning from it. There is no question that China has risen to global prominence on all fronts and most folk, me included don't understand how that all works together. Thank you for this opportunity to learn
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    May 5 2011: HI Helen, I thought that I had read recently that President Hu is putting signifcant resources into developing China's capacity for R&D. Gao Xudong from Tsinghua University was quoted as saying:"But for the next step, we need to spend more money on science, creating more knowledge, and contributing more to the world," he said.
    I think that the best innovation and R&D comes directly from the people involved in the processes and from the hearts of open and creative individuals. Thus you have the seeds of it already planted. The best ideas come from front line people who work with things day in and day out, in my opinion.I am not convinced that it should be simply transplanted.
    It is a huge expense to any corporation and the fundamental learning from recent experience is that a lot of investment leads no where even when you have the most creative and the most acclimatized people. Even P&G has downsized its internal R&D in favour of more organic insights from consumer, suppliers and creative types from outside the company.As long as people are worried that they are taking a gamble to start with and then that they might not be able to retain ownership of their advancements it will be a major risk to ship that department out.
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    May 5 2011: Helen: I would have thought that you would know better about this than I do, but I thought that companies are already starting to develop in China. I work with a company that designs/developes cell phone algorithms/circuitry. The Chinese are our biggest customers. Many are located in Shanghai where they take our components and develop them into full products.

    However, one problem with working with Chinese companies is that they don't respect patents. Now, I know there are issues with the current state of patent law (see lectures by Lawrence Lessig for details), but to agree to pay royalties and then just sell products and not pay them makes for bad business. So yes, I think IP rights are a big issue.

    What do you think China will do in the future on this issue? To me, they are just shooting themselves in the foot.