Hu Zhijian, Party chief of China Academy of Science and Technology for Development with the Ministry of Science and Technology, says China will certainly move up the ladder, but more slowly than in previous years.
"This is because the higher you climb, the stronger is the competition you will face," says Hu, whose organization published an annual innovation index in May that ranked China 20th among all the 40 sampled countries. Switzerland, Japan and France took the top three positions.
Hu says that in his index China jumped from the 38th slot in 2000 to 25th in 2005 and to 20th in 2010. "The momentum is becoming slower and slower, because it is getting more and more difficult."
As part of its 12th Five-Year Plan (2011-2015), China has pledged to turn itself into an innovative economy and also set a goal of achieving the 18th rank by 2015 in Hu's index.
Although it looks challenging, many experts say gaining a high score in innovation does not necessarily mean that the country is a global innovation hub.
Steven Veldhoen, partner with Booz & Co, a global management consultancy, which published a report titled Innovation: China's Next Advantage last year, says that although any country can be as innovative as Denmark or Finland (among the top 10 countries in the INSEAD Global Innovation Index 2013), it still does not mean they are global innovation hubs.
The Beijing-based Veldhoen, who specializes in improving corporate innovation and operation capabilities, says that when it comes to one country's innovative capability, people often talk about the R&D spending over GDP.
Although China has increased the number from 0.9 percent in 2000 to almost 2 percent last year, it is still small compared with the 4 percent or 5 percent in developed countries.
"It is not fair to China because it is such a big and diverse country. But if you consider the greater Beijing area a country or Shanghai and Jiangsu province a country, their investment in R&D over GDP are already at 4 percent or 5 percent. Some of the regions in China are already global innovation hubs."
Although it is difficult to quantify one country's status as a global innovation hub, Veldhoen says: "There are very few companies that consider themselves as global innovators who don't have an innovation center in China. That's a very good way to measure whether China is a global innovation hub."
Knowledge factor
The Ministry of Commerce says there are about 1,200 foreign multinational R&D centers in China, representing a total investment of about $12.8 billion in 2010.
Though cost was the key-driving factor a decade ago, foreign companies' interests in coming to China for R&D are now largely driven by market conditions and knowledge factors.
Yuan Qingbin, head of Hershey's Asia innovation center, admits the main reason that prompted the US company to set up an R&D facility in Shanghai was the robust sales performance and growing middle-class in China, particular considering the sales performance in developed markets.
"China is currently Hershey's fastest growth market, moving from No 7 to No 3 in chocolate share in just five years with overall chocolate share more than quadrupling by 2012. So we are betting big on China," he says.
The cost of Chinese talent is no longer an advantage for the company, according to Yuan. Some of the top Chinese R&D expertise can sometimes cost more than the equivalent in the US because of scarcity.
In pictures: history of China's auto industry
Feedback
RSS
