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Chinese companies face innovation challenge: E&Y

(Global Times)

08:51, December 15, 2011

Lagging behind in emerging technologies is the top problem facing Chinese companies, according to a report released by Ernst & Young yesterday.

The other main problems include government intervention, pricing pressure and access to credit.

The report, which surveyed over 700 companies in 15 countries and regions, noted that developed countries are still dominant in developing sophisticated technologies, while Chinese companies are in the middle- and low-end of the global industrial chain and must constantly battle to catch up.

The problem is greatest in industries that rely on innovation, such as IT, the Internet and clean-energy sectors, Sunny Chow, risk services leader for Ernst & Young in China, told the Global Times yesterday.

"Most Chinese companies prefer to buy up-to-date technologies, instead of making constant investment in innovation," said the report, which urged Chinese companies to put more effort into developing their own technologies in order to gain a stronger foothold in the global market.

However, Wang Zhile, director of Beijing New-century Academy on Transnational Corporations under the Ministry of Commerce, told the Global Times yesterday that buying technologies is a good way for Chinese companies to pursue growth, and is much less risky.

"To invest in developing a new technology involves great risk, since it takes time for the technology to generate any returns, and by then the market opportunity may have vanished," said Wang.

Wang said that for Chinese companies, most of which are small- and medium-sized enterprises, purchasing technologies may be the best strategy to gain market share in the shortest time.

The report said that Chinese companies are also seeking opportunities for mergers and acquisitions for their future development.

But Chow warned that even though the current global economic slowdown could result in lower prices in overseas acquisitions, Chinese companies should be "cautious in making overseas investment and examine the feasibility before making a move."

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See at 2011-12-1560.50.1.*
I did not agree with Wang Zeli because buying the up to date technologies is a short term benefit and once the subject technologies is outdated then you will find a problem. To develop your own technologies is a long term again unless the company is going to last for 3 to 4 years only

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