MNCs eye solid cooperation with local companies as emphasis on technology pays off

China's strategy for innovation-driven development will create opportunities for multinational corporations to thrive in the country just as Chinese companies seeking to expand their global presence will prosper. These twin possibilities will likely come to pass as technologies are seen as key to boosting the global economic recovery amid headwinds, experts and business executives said.

Seeing big opportunities for cooperation in areas such as digital technologies, green energy and healthcare, foreign companies are increasingly valuing China not just as a vast market, but as a pioneering research and development hub for their global business, they said.

Henry Ding, president of 3M China, the local arm of 3M, an MNC engaged in industry, worker safety, healthcare, and consumer goods, said China's investments in modern manufacturing and infrastructure development will bring new opportunities for the company.

"As an innovation-driven company, we are excited about business opportunities arising from China's renewed focus on innovation and high-quality development. As we have done for decades, we will continue to help support the evolution of China's economy into the future," Ding said.

The report to the 20th National Congress of the Communist Party of China in October said innovation will remain at the heart of China's modernization drive, and the country will accelerate the implementation of its strategy for innovation-driven development to achieve greater self-reliance and strength in science and technology.

China is a strong supporter of globalization, but the division of labor in the world is facing risks as some countries attempt to hinder cooperation in high-tech sectors, said Shi Hongxiu, a professor of economics at the National Academy of Governance.

Therefore, China has no choice but to boost self-reliance in crucial technologies, Shi said, adding that the country's emphasis on innovation-driven development is of great significance. It will encourage scientists, entrepreneurs and others to double down on the pursuit of indigenous innovation, which is expected to boost the country's drive for high-quality development.

Wang Yiming, vice-chairman of the China Center for International Economic Exchanges, said global competition in strategically important industries has intensified, and some countries have adopted an approach of being a "small courtyard with high walls "against China, aiming to contain its high-tech sectors.

"Self-reliance in some key technologies is crucial to make a big country like China really strong," Wang said.

But that does not mean that China is pursuing a closed development path. Instead, the country is working to strike a balance between promoting homegrown innovation and advancing international cooperation, experts said.

"More efforts will be made to open our door wider to international cooperation in cutting-edge technologies. We need to partner with as many more friends as possible. That is also a key way for us to overcome the obstacles set by some countries in technology," said Zhong Xinlong, a senior consultant at the China Center for Information Industry Development Consultancy.

According to him, as China beefs up its R&D prowess, that will also attract more MNCs to double down on their investments in China and create more economic growth opportunities for the world.

The 2022 Global Innovation Index showed this to be true. China climbed to 11th position in 2022, up from 34th in 2012, and firmly remains the only middle-income economy in the top 30, according to a report from the World Intellectual Property Organization, which compiles the index.

"China's rise (in GII rankings) from 34 to 11 over a 10-year period ...is really spectacular. The close attention paid by the government and the country to innovation as an engine of growth is paying off," WIPO Director-General Daren Tang said.

"The Chinese government takes IP (intellectual property) very seriously. They have five-year strategic plans in which they are able to harmonize IP policymaking with all the related elements. China nurtures its innovation ecosystem in a holistic, comprehensive manner," he said.

Hou Yang, chairman and CEO of Microsoft Greater China, the local arm of the global tech company, said: "To us, China is one of the world's most innovative and dynamic markets. We plan to continue responsibly serving our role as an international technology company helping Chinese innovators elevate their technology solutions on the global stage."

The company, he said, has built five basic R&D centers in China. Microsoft also cooperates with local governments and a string of innovation incubators throughout China that are tailored to local economic development needs. This approach helps startups, promotes local innovation and develops local talent.

"Both the current state of the innovation environment in China and our continued commitment to the market reflect our confidence in China's economic prospects and technology development potential," Hou said.

Specifically, China's emphasis on innovation in electric vehicles, biomedicine and green energy is attracting foreign companies in particular.

Denis Depoux, global managing director of consultancy Roland Berger, said China has demonstrated its innovation capability and is leapfrogging in several fields, gaining leadership globally in areas like the EV chain from batteries to charging infrastructure, photovoltaic panels, wind turbines, nuclear and telecommunications equipment.

"We anticipate that in the near future, global competitiveness will be more and more driven by Chinese technology innovation," Depoux said.

Vivian Zhang, general manager of Merck China Healthcare, said, "We applaud China's determined efforts to become self-reliant in pursuit of innovation-powered, high-quality development."

According to her, Merck has been in China for many years and has a full-fledged local footprint, which includes one of the company's four healthcare R&D hubs, located in Beijing. It is a key hub in the company's global network as it develops innovative drugs for treating diseases of high prevalence in China.

"We continue to forge strong strategic partnerships with local pharmaceutical companies. In China's evolving and increasingly innovative healthcare ecosystem, Merck is committed to driving innovation for superior patient outcomes," Zhang said.

Lars Eckerlein, general manager of ABB (China) Ltd, said: "Innovation will continue to be a major driver of economic growth in China. The country has put a lot of focus on technological innovation and decades of rapid economic growth has enabled China to invest more in the key areas that drive innovation."

Eckerlein also said ABB has continuously improved its local R&D capabilities, employing more than 2,000 engineers in China.

According to ABB, since the local launch of ABB Ability, an industrial internet platform, in 2017, the company has established open innovation hubs in Xiamen, Fujian province, Shanghai, Beijing and worked together with Chinese partners and customers to co-develop customized digital solutions in the areas of smart manufacturing, smart city, smart transportation and smart energy infrastructure, helping them improve performance and efficiency, and reduce energy consumption and emissions.

Frank Meng, chairman of Qualcomm China, the local arm of the global semiconductor, software and wireless tech services provider, said: "Through broad partnerships with local companies, we have sincerely felt that Chinese enterprises have the determination and courage to build themselves into world-class players.

"Chinese enterprises have actively integrated themselves into the overall landscape of global technological innovation, which has created even broader opportunities of collaboration with companies like Qualcomm."

According to Meng, in the coming years, digital technologies, such as 5G, internet of things, intelligent connected vehicles, virtual reality and augmented reality, will create more room for growth. "Qualcomm and Chinese industries will have even bigger opportunities for cooperation and we will keep creating value together."