Western Companies Go Slow on China R&D Operations; Quality, Intellectual Property Are Concerns

Article excerpt

One might imagine that China, with more than 1,000 institutions of higher education and hundreds of thousands of low-wage scientists and technicians, would offer fertile pastures to large multinational companies seeking to establish research and development programs. Nevertheless, while big companies have jumped at the chance to capitalize on China's low-cost labor force for manufacturing, they are hesitating on the research front.

Although the Chinese government performs no centralized tracking of foreign companies actively engaged in China-based research programs, queries among foreign technology-sector executives and analysts at foreign embassies in Beijing reveal a widespread reluctance to move their research operations to China.

Part of that reluctance is due to concerns about quality control, according to one Western diplomat in Beijing. "Doing anything here is tough. Companies can manufacture here, but only with aggressive quality control.

So far, not many feel they can find the talent here for things like marketing, management, or research. China's local base is probably a bit better for R&D than it is for marketing, but not by much," he said.

An executive at one of the world's top information technology companies says his firm has no doubt that research in China would prove fruitful, but it lacks faith in the ability of China's legal system to safeguard the rights to any new technology.

"We have sensitive technology and well-established research facilities elsewhere. Working in China could lead to a lot of security and patent headaches for us," said the executive.

Some companies, in particular the large automakers, have established in China what they call "technology centers." While some of these facilities conduct development work aimed at customizing existing products for the Chinese market, their main function is technical training rather than research.

"If you are asking whether this is a research program that looks anything like what we have in Detroit, then the answer is `no,' and will be for the foreseeable future," said an executive at the Beijing office of a Big Three car company.

H-P and Qinghua University

While most companies have been unwilling to invest in their own research facilities, some are cooperating with local universities or research institutes to conduct joint projects. Typical of such arrangements is an agreement announced in early February between Hewlett-Packard and China's top technology school, Qinghua University in Beijing. Hewlett-Packard has donated advanced instruments worth $200,000 to Qinghua and the two will run a joint-venture electronics research lab.

Ford Motor China has conducted similar joint projects, including one launched last year to conduct environmental, economic and energy life-cycle analyses of various energy sources in China. Ford is contributing $350,000 to the study, which will be carried out with participation from Qinghua, the Massachusetts Institute of Technology, and several Chinese government agencies.

Ford is also cooperating with the Chinese government on a three-year, $3 million R&D program aimed at producing a low-cost rare-earth catalyst for an emission control system that would make use of China's abundant supply of rare-earth deposits. …