johan20090 schreef op 28 juni 2021 05:11:
R&D spending and economic model changes
China’s economic growth, which was previously dominated by bulk manufacture of low-cost goods, has morphed into one of technological prowess as they have funnelled resources into innovation.
Despite China’s R&D spending is surprisingly low as a proportion of GDP (2.12%), but it accounts for 20 per cent of global R&D spending. What is more is this still grew by 11.8 per cent in 2018. This drive can clearly be seen in the ‘Made in China 2025’ policy, which focuses on increasing innovation spending in R&D intensive sectors such as robotics, aerospace and pharma.
It definitely appears that the Chinese economy innovates very effectively, creating leading global technology. Consumers are now familiar with some of the bigger players, such as Tencent and Huawei, as they build a larger presence in countries like the UK and US. This is because the R&D activity is heavily concentrated among several key companies which champion innovation and allocate large budgets to R&D. However, things are changing rapidly as the economy opens up. Recent figures show the number of tech unicorns in China is now 206, narrowly surpassing America’s 203. Similarly, the region is becoming an attractive destination for international R&D activity, such as Tesla in China and Dyson in Singapore.
On the other hand, China’s success is also its weakness. As economies across Asia continue to develop, wages are being driven up considerably. This has huge implications for R&D as it increases costs. R&D is driven by talent and it accounts for most costs associated with activity. If that talent costs more, the cost will spike. We will see the competitive advantage begin to swing back as computer scientists, software engineers, researchers and project managers begin to cost as much as in Asia as they would in the UK or France. Setting up factories and research facilities in Western Europe, for example, will soon be a more viable and competitive option to a facility in China.