S&T/R&D ACTIVITIES BY FOREIGN
INVESTED ENTERPRISES IN CHINA
在华三资企业的科技/研发活动
Cong Cao
University of Oregon
Outline
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Introduction
Basic Information of Large- and MediumSized FIEs
Performance Measurement of S&T
Activities
Current S&T Activities at FIEs
Trends of S&T Activities at FIEs
Discussion
Introduction

In 2003, China invested RMB154 billion, or
1.31% of its GDP, on R&D.
–
–
–
Of the expenditure, 62.4% was spent by enterprises
with three-quarters (RMB72.1 billion) at LMEs.
Of the R&D spending by LMEs, 23.1% was from FIEs
(三资企业), including those from Hong Kong, Macau,
Taiwan (8.1%), and those from foreign countries
(15.0%).
In other words, R&D spending by LM FIEs contributed
to 11.3% of the total enterprise R&D spending in China.
Introduction
Questions:
–
–
–
What does this expenditure tell us about the
general picture of the R&D activities and
more generally S&T activities of FIEs in
China?
What are the trends by which FIEs have
carried out R&D and S&T activities in China?
How have FIEs in China been doing
compared to their domestic counterparts in
R&D and S&T activities?
FIEs: Basic Information
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They have seen their share in China’s LMEs
increased
Composition of LMEs in China (% )
60
57.11
49.80
50
40
29.58
30
27.25
22.95
2003
20
13.31
10
0
State-owned
1998
Non state-owned
Foreign invested
FIEs: Basic Information

… and employment among LMEs increased
Employees at Chinese LMEs (%)
80
74.31
70
60
50
40
41.76
37.53
1998
2003
30
20.72
19.65
20
6.03
10
0
State-owned
Non state-owned
Foreign invested
FIEs: Basic Information

Per FIE employment had been constant until 2003
Average employees per LME (persons)
2500
2277
2000
1500
1000
500
1892
1454
1934
1408
1824
1332
966
963
1009
659
644
659
1732
1742
1224
1030
1173
991
651
670
SOEs
1393
1168
1059
1999
2000
2001
2002
FIEs
All LMEs
0
1998
NSOEs
2003
FIEs: Basic Information
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Their revenue has been climbing
Sales revenue per LM employee (RMB10,000)
60
50
SOEs
40
NSOEs
30
FIEs
20
All LMEs
10
0
1998
1999
2000
2001
2002
2003
FIEs: Basic Information

… so has been their profits
Profits per LM employee (RMB10,000)
7
6
6.3
5.7
5
4
3
3.5
2.8
2
1.8
4.0
3.4
4.9
4.4
4.0
SOEs
3.0
FIEs
2.3
All LMEs
1
0
2001
2002
NSOEs
2003
Performance Measurement
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Input
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Organizational
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–
Personnel

–
Enterprises with S&T institutes
Enterprises with S&T activities
Tech personnel, S&T personnel, R&D personnel,
S&Es
Financial
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
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Funds from enterprises
S&T expenditure
R&D expenditure
New product development expenditure
Performance Measurement
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Output
–
–
–
–
New product sales in total sales
Profits from new products in total profits
Patent applications and especially inventive
patent applications
Inventive patents owned
FIEs: Current S&T Activities

They have less S&T institutes and activities
With S&T
institutes
(%)
With S&T
activities
(%)
Technical
personnel
(%)
FIEs
SOEs
14.94
30.78
31.09
52.18
6.09
11.86
NSOEs
27.62
44.66
10.16
All LMEs
24.89
42.69
10.08
FIEs: Current S&T Activities

… and fewer S&T personnel
S&T
R&D
Personnel in
personnel personnel
S&T
(%)
(%)
institutes (%)
FIEs
2.68
1.06
1.02
SOEs
5.15
1.58
1.61
NSOEs
4.96
1.75
2.14
All LMEs
4.55
1.54
1.71
FIEs: Current S&T Activities
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FIEs may be
–
–
–
–
not that interested in S&T activities.
mainly manufacturing facilities.
dependent upon their parents for technology.
less likely to be engaged in innovation within
the confine of a formal research setting as
innovation has become a day-to-day and
conscious activity at the shop level (do this
suggest that FIEs and Chinese enterprises
have different innovation culture?)
FIEs: Current S&T Activities

FIEs spend less on S&T activities
S&T
R&D
expenditure/Sales expenditure/Sales
revenue (%)
revenue (%)
FIEs
SOEs
NSOEs
1.11
1.69
1.72
0.56
0.81
0.84
All LMEs
1.52
0.75
FIEs: Current S&T Activities
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… but more on new product development
FIEs
SOEs
NSOEs
All LMEs
New product
New product
development
development
expenditure/Sales expenditure/S&T
revenue (%)
expenditure (%)
0.57
51.29
0.68
0.72
0.66
40.37
41.91
43.53
FIEs: Current S&T Activities
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They also have significantly higher per capita
spending
S&T expenditure per S&T personnel (RMB10,000)
25
19.17
20
15
10.55
10
10.40
7.72
5
0
State-owned
Non state-owned
Foreign invested
All LMEs
FIEs: Current S&T Activities

FIEs get more from new products
New product
sales/Total
sales (%)
New product
profits/Total profits
(%)
FIEs
SOEs
18.60
11.34
18.60
11.70
NSOEs
All LMEs
13.88
14.61
10.46
13.03
FIEs: Current S&T Activities

They do well in inventive patenting
FIEs
SOEs
NSOEs
All LMEs
Patent
applications
(items)
9,144
Inventive patent
applications (%)
5,360
16,878
31,382
20.80
27.23
29.94
40.29
FIEs: Current S&T Activities

… and are more cost effective
FIEs
SOEs
NSOEs
All LMEs
S&T personnel
per patent
applications
(persons/item)
19
112
38
45
S&T expenditure
per patent
application
(RMB10,000/item)
360.9
863.4
399.9
467.7
FIEs: Current S&T Activities

FIEs are more efficient and cost
effective in their S&T activities.
–
–
–
In spite of fewer S&T personnel and less
spending on S&T/R&D activities, FIEs do
well with higher sales revenue and profits
from new products.
S&T personnel and expenditure per patent
application are low.
These may be associated with significantly
higher level of S&T expenditure per S&T
personnel, higher percentage of S&T
expenditure devoted to new product
development, among others.
FIEs: Trends
LMEs with S&T institutes (%)
40
35
30
SOEs
25
NSOEs
20
FIEs
15
All LMEs
10
5
0
1998
1999
2000
2001
2002
2003
FIEs: Trends
Sales revenue devoted to S&T activities (%)
2.5
2.0
SOEs
1.5
NSOEs
FIEs
1.0
All LMEs
0.5
0.0
1998
1999
2000
2001
2002
2003
FIEs: Trends
New product sales in total sales (%)
30
25
SOEs
20
NSOEs
15
FIEs
10
All LMEs
5
0
1998
1999
2000
2001
2002
2003
FIEs: Trends
S&T personnel per patent application (persons/item)
250
200
SOEs
150
NSOEs
FIEs
100
All LMEs
50
0
1999
2000
2001
2002
2003
FIEs: Trends
Patent application (items)
18000
16000
14000
12000
SOEs
10000
NSOEs
8000
FIEs
6000
4000
2000
0
1998
1999
2000
2001
2002
2003
2004
Discussion
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The analysis is not about R&D/S&T activities by
foreign corporations per se.
It is about LM FIEs in China as a whole. But
these are likely to set up R&D centers/S&T
institutes and engage in S&T activities as they
have resources.
Many of these centers/institutes are not separate
units. Their registration with governments is
mainly intended to take advantage of the
preferable policies.
Therefore, the analysis is a proxy to the current
situation of FIEs’ R&D/S&T activities in China.