Innovation from Rising R&D

Chinese companies head up ranks of those spending on creativity

Chinese enterprises have increased their investment in research and development, with PetroChina, for the first time, entering the top 100 of a global innovation list, said global management consulting firm Booz & Co.

A total of 47 Chinese companies entered the 2011 Innovation 1,000 list, compared with 40 Chinese companies in 2010's survey, 23 in 2009 and 15 in 2008, according to the latest Global Innovation 1,000 study.

This was the eighth annual analysis of corporate R&D spending by Booz & Co.

"It is noteworthy that although the study only includes listed companies, a few Chinese private companies have invested tremendous innovation spending in recent years," said Steven Veldhoen, a partner at Booz & Co and head of its China Innovation Practice,

Huawei Technologies Co, for instance, spent 23.7 billion yuan (US$3.8 billion) in R&D last year. It is ranked 40th in the Global Innovation 1,000 list, surpassing PetroChina to claim the position of the largest R&D spender among Chinese companies.

According to Bill Peng, principal at Booz & Co, Chinese public companies have increased their R&D spending greatly.

The total R&D spent by 2011 Innovation 1,000 companies headquartered in China was US$14.8 billion. That compares with US$11 billion the previous year. This is an increase of 34.5 percent over 2010.

The R&D spent by companies headquartered in China represents 2.5 percent of this year's total Innovation 1,000 R&D spent, according to the study.

PetroChina Co, with its R&D spending in 2011 reaching nearly US$2 billion, compared with US$1.75 billion in 2010, ranked the top among the 47 Chinese companies and ranked 70 in the global innovation list.

A total of 13 Chinese companies were added to the list this year, including China National Chemical Engineering Co, China Shipbuilding Industry Co and Huayu Automotive Systems Co.

Analysts said Chinese enterprises' fast growing investment in R&D is an indication of a shift in their business strategy that is aimed at strengthening their core competitiveness.

Oliver Rootsey, an account manager with Lenovo (Germany), has been with the company for seven years and now is in the company's commercial business sector.

He said that after acquiring the IBM PC division, some of their clients did have a question: could Lenovo deliver high quality products?

"We lost some of our clients at the very beginning but most of them came back later when they recognized that it was a 'soft' merger and we lived up to their expectations for high quality products," said Rootsey.

"There is a gradual shift in the perception among people in the EU: China is moving from imitation to innovation."

Globally, the innovation spending from the top 1,000 public companies that spent the most on R&D in 2011 increased 9.6 percent to US$603 billion - an all-time record, according to the survey.

This is the second consecutive year of growth. The rebound comes after spending dropped 3.5 percent between 2008 and 2009 during the height of the global financial crisis.