China gaining ground in outsourcing supremacy

By Wai Lang Chu

- Last updated on GMT

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A recent report that focuses on international research and
development trends has placed China as the country gaining
significant grounds on the US in terms of R&D spending and
outsourcing capabilities.

Outsourcing of R&D has been a growing trend and will continue to grow as long as the cost of doing business makes sense for US companies, said the report. The lower costs in emerging nations such as China and India have enhanced the competitive position compared to other (usually domestic) resources leading to measures of higher productivity. The report, compiled by Battelle-R&D Magazine, reckoned that while the US remains the standard-bearer in terms of worldwide R&D, China is emerging as an R&D giant, a trend expected to continue, said the report. According to the report, The US makes up 32.4 per cent of global R&D for 2006, compared to 13.4 per cent for China. Those numbers were first and second, respectively, worldwide but represent a decline for the US and an increase for China. "The same trend will continue in 2007, when the US will be responsible for 31.9 per cent of global R&D and China 14.8 per cent,"​ predicted the report. Analysts have pointed to changes in government attitudes, direct government investments, liberalisation of their economies, and an increased emphasis on developing a highly educated, technology-oriented population are some of the factors leading to the R&D growth in Asia. Interestingly, the report touched on the way it develops relationships with the R&D communities from these burgeoning countries. "The first steps could be characterised as casual, "testing-the-waters" interactions that included preliminary contract research arrangements. These quickly have evolved into major investments in institution-building, the creation of subsidiary operations, and the development of a wide range of joint ventures,"​ the report said. China's progress has been nothing short of remarkable as the Asian region continues to seize more and more of the international R&D market. It's share of global R&D grew from 34.9 per cent in 2005 to 35.6 percent this year and should continue to grow to a projected 36.5 per cent in 2007, according to the report. The US, over the same period, has declined from 32.7 per cent to 32.4 per cent this year and is projected to dip to 31.9 per cent next year. "It is apparent that the modifications in the internal policies of East and South Asia, in particular, have had and will continue to have an influence on the amounts and patterns of R&D performance in the US and other nations,"​ said Tim Studt, editor of R&D Magazine and co-author on the report.

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