China’s Push to Localise Foreign R&D Elicits Diverse Responses from European Companies Go back »

2023-04-21 | All chapters

China’s Push to Localise Foreign R&D Elicits Diverse Responses from European Companies

Beijing, 21st April 2023 – The European Union Chamber of Commerce in China (European Chamber), in partnership with the Mercator Institute for China Studies (MERICS), today published China’s Innovation Ecosystem: the localisation dilemma. Based on a member survey and in-depth interviews, the report highlights that the complexity of China’s business environment is necessitating a wide range of research and development (R&D) strategies to be deployed by European companies.

There are several positive market factors steering a large share of European companies towards deeper localisation, including the size of China’s market (61%), strong demand (47%) and the fast pace of commercialisation of R&D results (39%). At the same time, long-standing issues such as China’s weak intellectual property rights (IPR) protection system (34%) and an unlevel playing field for foreign companies (32%) deter others from bringing their technology into China, with many just engaging in development of existing products, while working on their core technologies outside of China.

While business confidence was significantly eroded by China’s stringent zero-COVID policy and the subsequent lockdowns and travel restrictions, many European companies expect this to be restored, though it will likely take years. However, the impact that geopolitics is having on the perceived stability of China’s business environment is only expected to worsen. Nearly half of respondents reported negative impacts on their R&D strategies resulting from Russia’s invasion of Ukraine, and many interviewees said the role that corporate risk assessments now play in strategy-making is unprecedented. A potential escalation of Russia’s war in Ukraine or further frictions in the Taiwan Strait are scenarios that businesses are taking into account, and the potential risks they pose significantly undermine the case for increasing R&D investments in China.

“European companies in China that are competing fiercely for market share often see R&D localisation as their ticket to staying ahead of the curve,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “However, a notable tempering of future R&D investment ambitions among MNCs shows that perceptions about China’s innovation ecosystem reflects broader business sentiment, which has been greatly eroded by the increasing unpredictability of doing business in China.”

“It is critical for European policymakers to understand the diverse strategies that Europe’s companies adopt to R&D and technology localisation in China,” said Mikko Huotari, executive director MERICS. “As the EU considers a ‘de-risking’ strategy towards China, it should recognise that there is no ‘one-size-fits-all’ solution. It will take considerable work with stakeholders to ensure that European firms can benefit from China’s innovation ecosystem, but to also take head on the geopolitical possibilities that we have all been reminded of since Russia’s invasion of Ukraine.”

This report is the second of a planned three roundsof surveys and interviews, which fall under a consortium projectsupported and funded by the German Ministry of Education and Research. It is a result of collaboration between the European Chamber and MERICS, with input from partners at Ruhr University Bochum, and the University of Duisburg-Essen.

Download the report here.







“对欧盟决策者而言,了解欧盟在华企业为实现研发和科技本土化而采用的多种策略至关重要”墨卡托中国研究中心执行董事Mikko Huotari表示,“当欧盟决定对中国采取‘去风险化’战略时就应当意识到没有‘一劳永逸’的方案。欧盟须积极协调各利益相关方保证欧盟企业利用好中国创新生态系统,并及时预估地缘政治风险,后者也是俄罗斯入侵乌克兰带给我们的警示。”



For more information please contact

Xinhe Fan