China is the West’s corporate R&D lab. Can it remain so?

CHINA IS, FAMOUSLY, the world’s factory and a giant market for the world’s companies. More unremarked is its growing role as the world’s research-and-development laboratory. Between 2012 and 2021 foreign firms increased their collective Chinese research personnel by a fifth, to 716,000. Their annual R&D spending in the country almost doubled, to 338bn yuan ($52bn). Add investments by local firms and China now matches Europe’s R&D tally (see chart). Only America splurges more.

In 2022, despite harsh covid-19 lockdowns, 25 new foreign R&D centres opened in Shanghai. Last year, when overall foreign direct investments in China shrivelled by 80%, those in R&D rose by 4%. In the process, Western R&D centres in China have been re-engineered, from places to learn about the domestic market into hotbeds of innovation whose fruits can be found in products sold everywhere.

This article appeared in the Business section of the print edition under the headline “Research developments”