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China Briefings

Reports on China issued by Samsung Economic Research Institute

Operation Strategy of Foreign-Invested R&D Centers

Operation Strategy of Foreign-Invested R&D Centers

Samsung Economic Research Institute Beijing Office

Nov. 30, 2006

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Multinational companies (MNCs) have set up research and development (R&D) centers in China since the 1990s. Motorola established China's first foreign-invested R&D center, the Motorola Global Software Group, in 1993. Since China joined the World Trade Organization (WTO) in 2001, the Chinese government has noticeably strengthened efforts to attract foreign-invested R&D centers.

As of October 2006, the number of foreign-invested R&D centers located in China numbered 800. The R&D centers' headquarters are located around the world including North America, Europe, Japan, Korea, and Taiwan.

Since 2005, approximately 50 R&D centers have been established by MNCs.

Why have MNCs established R&D centers in China? Most notably, China's enormous domestic consumer market and increasing technological prowess. In the wake of China's domestic opening, MNCs have moved their manufacturing facilities to China in order to take advantage of low labor costs. According to China's Ministry of Commerce (MOFCOM), 480 of the world's largest 500 MNCs currently have operations in the domestic market.

With China's entrance into the WTO, MNCs have recognized China's strong growth potential which is likely to continue over the near-term. In an effort to survive increasingly intense competition and gain an edge over other MNCs operating in China, global companies have established R&D centers there.

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