Economic Watch: From factory floor to innovation hub: how foreign firms deepen China presence

by Xinhua writers Li Kun, Zhang Yuqi and Liang Zi

TIANJIN, July 24 (Xinhua) -- At a medical device plant in the Tianjin Port Free Trade Zone, technicians in sterile suits assemble fully automated blood coagulation analyzers. Components sourced from Europe and China are assembled and tested before being delivered to hospitals and laboratories across the country.

The facility is French healthcare company Stago's first and only production site outside Europe. But after more than 20 years in China, Stago has moved beyond trading and manufacturing.

It now conducts research and development (R&D) in the northern Chinese city, a shift that has transformed the way the company operates, said Sun Xiangchao, the company's China supply chain and production director.

"We are no longer just shipping products to China or relocating production lines here," Sun said. "We are embedding R&D capabilities into the country." That, he added, has shortened the "reflex arc" between the French headquarters and its Chinese operations, drastically speeding up decision-making and innovation.

The evolution reflects a broader trend. China is no longer seen simply as the world's factory floor, but increasingly as a global platform for innovation, a place where foreign companies not only manufacture, but also develop new products and technologies, sometimes in partnership with Chinese companies.

China remains a popular destination for foreign investment. In the first five months of this year, nearly 4,000 foreign-invested firms increased their investment in China, according to the Ministry of Commerce.

Foreign-funded R&D centers have become a key part of China's innovation system, with many multinational companies upgrading their operations in the country from manufacturing bases to innovation hubs, He Yadong, a spokesperson of the Ministry of Commerce, said in April.

Foreign R&D centers in China are shifting from meeting local adaptation needs to serving as pivots for global innovation, He added.

In June, Danish pharmaceutical giant Novo Nordisk announced an additional 200 million yuan (about 29.4 million U.S. dollars) investment in its Tianjin production base to expand its pen-injector assembly capacity. The decision came during a visit by its president and CEO Maziar Mike Doustdar.

"One cannot ignore China and the innovation that is happening," Doustdar said. "We need to continue to take China much more into the integration of our corporate strategy, and try to duplicate some of the good things that are happening here for other markets."

China's policy direction backs the expansion. The country's 15th Five-Year Plan underscores advancing the Healthy China Initiative and places biomedicine among its strategic emerging industries.

For multinationals, the calculus is changing. As China spearheads industrial innovation through sci-tech innovation, a growing number of multinational corporations are locating their R&D and high-end manufacturing operations in China, boosting their global competitiveness.

GE HealthCare opened the Magnetic Resonance (MR) Eastern Hemisphere Headquarters R&D Center in Tianjin late last year, its only system-level MR imaging research base outside the United States.

Kelly Londy, president and CEO of MR at GE HealthCare, described the facility as "a critical upgrade" to the company's global innovation network. "China is not only one of the world's most dynamic healthcare markets, but is also emerging as a key engine driving cutting-edge industry innovation," Londy said.

A recent survey by the European Union Chamber of Commerce in China, conducted with Roland Berger, found that business confidence among European firms in China is recovering. China's dynamic R&D ecosystem, vast talent pool and rapid product commercialization capabilities are attracting more European enterprises to scale up their R&D activities in the country, according to the survey.

Jens Eskelund, the chamber's president, said many European firms want to tap into China's innovation ecosystem, but must also contend with fierce competition here. "You need to be really good to succeed on the Chinese market." Enditem