China's Manufacturing R&D spend set to increase?
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A recent survey by KPMG shows China’s attitude to manufacturing R&D spend is changing. The country is starting from a very low base, with 83% of manufacturers spending less than 1% of revenue on R&D, but it’s at a tipping point.  83% are planning to double or triple investment in manufacturing R&D in the next 12-24 months.

Alex Shum, KPMG Partner, China, comments that ‘China manufacturers must continue their efforts to move up the value chain and increase the added value of their products in order to sustain their revenue growth in domestic and international markets.’

The KPMG survey was world-wide, not just in China.  It’s interesting to compare the responses of China manufacturers to their global counterparts.

Manufacturing-challenges-June-2014

Both groups note competitive price pressure as a key challenge, along with key input costs.  Input costs are more of an issue for China, probably due to rising wages.  But the biggest challenge of all for China is tax increases.  Global companies, meanwhile, are more concerned about IT and regulation.

How to fund increased manufacturing R&D

Finding funds for manufacturing R&D comes in as China’s 4th biggest challenge.  It’s not surprising given the financial pressures in the top three.  Companies are looking for ways to make their R&D spend go further.

Partnership and Collaboration

The survey also reports 90% of companies worldwide see partnership as a key driver for future innovation.  This is a massive increase from 51% a year ago.  There’s no real difference of opinion between China and the rest of the world here, but China lags in implementation.  Only 30% have adopted collaborative working with clients and suppliers, compared to over two thirds of respondents world-wide.

Those 30% are the ones Hornet Group likes to work with!  It’s especially important for custom manufacturing projects.  Factory managers with production expertise can sometimes make design tweaks which reduce cost without affecting quality.

So will China manage to increase manufacturing R&D investment as planned?  Some companies will, others won’t.  Overall, it won’t be easy, but only time will tell how many succeed.

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