Trailblazing city gets ready to become a leading player in R&D investment in world market
Ken Hu, global rotating chief executive of Huawei Technologies Co Ltd, one of the world's major telecom equipment providers, attributed the company's growing presence in the global market to its consistent investment in research and development over the years.
"Innovation, following increasing investment in research and development, is part of the company's DNA," said Hu, after Huawei stepped up its innovation and talent development recently by investing in an overseas training and innovation center.
Huawei, which reported a year-on-year increase in sales of 20 percent in 2014, invested about $22.8 million in a new training and innovation center in Sydney on Wednesday, according to the company.
According to Hu, Huawei, which is based in Shenzhen, a longtime testing ground for China's reform and openingup, has invested at least 10 percent of its revenue in research and development since its founding in 1987.
Last year alone, the company's investment in research and development increased about 28 percent year-on-year to about 40 billion yuan ($6.26 billion), surpassing the total net profit of its overall business, according to the company.
"Increased investment in research and development, especially in the new technology sector, has long been driving Huawei's business growth," Hu said.
Huawei's efforts in boosting research and development mirror a new economic development model in Shenzhen - innovation plays an increasing role in driving the local economy.
Shenzhen, which created a miracle of economic development over the past 30 years by depending on speed - a term used to describe the rapid local economic growth after introducing foreign investment, will now rely more on innovation to drive its economy, said Zhang Hu, deputy mayor of Shenzhen.
"Innovation will become a hallmark of Shenzhen as we are making further efforts in investing in research and development," Zhang said.
Shenzhen's overall investment in research and development reached 64.3 billion yuan in 2014, accounting for 4.02 percent of the city's GDP, according to Zhang.
According to sources with the Shenzhen Statistics Bureau, Shenzhen's research and development investment reached 30.5 billion yuan in the first half of this year, or 4.04 percent of the city's GDP, a percentage surpassing that of most developed economies including the United States and Japan.
Following increased research and development investment, the city's growth rate of strategic emerging industries almost doubled that of its overall economic growth, which increased 8.8 percent year-on-year to surpass 1.6 trillion yuan in 2014, according to the bureau.
The overall output value of strategic emerging industries including fourth-generation technology, 3-D printing, new-energy automobiles, industrial robots, smart equipment, life health and gene sequencing, accounted for 35 percent of the city's economy, according to the bureau.
"We are developing the local economy by relying more on quality rather than speed," Zhang said.
According to the local statistics bureau, Shenzhen's high-tech industries have grown rapidly, with the industrial output value increasing 10.2 percent year-on-year to reach 739.24 billion yuan in the first half of this year.
Lu Jian, director of Shenzhen Science and Technology Innovation Commission, said boosted efforts in research and development would help upgrade the industrial structure of Shenzhen.
"Unlike most cities such as Beijing and Shanghai, Shenzhen's investment in research and development is mainly from companies, rather than higher education authorities or science and technology institutes," said Lu.
"Companies in Shenzhen are in need of innovation, after decades of development relying on labor-intensive manufacturing and trade," Lu said.
For example, Huawei currently has about 170,000 employees in its global offices, of which nearly half are engaged in research and development, according to Lu.
"That well explains why Huawei invested a huge amount of money in research and development, which has already become a core driver of the company's business growth," he said.
Up to 90 percent of investment and personnel in research and development in Shenzhen are from companies, which have generated more than 90 percent of the city's patented products, said Lu.
Shenzhen's investment in research and development would account for 4.25 percent of its economy by 2020, helping make the city a leading global player in innovation development, Lu said.
Currently, only Israel and South Korea's investment in research and development surpassed 4 percent of their economies, according to Lu.
Gao Guohui, deputy secretary-general of Shenzhen government, said: "Traditional processing and manufacturing business has changed fundamentally since we introduced an overall plan to upgrade the industries by attaching priority to innovation in the late 1990s."
According to Gao, a growing number of traditional manufacturing businesses in Shenzhen have been well upgraded with innovative technologies.
"Manufacturing businesses, although they are not directly engaged in the information and technology sector, are using innovative technologies in their processing facilities," said Gao.
Still, Shenzhen produces more than 80 percent of frames for glasses in the world. "Shenzhen has formed new competitiveness in its manufacturing sector as local industrial players upgrade their traditional processing businesses by attaching more importance to innovation," Gao said.