China is not only regarded as the world's factory, but is also growing as the world's R&D laboratory, The Economist said in an article published this July. This is borne out by the evidence that as of the end of June this year, a cumulative total of 985 multinational corporation (MNC) headquarters and 575 foreign-funded R&D centers had been established in Shanghai alone. In addition, on July 25, 30 regional headquarters of MNCs and 15 research and development (R&D) centers were certified by the municipal government of Shanghai.

In recent years, foreign companies have been shifting their strategic focus on entering the Chinese market from manufacturing and operational management, to localizing the R&D product design and management.

One main factor behind this trend is that China's further opening up brings more favorable policies for foreign enterprises to conduct R&D activities. For example, in January 2023, the Ministry of Commerce and the Ministry of Science and Technology issued a policy document to further support foreign investors in setting up R&D centers in China.

Key measures include supporting legal cross-border circulation of R&D data, optimizing the management of intellectual property rights for external transfer and technology imports and exports, and making it more convenient for introduction of overseas talent. These measures create a better environment for the development of foreign-funded R&D centers, enable them to allocate their resources globally and unleash their potential to drive industrial upgrades.

The other main reason is attributed to China's open and innovative R&D ecological environment with mounting young talent, various application scenarios, and an innovation-curious regulatory regime. The robust sci-tech ecosystem could be largely attributed to China's long-term investment. China's R&D expenditure exceeded 3.3 trillion RMB (about 458.5 billion USD) in 2023, an 8.1 percent year-on-year increase, according to the National Bureau of Statistics. The country's total expenditure on R&D across all fields ranks second in the world.

The Economist wrote that Chinese engineers and scientists are certainly "quite a catch" for doing lots of R&D. They are no less talented than their counterparts in the West. China now has a total of 250 million people receiving higher education and boasts the largest number of R&D personnel in the world, China's Minister of Education Huai Jinpeng said at a press briefing.

China provides diverse application scenarios for R&D and innovation-driven regulations, offering foreign companies unique opportunities to innovate and test new technologies in a large and dynamic market. For example, U.S. automaker Tesla, which has a gigafactory in Shanghai, was approved by the city's authorities to carry out the company's most advanced autonomous driving software tests this June.

As China is increasingly looking toward innovation as a driver of its economic growth, it is also taking steps to offer an environment of openness, impartiality and fairness for foreign enterprises to expand business. Foreign-funded R&D centers are not only an effective channel for foreign businesses to gain access to the Chinese market but also enable them to take part in domestic innovation and share common prosperity.