R&D spending grows in China

Research and development spending at large companies around the world fell in 2014 to the second lowest rate in the past ten years, while the spending at Chinese enterprises grew, a report from consulting company Strategy& showed.

The study, which analyzes R&D investment at 1,000 companies around the world, found that R&D spending rose by only 1.4 percent last year, dropping by 2.4 percent compared with the 3.8 percent rise from the year before. This marked a drop from the 10-year average growth rate of 5.5 percent.

Apple, Google, Amazon and Samsung top the list of the 10 most innovative companies in 2014 as identified by survey respondents.

While spending dropped around the world, the total R&D spending of Chinese companies included on this list reached $29.96 billion this year, an increase of 46 percent compared to the $20.53 billion last year. North American and European companies increased spending by only 3.4 percent and 2.5 percent respectively.

The R&D spending by Chinese companies accounted for 4.63 percent of this year's total Innovation 1000 R&D spending.

Furthermore, the number of Chinese companies represented in the Global Innovation 1000 rose from eight in 2005 to 114 in 2014 – an increase of 1,325%.

Petro China has surpassed all other Chinese companies by spending $2303 million in total R&D. It is also the only Chinese company which ranked in the top 100 in this year's list.

"What many highly innovative companies have in common is not a high level of R&D spending, but an understanding of end-users' wants and needs," said Bill Peng, Partner with Strategy&. "These companies intimate connections with customers and innovate around their needs."

The study also shows that Chinese companies prioritize innovation in globalization more than MNCs prioritize innovation in China. Innovation is the first priority for 31 percent of Chinese companies in the globalization, compared to 21 percent of MNCs.

In the 2014 survey, eight of the top 10 Chinese innovators are high-tech or internet companies. The top three are Huawei, Tencent and Alibaba.

Despite growing in number, Peng said that Chinese companies seeking to globalize and MNC's looking to succeed in China face challenges. Peng said that MNC's need to make large rigid "machines" more nimble.

"Chinese companies that want to globalize and MNCs seeking to succeed in China face challenges," said Peng. "Most of Chinese companies haven't set up R&D center overseas and they now design products with the help of their foreign partners."