China Manufacturers Plan to Double or Triple R&D Spend Over Next 24 Months

Manufacturers in China are set to significantly increase expenditure in research and development (R&D), according to a recent global manufacturing survey by KPMG.

While 83 percent of China respondents said they spent less than just one percent or less of their revenue for R&D and innovation in the past two years, this is set to change as 83 percent also indicated they plan to double or triple that level of spend over the next 24 months.

Around three quarters (76 percent) of respondents indicated the same in the previous survey.

Chinese respondents are also focusing efforts on more innovation – either enhancing existing product lines or breakthroughs.

Three out of ten China respondents said they anticipate 10 to 15 percent of their revenue over the next two years to be attributed to new innovation and product innovation, compared to 13 percent of global respondents.

“With increasing competition from other lower-cost countries, 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,” says Alex Shum, Partner, KPMG China.

A lack of R&D funding is one of the main challenges impacting a Chinese manufacturer's ability to innovate, as indicated by 53 percent of respondents.

Half of them said they view the prospect of tax increases as a key challenge, followed by market competition and price volatility (both at 40 percent), while efficiency in R&D or product development process ranks third (37 percent).

Due to existing challenges of securing new funding, many manufacturers are instead focused on stretching their R&D investments as far as possible and finding alternatives way to proceed, the report notes.

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