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How will China’s surging R&D investment impact hiring?

Date: 02 July 2019

In 2018, China’s corporate spending on research and development (R&D) surged by 20%. While PwC reported that Chinese companies spend on R&D grew the most globally in the 12 months to June 2018, at an increase of 34%. However it’s being measured, one thing is clear: Chinese firms are investing heavily in R&D and are almost to the point of parity (in terms of spending power, if not dollar for dollar) with the US. According to the Brookings Institute, this upswing in R&D investment has bolstered the country’s economic growth.

So what ramifications does this have for hiring and people management across R&D departments in China? 

A Yen represented in binary code

What are the highest growth industries for R&D in China?

There’s been significant growth across all sectors, but hiring demand is particularly high across the Tech and Information Technology, Pharma and Healthcare industries. This tallies with the EU Industrial R&D Investment Scoreboard’s finding that the biggest sectors represented in the top 30 high growth are Technology Hardware (12 of 30), Software (10) and Biopharmaceuticals (5). The same report found that Huawei ranked #5 on the global list of top R&D investors (elsewhere in the region, Samsung was #1).

Because of China’s position as a global factory, a large proportion of the supply chains of many industries, such as technology, which consists of thousands of component suppliers, are now located in the country. According to Yanfei Li, an Energy Economist Policy Fellow at the Economic Research Institute for ASEAN and East Asia, “R&D activities based in China could thus be more effective in identifying or creating new combinations [of component technologies], as evidenced by the many global industrial giants setting up R&D centres in the country.”

As global companies search for the best supply chain capability to commercialise innovations, high-tech industries will continue to look to China for manufacturing solutions. Subsequently, supply chains are evolving in tandem with R&D growth to be able to serve the market.

Which industries are spending the most on R&D?

The EU Industrial R&D Investment Scoreboard 2018 reported that Information and Communications Technology (ICT) companies accounted for 33% of global R&D investment among the 2500 companies surveyed globally; Automotive and other Transport companies was responsible for 11%; and ICT services 15%).

Bio-Tech and Life Sciences are also one of the major growth areas, due to a combination of sustained government interest and a booming need for health science. The streamlining of regulation has also increased efficiency.

Is the growth in spending correlated with growth in employment?

It seems that headcount is one of the major line items in the investment budget. The EU Industrial R&D Investment Scoreboard reported that from 2008 to 2018, employment in China’s R&D departments grew by 49% (compared with 

14% in the US, 20% in Japan and 11% in the EU), with the biggest increases seen in medium-low tech (121%) and medium-high tech (86%).

With China being the second-largest market for pharmaceutical and medical products in the world, the Biotech talent pool has seen significant growth through the Thousand Talents initiative to bring Chinese expat scientists, academics and entrepreneurs back to China (while also attracting foreign talent in these fields). The initiative has successfully brought back 1400 science professionals to date into the Biotech ecosystem and created more jobs in the process.

What job roles are most desired by Chinese R&D teams?

This rapid growth has left a talent gap in the market – mid to senior professionals are some of the most sought after, and we’re seeing the highest level of demand for:

  • R&D Quality Engineers
  • Senior R&D Engineers
  • Senior R&D Managers
  • Senior R&D Chemists
  • Plant/Site Managers
  • Quality Engineers
  • Safety Engineers
  • New Product Development Managers

Where is the talent coming from?

With fewer candidates available to fill senior roles as a result of rapid investment growth, firms (particularly MNCs) need to acquire external talent from regional and global markets, rather than promoting from within. In addition, the specialist nature of R&D careers restricts professionals from transitioning easily between industries, so the talent pool is restricted further. As a result, much of the talent flow to China’s R&D market comes from outside the APAC region, particularly in the European Union and the United States, where R&D is highly advanced.

What skills are in demand?

While the right combination of technical skills and experience is essential, interpersonal skills and cultural fit are high on the list for top talent. With the mandate to acquire talent from outside of China, Mandarin speaking skills are preferred, but not essential.

The in-demand technical skills across the board include:

  • New product development
  • The ability to develop and lead R&D strategy
  • Process improvement
  • Resource development/allocation
  • Competence gap analysis
  • Technology roadmap development/execution
  • Driving systematic cost study across the full value chain, from: (a) product requirements management; (b) product platform design; (c) process optimisation; (d) sourcing to product industrailisation; (e) inventory management

For senior leaders, the soft skills required include:

  • Strong interpersonal skills
  • High EQ
  • Senior stakeholder management
  • Ability to manage cross-functional teams
  • Strong negotiation skills
  • Ability to manage and resolve conflict
  • Problem solving

What kinds of salaries, perks and benefits are attracting top talent?

Within this environment, we are witnessing a bidding war for the best talent, particularly as startup firms in the Pharma, Healthcare and Biotech industries poach professionals from Fortune 500 MNCs. These smaller, more agile firms are setting the pace by offering better titles, higher total compensation (often a combination of base + options, stock or equity) and more exciting challenges. MNCs as a result have no option but to look outside China to source candidates.

Conclusion

China’s R&D funding is targeted to reach 2.5% of GDP by next year, so will expect to see a significant push towards this goal from a current hold of 2% GDP. Additionally, the Made in China 2025 aims to cut the country’s reliance on foreign technology in sectors such as Robotics, Aerospace and New-Energy vehicles by 2025, so we also anticipate significant investment in these areas. Meanwhile, an increasingly ageing population is driving demand for technological innovation in the healthcare industry. As more of the nation’s population live with chronic health conditions, we anticipate there will be calls for increased investments in Biotech and Pharmaceutical R&D to meet their medical needs.

Do you want to know what career opportunities are currently available in China? Get in touch with us for personal advice.