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Chinese companies bank on research and development-led growth for better returns in Europe

Chinese companies are investing heavily in research and development in Europe, drawing on the continent's plentiful high-technology and human resources to help them move up the value chain and internationalize their operations.

They often establish R&D laboratories through existing subsidiaries in Europe, or by buying European companies with existing R&D capabilities that they can add to.

One of these Chinese companies is the telecommunications giant Huawei Technologies Co Ltd. Renato Lombardi, vice-president of Huawei's European research center, said the company allocates its R&D resources with the aim of making the most of what each country's human resources and social networks offer.

In Europe the company has R&D centers in Belgium, the United Kingdom, Finland, France, Germany, Ireland, Italy and Sweden, and it allocates a portion of its R&D work to each country based on its expertise.

The center in Italy focuses on microwave research, which is critical in connecting mobile base stations and networks. Before the center was set up in 2008, Huawei outsourced its microwave business to other companies, Lombardi said. Realizing the importance of developing microwave technology, it decided to set up the Italian center, and Lombardi said that in-house microwave technology has greatly benefited Huawei's global operations.

Xu Bin, director of Huawei's UK research effort, said: "This long-term R&D investment generates the breakthroughs that are to be the basis for our revenue streams in the future."

Medical equipment company Mindray Medical International Ltd gained a R&D center in Sweden when it bought Datascope, a United States company, in 2008.

However, the company's R&D activities extend beyond this center, because it is also using its European sales force as a way of gathering information on customer needs, which is then used by its R&D centers in China to further develop products, said Su Lei, country manager for Mindray UK.

"We greatly value this R&D center from a strategic perspective, and we use it to research pioneering technology in relation to the medical industry because Europe has an advantage in breakthrough technology research."

As with Mindray's access to R&D capability in anaesthesia through the Datascope acquisition, the 2008 purchase by the Chinese company Zhuzhou CSR Times Electric Co Ltd of the United Kingdom-based semiconductor company Dynex Semiconductor Ltd has given it crucial R&D capability in chip technology, which is crucial for the railway industry.