Archives 2006

¡°China Rocks!¡± says Boeing¡¯s chief executive

Apr. 21, 2006 (China Knowledge) ¨C ¡°China Rocks!¡± said Boeing Commercial Airplanes Chief Executive Alan Mulally as he closed the proceedings of Chinese President Hu Jintao¡¯s speech at Boeing¡¯s Everett plant.

While Hu displayed goodwill of friendship and healthy working relation at Microsoft, the usually reserved president showed the affectionate side of him that amazed both Americans and his people at home.

Not only did Hu, in a celebrity-like gesture, put on a Boeing cap offered by one of Boeing¡¯s veteran staff Paul Dernier, he also gave the latter two hugs and several pats on the back as a sign of camaraderie and appreciation.

This came after a well-received speech from Hu. Commenting on Boeing¡¯s relations with China, Hu said, ¡°Boeing’s cooperation with China is a living example of the mutually beneficial cooperation and win-win outcome that China and the United States have achieved from trade with each other.”

“This clearly points to a bright tomorrow for future cooperation between Boeing and China,” Hu added.

Although several other Boeing workers remain apprehensive about this ¡°bright tomorrow¡± which might threaten their employment as China rises in economic terms, Dernier, who received Hu¡¯s public display of affection said the close ties between Boeing and China ¡±helps keep our factory open¡±, according to Seattle Post-Intelligencer.

In his speech, Hu shared a way by which China can help to keep their factory open: ¡°I hope the American companies will seize opportunities, aggressively expand their share of China’s market and continue to enhance their business ties with China.”

Partner (Head of China Operation)

Company introduction:

Our client is the leader in operational and financial internal audit services, which is also the firm who set the benchmark for internal audit partnering. Our client has a physical presence in over 130 locations and alliances worldwide. Their goal is always to establish a long-term and mutually beneficial relationship, with both our clients and our workforce. For the increased demands by their US based clients who have operations within China, they are looking for a partner in China.

Responsibilities:

1 Leading China business unit
2.Developing business by contracting with new customers consistent with the company’s business strategy.
3.Hiring consultants to support the development of business.
4.Oversight and follow-up for each client assigned to you.
5.Overseeing billing and collections.
6.Managing the relationship between staff and customers.
7.Reporting to your Principal about the progress of each project, and information relating to the continuation of each project.
8.Coordinating the management of each client assigned to you.

Requirements:

1.BA/BS in accounting or related field.
2.Well versed in GAAP accounting rules.
3.Strong orientation toward internal control, risk assessment and operational auditing.
4.10+ years internal audit experience in public accounting and / or private industry with either manufacturing, retail and distribution, banking, insurance/health care asset-based lending, food/consumer products, telecommunications and MIS.
5.Attainment of Senior Internal Audit designation.
6.Line operations experience and a demonstrated, innovative approach to internal audit as a consultative service is a distinct plus.
7.Adept at the use of technology (MS Word, Excel, Visio and PowerPoint; ACL & MS Access a plus).
8.Prefer CPA, MBA, CIA, CISA, or CFE.
9.Strong oral and written communication skills.
10.Commitment to exceptional client service.
11.Creative problem-solving ability and a consultancy mindset.
12.Flexible, self started possessing intellectual curiosity.
13.Ability to interact with various levels of client and company management.
14.Fluent in English and either Mandarin or Cantonese ¨C both written and verbal
15. Big 4 experience is definitely a big plus

Very competitive package offered to capable candidates.

Please send your resume to topjob_fi093sh@dacare.com

Stealing Managers From The Big Boys – China Headhunting Story

Chinese companies are energetically wooing execs away from multinationals

By just about any measure, Aaron Tong was a success. He was pulling down $100,000-plus as a senior manager of Motorola Inc.’s (MOT ) cellular division in Beijing and had worked in Singapore and the U.S. But two years ago, when TV-and-phone-maker TCL Corp. asked if Tong might accept a position as vice-president, he jumped at the chance. Although the modest salary hike and stock options were welcome, that wasn’t what really attracted him. “They were offering me a more challenging job,” says Tong, 42. At “a Chinese company, you can do a lot more important things than with a multinational.”

Tong isn’t the only Chinese manager being poached from the global giants. Tang Jun, president of NASDAQ-listed online gaming company Shanda Interactive Entertainment (SNDA ), served as president of Microsoft Corp.’s (MSFT ) Chinese operations. Jean Cai, head of corporate communications at Lenovo, is a veteran of Ogilvy & Mather Worldwide and General Electric Co. (GE ) Telecom equipment maker Huawei has hired people away from Motorola and Nokia, while Haier (appliances), China Netcom (telecoms), and Brilliance China Automotive Holdings (CBA ) have lured staffers from consultants McKinsey, A.T. Kearney, and Boston Consulting Group.

This migration is a big change from five years ago, when no self-respecting white-collar worker in China would have dreamed of quitting a foreign company to join a local outfit. These days the turbo-charged growth, global aspirations, and deep pockets of China’s ambitious private companies are looking better all the time. In 2000 locals made up just 20% to 30% of the managers recruited in China by headhunter Heidrick & Struggles. Today that figure is 60% to 70%. Local companies are “cherry-picking the best talent,” says by a managing partner for a headhunting company.

Managers say working for local companies lets them take on more responsibility and make a greater contribution. That’s what made Wu Xianyong, a 34-year-old native of the southern province of Yunnan, quit flogging Crest toothpaste and Pringles potato chips for Procter & Gamble Co. (PG ). In 2004, after nearly nine years at P&G, he jumped at the chance to serve as vice-president for marketing at Li-Ning, China’s top athletic-shoe maker and sports apparel marketer. He has since taken on oversight of international business as well. “Li-Ning can provide me with a much better platform to play on,” says Wu, who also snagged a 50% raise plus generous stock options. “I’m not just managing a brand. I do sports marketing, events, and PR, and I manage research.” In fact, Li-Ning is chock-full of multinational alums: The vice-president for sales formerly worked at Avon Products Inc. (AVP ), the vice-president for footwear came from Nike Inc. (NKE ), and the chief financial officer left news wire Reuters Group PLC. (RTRSY ).

Much of the shift stems from global aspirations. By hiring execs with experience at multinationals, the Chinese figure, they’ll have a leg up when they go abroad. For instance Gome, China’s No. 2 retailer, has ambitious plans to expand. So in January it recruited Weng Xiangwei, a 37-year-old former vice-president in Morgan Stanley’s mergers-and-acquisitions team, as its strategy chief and financial guru. “When a company grows to a certain size, it needs to think about more than just where to open its next store,” says Weng, a Shanghai native with a PhD in biophysics from the University of California at Berkeley.

Some managers take a pay cut when they jump ship — although stock options often fill in the gap. That trend will accelerate as more private Chinese companies list on overseas stock markets. Deng Kangming, for example, saw his salary drop by 20% when he left his job as head of human resources at Microsoft in Beijing for a similar job at Net auctioneer Alibaba Technology, but he was granted a generous dollop of options. Two years ago, 27-year-old Zhou Donglei took a 35% cut when she left Japan’s Softbank Infrastructure Fund in Beijing to run business development and investor relations at Shanda. “What drew me was the opportunity, definitely not the salary,” says Zhou.

Yet salary can play a role in many searches, especially for sought-after talents such as finance. One veteran of the Bank of China saw his pay jump in just six months from $70,000 to $180,000 after a bidding war broke out for his talents among a foreign bank and two Chinese companies, according to Heidrick & Struggles: The manager ended up as CFO for a local valve maker.

China’s state-owned giants are also likely to pay a premium to woo talent. For instance, Ping An Insurance Group, China’s second-largest life insurer, has hired managers away from Canadian Imperial Bank of Commerce and American International Group — often upping their pay by as much as 50%. Ping An just hired a manager with five years of experience at an international bank for $65,000 per year — a huge sum in China, and 40% more than he was making at his old job.

Most telling of all, Chinese companies are even starting to look overseas for talent. Michael Zhang, a 37-year-old native of Sichuan province, worked for four years at medical device maker Guidant Corp. (GDT ) before being recruited as CEO of Microport Medical (Shanghai) Co., which makes stents used in unblocking arteries. He, in turn, hired 33-year-old Zhao Ruilin, who had joined rival device-maker Medtronic Inc. (MDT ) in Minneapolis after earning a PhD from a Harvard University/Massachusetts Institute of Technology joint program in health sciences and technology, as well as an MBA from the Wharton School. Zhao now serves as Microport’s vice-president for business development and strategic planning. He earns just $60,000 — a bit more than half what he made at Medtronic, though he also gets free housing. Still, he says, the greater responsibilities he has, coupled with Microport’s hypergrowth — sales this year are expected to triple, to $30 million — make up for the pay cut. “Working for this company is so much fun,” Zhao says. “Now I’m interacting with bankers, private equity shops, lawyers, and accountants.”

The drive for talent by China’s best companies feeds into the boom for middle and upper managers at both multinationals and local firms. One recruiter estimates managing directors at Chinese state-owned companies can earn up to $300,000 a year plus a car and housing, while middle managers with the right skills pull down $70,000 or more. Annual raises of about 13% to 14% are necessary to hold on to employees, while poachers offer pay jumps of 20% to 30%, according to Hong Kong recruiting firm Bo Le Associates. “For mid-level management, the market is really hot,” says Bo Le managing director Louisa Wong Rousseau.

And don’t expect things to cool off anytime soon. China will need 75,000 globally capable execs in the next five years but has fewer than 5,000 today, estimates McKinsey. As long as multinationals in China train locals to run their operations, there’s likely to be no shortage of mainland rivals eager to snatch them away.

Germany’s SAP hopes to triple China staff by 2008

Last Update: 5:20 AM ET Mar 24, 2006

SHANGHAI (MarketWatch) — Germany’s SAP AG (SAP), the world’s biggest business software company by revenue, hopes to triple the number of its staff in China by 2008, a senior executive said Friday.
SAP now has 1,100 employees in China, including staff at a regional support center in the northeastern port city of Dalian, a laboratory in the central city of Chengdu and a new laboratory in Shanghai.

Labor in China

According to recent front-page articles in the New York Times and the Financial Times Asia edition, wages have been steadily rising during the last several years throughout southern China, where the world’s largest manufacturing base is located. Citing “double-digit” increases in Chinese labor costs, executives of the Li & Fung group, a $7 billion Hong Kong-based trade-sourcing company, told the Financial Times last month that the competitiveness of China’s sprawling manufacturing industries seriously eroded last year. William Fung even went so far as to declare that China “is no longer the most cost-effective country in the region,” an assertion that has been seriously challenged.

China’s rising costs have generated recent price increases averaging 2 percent to 3 percent for its goods, Mr. Fung reported. Though relatively small in absolute terms, these price increases nonetheless represent a major reversal of a long-term trend marked by “severe deflation.” That deflation, which reflects falling prices, was especially evident in many consumer durable goods, which are products expected to last three years or longer, such as furniture, household appliances and most electronic goods, all of which China produces in abundance.

The Commerce Department’s price index for all consumer durable goods, for example, has declined by nearly 20 percent since 1995, while the price index for furniture and household equipment plunged more than 40 percent over the same period. The prices for clothing and shoes, nondurable goods in which China specializes, fell 14 percent over the last 10 years. U.S. consumers derived extraordinary purchasing-power benefits from these falling prices, whose anti-inflationary impact has had the added benefit of helping to keep long-term interest rates, including mortgage rates, well below historical levels for years.

The New York Times article attributed China’s rapidly accelerating wages to “persistent labor shortages,” noting that the rising wages were “swelling the ranks of the country’s middle class.” U.S. workers should view this as a welcome development because American exports become far more affordable to Chinese workers whose living standards are rising. However, while the recent upward trend in Chinese wages is indisputable, there is good reason to believe that the trend will not have the long-term impact that experts cited by the New York Times seem to believe. Specifically, it is highly unlikely that rising wages are causing the Chinese economy to undergo “a profound change that will ripple through the global market for manufactured goods.”

Applying “the math of small numbers” to China’s changing wage structure, Stephen Roach of Morgan Stanley recently explained why China and its 1.3 billion people are unlikely to lose their comparative advantage in the manufacture of goods. “Rapid wage inflation off a very low base does little to close the gap with higher-wage economies on a moderate inflation trajectory,” Mr. Roach convincingly argued. Back-of-the-envelope calculations illustrate Mr. Roach’s point. The New York Times reports that the wages paid by multinational corporations in their largest Chinese factories typically average between $100 and $200 a month. (Minimum wages are less than $80 per month.) Given that Chinese manufacturing employees customarily work 10 hours per day six days a week, the upper limit ($200 per month) of wages paid by multinationals translates into 77 cents an hour. By contrast, U.S. workers in goods-producing industries earn an average wage of $17.72 per hour. Now, assume the 77-cent wage increases by 20 percent for each of the next five years. (The 20 percent annual increase would represent a significant acceleration over the 12-percent annual average that has prevailed since 1999.) Next, assume that the average U.S. goods-producing wage increases over the next five years by the Blue Chip consensus inflation forecast of 2.5 percent per year. Five years from now, China’s top wage would be $1.92 an hour, having increased by $1.15. America’s average goods-producing wage would be $20.05 per hour, having increased by $2.33, an absolute rise that is more than twice the absolute increase in the Chinese wage. The U.S.-Chinese wage difference would increase from $16.95 today ($17.72 less 77 cents) to $18.13 five years from now.

Responding to the New York Times assertion that China’s rising manufacturing wages are “threatening at some point to weaken China’s competitiveness on world markets,” Morgan Stanley’s Mr. Roach notes that “[p]roductivity growth in China’s industrial sector — manufacturing, mining and construction — surged at an average annual rate of nearly 20 percent over the 2000 to 2004 interval,” which was “well in excess of the cost pressures implied by 12 percent gains in hourly compensation.” Thus, unit labor costs probably declined over the past five years. At worst, they were very well contained. Mr. Roach finds the “labor shortage in China” argument to be “equally preposterous.” He cites the 60 million workers that have been furloughed by China’s state-sponsored enterprises since 1997. And he points to the fact that China’s rural population totals nearly 750 million, “by far the largest pool of surplus labor in the world.”

So, it is good news that China’s growing middle class is experiencing sizable relative income gains, a trend (if it continues) that will make U.S. goods more affordable to the average worker in China. It is also good news that the combination of soaring Chinese productivity and the continuing large absolute difference between Chinese wages and developed-country wages is likely to keep low-priced, purchasing-power-enhancing Chinese products within easy reach of consumers everywhere.

http://washingtontimes.com/op-ed/20060415-091638-9341r.htm

Morgan Stanley Hires Exec Director, Invest Banking China

HONG KONG (Dow Jones)–Morgan Stanley (MS) said Thursday it hired Kai Yang as an executive director for its China investment banking team, based in Beijing.

Yang previously worked as chief representative in Beijing for Citigroup Inc. (C) and Swiss bank UBS AG (UBS).

Yang, who will start working at Morgan Stanley in May, will report to C.G. Wu, the company’s head of investment banking for China.

So far this year, Morgan Stanley is the top bookrunner for equity deals in China, according to Dealogic PLC (DL.LN), a capital markets data provider. The company has acted as bookrunner on US$339 million worth of deals. The firm was also the top bookrunner for China equity deals in 2005.

http://sg.biz.yahoo.com/060323/15/3zku2.html

UBS Appoints Cai Hongping Chairman of China’s Investment Banking

(SinoCast Via Thomson Dialog NewsEdge)BEIJING, Apr 04, 2006 (SinoCast via COMTEX) –UBS AG, a global leading financial service provider, appoints Cai Hongping the chairman of the investment banking business in China.

Mr. Cai, formerly served in BNP Paribas, has 12 years of experience in helping the state-owned companies go public and vie for underwriting business of USD 2.5 million, in which BNP Paribas was a leading bank and arranger.

Robert Rankin, joint head of USB investment banking business in Asia, reveals that Mr. Cai has been doing the investment banking business for ten years and is a senior investment banker. He had in-depth understanding of the Chinese private companies in various industries, including manufacturing, transportation, infrastructure, retail, and power and energy. The coming of Mr. Cai will help UBS AG to improve the current business in China.

Cai Hongping joined BNP Paribas in 1997 and became the managing director in 2002. Later, he was promoted to be the joint head of the bank’s Asian business.

Number of foreigners working in China soars

www.chinaview.cn 2006-04-04 08:15:47

BEIJING, April 4 — A lack of qualified personnel in both the private and public sectors has seen the number of foreigners working in the country soar.

Expatriates legally employed in the country last year almost doubled compared with three years earlier, reaching a record high of more than 150,000, according to the Ministry of Labour and Social Security.

The rise is mainly seen in overseas-funded companies and local offices of multinationals as they expand rapidly in the coastal areas as well as big cities in the inland provinces.

The most sought-after positions include those in information technology (IT) and management, including human resources and finance departments.

In Shanghai alone, where more than half of the global top 500 multinationals have a presence, an estimated 40,000 foreigners work.

The State Administration of Foreign Experts Affairs is also hiring foreign experts every year.

“Foreigners with managerial and professional skills are welcome to work in China,” said Gao Lin, an official with the ministry’s employment department, adding that more are coming after the country joined the World Trade Organization (WTO) in 2001.

Lack of talents to fill new positions is a major reason behind the influx of foreign professionals.

The IT and telecommunications sectors, new materials and energies, high-tech and financial industries are particularly in need of foreign talent, said Wang Tongxun, a senior expert with the Chinese Academy of Personnel Science under the Ministry of Personnel.

“It means greater opportunities for both domestic and overseas talented people,” he said. But since most domestic jobseekers cannot meet the requirements, foreigners fill the breach.

For instance, senior personnel in finance and accounting, like finance controllers, are urgently needed, Mercer Consulting said in a mid-March report after it co-sponsored a survey with the Association of Chartered Certified Accountants (ACCA).

But most senior accounting positions are taken by expatriates, it said.

Key positions such as marketing managers of overseas enterprises and foreign-funded hotels, and top posts in banks and manufacturers are also mostly taken by foreigners.

For these jobs, “expatriates are paid two to three times higher than their local counterparts,” said Alan Zhang, who leads Mercer’s Human Capital Product Solutions business in China.

“Most expatriates used to take up senior managerial or senior technical positions. But since 2004, there is an increasing trend to assign expatriates at middle management and professional level,” he added.

(Source: China Daily)

Get Me Personnel, We got hottest Job in China

Who’s got the hottest job in China? The HR guy.

Michael Cline has seen the front line of the piracy battle in China. As a vice president for global personnel at AO Smith, the maker of heaters and motors based in Milwaukee, he helped guide the firm’s China expansion from no plants in 2001 to multiple sites in four cities by 2005, and from zero employees to 3,000 people. Problems soon emerged: Employees were selling the company’s technology to outsiders, and sales staff were, he says, “leading a dual life” by also working for rivals.

“The environment here was very different from anything the company had faced before,” says Cline, who now runs a U.S. textile company in China. “I was spending 70% of my time” on China.

So AO Smith called in a U.K. consultancy called Control Risks to plug the security holes and help vet employees more carefully. They tried to root out nepotism by managers who directed business to companies controlled by family members, says Dane Chamorro, the China deputy manager with Control Risks in Shanghai. AO Smith declined to comment on the security issues. “There are a lot of messes here” in China, Chamorro says.

China’s economic boom and attendant surge in intellectual property theft and financial crimes are taxing the skills of personnel departments. The demand for those skills is making personnel into one of the hottest careers in China today. According to consulting firm Mercer, wages in China for top HR executives of multinational companies grew 20% in each of the last two years to $97,000–in a country where per capita income is 1% of that figure.

The risk of a bad hire is getting bigger as manufacturers transfer sophisticated technology to woo local consumers and overseas investment funds pour fresh capital into local businesses. Corporate-snooping outfits are thriving as clients demand more background checks on their partners and employees. After opening a Shanghai office in 2003, Control Risks has gone from 2 to 22 employees in the city and will add an office of 5 people in Hong Kong this year.

For decades after the Communists took over in 1949, workers spent their entire careers with one state-owned company and rarely moved to a different town. Although state-owned enterprises now account for only a third of the economy and workers are far more mobile, there are no good national databases for checking employment histories, education credentials and criminal records.

The cost to check out a potential or past hire can range from $100 to $5,000, more than in the U.S., where criminal, legal and credit databases are more easily checked. The expense and hassle deters some businesses from even bothering, says Control Risks’ Chamorro. Résumé fraud is rampant, and applicants frequently forge names on recommendation letters. “They don’t expect to be checked–that’s why they do it,” says Chamorro.

And don’t bother calling a former employer by phone. “If you call another part of China to ask about someone, people will tend to say everything is fine because they don’t want to risk trouble from saying anything bad,” says Simon Yin, cofounder of Hongren Club, an association based in Shanghai of about 1,000 personnel professionals. Yin is a big proponent of informal information exchanges about job applicants and of using references among group members.

“A lot of laws are there, but they don’t always help. You have to work internally,” says Arthur Yeung, who teaches at the China-Europe Business International School.

http://www.forbes.com/business/global/2006/0417/022.html

Low Costs, Plentiful Talent Make China a Global Magnet for R&D

Kathy Chen
Jason Dean
The Wall Street Journal, 14 March 2006

BEIJING — Multinational companies, drawn by a huge and inexpensive talent pool, are pouring money into research and development in China — a trend that promises to broaden the country’s huge role in the global economy.

The total number of foreign-invested RnD centers in the country has surged to about 750 from 200 four years ago, according to China’s Ministry of Commerce. And in a survey of multinationals published in September by the United Nations Conference on Trade and Development, China was by far the most frequently cited location for RnD expansion, well ahead of the U.S. and third-place India, China’s chief rival as an emerging innovator.

Still, China’s growth as a global RnD hub faces some constraints. Among them is the country’s weak protection of patents and other intellectual-property rights. That has encouraged some foreign companies, fearful of risking their trade secrets, to keep more cutting-edge research out of China, analysts say. But others have rushed to expand the scope of their development efforts here.

Whereas RnD investment in China initially focused on adapting existing products and technologies to the Chinese market, companies such as Procter & Gamble Co., Motorola Inc. and International Business Machines Corp., among many others, have been investing to expand their Chinese RnD operations to develop products for the global market.

PnG opened a research arm in China in 1988, consisting of two dozen employees concerned mainly with studying Chinese consumers’ laundry habits and oral hygiene. Today, the U.S. consumer-products giant runs five RnD facilities in China with about 300 researchers who work on innovations for everything from Crest toothpaste to Oil of Olay face cream.

The Chinese facilities have been a lead site for developing a new grease-fighting formula of Tide laundry detergent that sells in Asia, Eastern Europe and Latin America. At one facility in Beijing’s university district, researchers use computer modeling to tinker with other promising formulas that chemists in white lab coats and protective glasses then mix and test. “We are developing capabilities in China that we can use globally,” says Dick Carpenter, director of PnG Technology (Beijing) Ltd.

Giving impetus to the RnD expansion in sectors from biotechnology to pharmaceuticals to semiconductors is China’s government. Having enlisted foreign investment to transform China into a manufacturing powerhouse over the past few decades, Beijing now is mounting a campaign to strengthen domestic innovation that could help push the country into more advanced niches of the global economy.

In his annual report at the National People’s Congress in Beijing, which ends tomorrow, Chinese Premier Wen Jiabao said the central government will increase spending on science and technology by nearly 20% this year. “China has entered a stage in its history where it must increase its reliance on scientific and technological advances and innovation to drive social and economic development,” he said.

China’s State Council, or cabinet, recently said the country would seek to boost RnD investment to 2% of gross domestic product in 2010 and 2.5% by 2020. At a news conference Friday, senior officials outlined tax breaks and other tools they plan to use to meet that target. Last year, total RnD spending in China — not including foreign investment — reached $29.4 billion, rising steadily from $11.13 billion in 2000, according to the government.

China faces numerous obstacles to joining the ranks of the world’s innovation leaders — beyond its weak intellectual-property protections. Research spending is still small compared with that of developed countries; the U.S., for example, spends about 2.7% of GDP on RnD, compared with 1.3% of GDP in China last year. And much of what is spent in China still comes from foreign companies: Less than a quarter of Chinese midsize and large enterprises had their own science and technology institutions in 2004. Of China’s high-tech exports, valued at $218.3 billion last year, nearly 90% was produced by foreign-invested companies, according to the Ministry of Commerce.

Still, the RnD trend is bolstering China’s position relative to other developing countries, particularly India, which is also seeking to build its innovation abilities. India’s total domestic spending on RnD rose an estimated 9.7% to $4.9 billion, or 0.77% of GDP, in the fiscal year ended March 2005, according to India’s Ministry of Science and Technology.

India is also trying to build RnD, “but the scale of investment [compared with China] is not much” because of budgetary constraints, says V.S. Ramamurthy, a top official at the ministry. Foreign investment in Indian RnD has also lagged behind that of China, he says. And while Mr. Ramamurthy argues that the amount of investment isn’t the only way to measure RnD success, “it is a concern for us.”

Zhang Jun, director of the China Center for Economic Studies at Shanghai’s Fudan University, says that given time, “China’s advantages in this area will become more obvious…and its attractiveness will increasingly become stronger than India’s.”

Among China’s draws, he says: the relatively low cost of hiring engineers and researchers; a huge talent pool, including five million university graduates annually (one-fifth majoring in science or engineering); and China’s own huge market of 1.3 billion consumers. China offers its students abroad incentives to return once they graduate, including generous research grants and chances to run their own RnD projects.

One early returnee is Enge Wang. Mr. Wang, who had worked as a research associate at the University of Houston, decided to return to Beijing to conduct research under a Chinese Academy of Sciences program in 1995. At the time, he says, his U.S. colleagues and friends questioned his decision, but he says he is glad he made the move. Today, Mr. Wang is director of the Institute of Physics under the academy, one of China’s top research organizations, which is engaged in several RnD cooperative ventures with foreign companies.

China’s “research funding is getting much better,” Mr. Wang says, and as a result, overseas Chinese are flocking back from top U.S. institutions like Harvard University and Lawrence Berkeley National Laboratory. Talented returnees can secure enough backing “to build up their own lab and extend their research in one direction for 10 years,” he says. “It’s hard to find such conditions elsewhere.”

“There’s been a paradigm shift among foreign companies in China,” says Chen Zhu, a Chinese Academy of Sciences vice president. “Now, more foreign companies realize

China is not just a market but a country with huge amounts of talent.”

Motorola, which began investing in low-level RnD in China in 1993, now has 16 RnD offices in five Chinese cities, with an accumulated investment of about $500 million. The U.S. company has more than 1,800 Chinese engineers, and the number is expected to surpass 2,000 this year. They have recently begun developing new phones and other products for sale not only in China, but also overseas, executives say.

One phone developed in China, the A780, lets users write on the screen with just a finger, rather than a stylus. It’s now available in the U.S. and Europe. Another phone that can scan contact information from business cards using a built-in camera and enter it into a contact database is expected to be marketed in the U.S. “China is moving from the manufacturing center into advanced RnD,” says Ching Chuang, who heads Motorola’s Chinese RnD operations.

Microsoft Corp.’s basic-research lab in Beijing was only its second outside the U.S. when it opened in 1998. That China lab now employs about 200 full-time scientists, and the software giant expects its total RnD headcount in China to double in this year to about 800 researchers.

At IBM’s research lab in Beijing, Chinese scientists have led the development of several technologies now being used abroad. Among them: “voice morphing” software that can convert typescript or a recorded voice into another voice. “Our RnD now has a global mission,” says Thomas S. Li, director of IBM China Research Lab.

At the state-run Institute of Computing Technology, engineers are tackling one of technology’s tougher challenges: designing a computer microprocessor. Though still many years behind industry leaders like Intel Corp., the institute last year unveiled its second-generation microprocessor, with about the same computing power as mainstream chips in the late 1990s. This year, it plans to finish work on a third-generation chip that could narrow the gap.

China is also emerging as an RnD force in such sectors as nanotechnology, biotech and genetically modified crops. It was the first country to establish a full rice genome database, which has helped Chinese scientists develop hardier and higher-yielding strains of the staple cereal.

Swiss pharmaceuticals companies Novartis AG and Debiopharm SA have teamed up with the Shanghai Institute of Materia Medica under the Chinese Academy of Sciences to conduct research into traditional Chinese medicines to look for treatments for malaria and Alzheimer’s disease. “This last decade, the progress we have seen in China’s scientific research sector is phenomenal,” says Ju Li-ya, director of Debiopharm’s China department.