The US$40 million new research-and-development center 3M Co. is building here is a sign of the times. China isn't just the world's factory any longer. Laboratory by laboratory, China is fast becoming a significant research power - and foreign companies are only too eager to tap into its talent.
More than two decades ago, 3M was way out front in doing business in China. It was the first wholly owned foreign enterprise founded outside China's special economic zones. But when 3M's five-story metallic R&D complex opens up in southwest Shanghai next spring, it will already have plenty of company.
There are about 140 foreign-owned R&D centers in Shanghai now, and as many as 700 across the country. Search engine Google is just the latest to announce it's opening an R&D operation in China.
It's all part of a combined effort by the Chinese government, top research institutes like the Chinese Academy of Sciences and Chinese business to boost China's spending on R&D.
China now spends about 1.3 percent of its gross domestic product on R&D if both public and private funding are included. The United States, by contrast, spends about 2.6 percent, and Japan about 3.2 percent, which still puts it in the lead, according to the Organization for Economic Cooperation and Development.
That puts China in the game, but not a dominant player - yet, said Robert Haak, the Tokyo-based general manager of the Asian Technology Information Program, a U.S.-based nonprofit. Haak estimates it will take 10 to 20 years before China is a scientific power that dominates any area in the global market.
The rush by U.S. companies to set up R&D centers in China fuels concern at home that a complacent United States could be losing its competitive edge.
"I do sense there's sort of a Chicken Little mentality in the U.S. that the sky is falling because of China," Haak said. "I really don't see anything that warrants it."
3M China's research team currently stands at 208, out of about 2,800 total employees in China (and a worldwide work force of 67,000). But as 3M China approaches 2007, when it expects to hit US$1 billion in sales, it's adding R&D staff quickly, recruiting at university campuses and running ads on popular Web sites. 3M plans to add another 100 engineers in the next two years, according to China technical director Joe Liu.
"We don't want to miss the business opportunities," said Liu, describing US$1 billion as the "tip of the iceberg."
More of those opportunities are with the members of China's swelling middle class, who buy such 3M consumer products as Scotch-Brite pads and Post-It Notes. As a new car culture emerges in China, car owners head to 3M Car Care Centers for detailing. 3M has about 240 such centers around China - something of a surprise hit for the company.
Most of 3M's business here, however, is with other companies. To Liu, 3M's R&D buildup is a natural outgrowth of servicing those business customers for the last 20 years, modifying products to suit them. Sometimes adaptations are as simple as making Scotch Brite pads pink instead of blue, since red is a popular color in China.
Frequently such modifications involve design changes. Kenneth Yu, head of 3M's China operations, offers a simple example: the changes 3M made to its transparent wound dressings to work with traditional Chinese medicinal herb "plasters." Plasters are typically put on sore muscles or sprains, but are backed with cloth and can't be worn into the shower, Yu explained. So 3M stuck the plasters on its waterproof but semi-permeable backings to create a kind of super band aid.
"The White Medicine from the Province of Yunan," as it is called, hasn't been launched yet. 3M plans to sell it to Chinese pharmacies for sale over the counter.
Product modifications evolve into new product development, and so on up the knowledge ladder. About 50 of the 250 inventions the China team has developed in the last five years have been patented here, said Liu.
To be sure, most of the 3M's R&D in China is actually technical service to customers, or doing applied research such as product development. Only a very small portion of the work is what's considered basic research, the more "pure" scientific noodling that isn't directly tied to existing products.
That will change, Liu said, as 3M's new center adds more basic research muscle in such areas as nanotechnology (the science of miniscule particles), Generation 3 wireless technology, chemicals for cleaning and disinfecting, and components for China's growing local base of computer chip makers. And since electric utility companies here are plagued by breakdowns, particularly during the hot, humid summer months, products for high-voltage electricity transmission are another promising area, Liu said.
Such research prospects are what brought York Yu to 3M.
Yu, 31, heads 3M's corporate research materials lab. He puts his Ph.D. in polymer materials to work on battery materials and special new coatings to insulate construction materials and comply with new government thermal standards. Yu bikes to work from the apartment he and his wife bought nearby. He won't discuss his salary and will only say it's competitive with what other foreign multinationals offer.
According to JM Gemini, one of China's leading recruiters, an engineering graduate with a few years' experience earns US$7,500 to US$15,000 a year in cities such as Shanghai. Salaries can go significantly higher with advanced degrees and experience.
Until last year, Yu worked for a Chinese company. At 3M, he said, there's "More teamwork, more communication." At his old company, by contrast, "all your work is arranged by your boss."
Yu loves 3M's longstanding rule that scientists get to spend 15 percent of their work time on their own pet projects. He is spending it studying the microscopic surface structure of lotus flowers. Water always beads on the flowers, Yu noted. They clean themselves of dust. The structure of lotus flowers could have valuable applications for treating outdoor glass or kitchen counters, Yu said.