R&D spending speeds up in 2016, shifts from products to digital: PwC study

Updated 2016-10-27 10:03:48 Global Times

Companies based in China have been increasing their spending on research and development (R&D) this year, according to a report released by global accounting firm PwC on Wednesday.

The report, called "2016 Global Innovation 1000," investigates the trends at the world's 1,000 largest R&D spenders, including 130 companies from China.

According to the report, Chinese companies on the list have spent about billion on R&D so far in 2016, up 19 percent compared to billion in the previous year.

"As R&D spending by European and Japanese companies declines, Chinese companies are in the leading position," said Adam Xu, partner and leader of the digital practice with Strategy&, which is PwC's strategy consulting business.

He added that North American companies' R&D spending also grew in 2016, but to a smaller extent than that of Chinese companies.'

According to the report, most of the top R&D spenders in China are State-owned enterprises in traditional industries such as manufacturing.

"R&D costs money. Only companies with a certain scale can afford that," Xu said on Wednesday.

Alibaba Group Holding, ZTE Corp and PetroChina Co are the top three R&D spenders in China this year, according to the report.

The report also stressed that many of the world's companies are making a transition as they shift the majority of their R&D spending from physical product-based offerings to digital offerings such as software and services, and they are likely to complete this transformation by the end of 2020.

"This trend is definitely very obvious in China, and based on personal observations I have been impressed with how China has invested in R&D in the software sector," Huw Andrews, partner and innovation group leader of PwC China, told the Global Times on Wednesday.

Xu also told the Global Times on Wednesday that there's no question that China is putting more focus on software R&D. "The problem is: software R&D does not necessarily lead to good financial returns. The right profit model is still not clear," Xu said.

The report also said that global R&D spending on software offerings had increased from billion in 2010 to 2 billion in 2015, up 65 percent.

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