Global companies will play a major role in China's high-tech sector for years to come, despite the country's drive to boost domestic firms onto the higher-value rungs of industries from chips to software, a senior government official said.
Li Yiping, Chairman of Shanghai's Science & Technology Commission, said on Monday that China, the world's fastest-growing economy, had no choice but to rely on foreign technology for now.
But Beijing wants to create a local industry with sizeable intellectual content to play a bigger technology role in the future - particularly as the country loses its low-cost, cheap-labour edge, Li told the Reuters Asia Technology Summit.
China is now hindered, however, by the enormous cost of funding research.
Li, who oversees the city's efforts to become a regional technology hub, noted that multinational firms such as Merck and Intel spend as much as $3 billion to $5 billion a year on their global research and development operations.
That's beyond the reach of even China's richest city.
So while Shanghai - a vital cog in China's fledgling research engine - is racing to pool equipment and share findings via a city-wide platform to shore up local players' efforts, it retains an open-arms policy to foreign-funded research.
"We simply can't go it alone. That's why the biggest winners in all this are the foreign multinationals," Li told Reuters Television in a rare interview with a senior Shanghai official, on the sidelines of the summit.
"They're the main players in research with commercial applications - something we're not good at.
"We're weak, whether in design or production or exports."
In the past, investment was focused primarily on manufacturing, positioning China as the world's workshop.
Overseas players and their joint ventures still account for more than 85 percent of Chinese exports of high-tech goods, official data show, as global companies such as Siemens manufacture products in China to ship abroad.
But China is increasingly intent on higher value-added production, as it strives to turn "made in China" into a respectable appellation.
Multinational firms from Intel to Applied Materials are constructing research labs across the country. Hardly a week goes by without a global player unveiling plans to establish a research base in the world's fastest-growing major IT market.
Many, such as Motorola, say they eventually want to be able to design products for local tastes.
But Li said the country could not rely indefinitely on foreign firms moving in to take advantage of its low costs and vast market.
"As we grow, our land cost rises, labour cost rises, and we no longer offer strong incentives," Li said. "People will start factoring in the level of service, the freedom of information flow, and the quality of local talent."
All of which, Li conceded, would take a long time for China to boost to world-class levels.
To speed up the process, local firms are being encouraged to venture abroad.
Li cited SVA Group and Fosun Group, a property-to-technology private-sector company, among the tentative pioneers.
SVA, an appliance maker racing to become one of two home-grown companies producing thin-film transistor liquid-crystal displays - the colour screens commonly used in computers and TVs, runs a research lab in the United States.
Fosun told an industry conference recently it wanted to buy research centres overseas, leap-frogging the value chain.
"Some are indeed venturing outside. But their voices are still weak amid the clamour of economic globalisation," Li said.
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