The Special Advisor to I&IR, Dr. Jean-Claude Muller completed a 10 days business trip to China from October 20 through October 29, 2013.

A French Business Delagation in Chengdu

In the first part of his visit, he was a member of a French business delegation headed by the former Prime Minister of France and current President of the Fondation Prospective et Innovation, Mr. Jean-Pierre Raffarin. The main goal of this delegation is the preparation of an extended French Chinese “B to B” meeting between 1000 small and medium sized companies from both countries to be held in Chengdu in October 2014 during the Western International Fair. As such he met with the French Ambassador in Beijing, Mrs. Sylvie Bermann, with the former French Minister of Higher Education and Research, Mrs Valérie Pécresse, with the current Chinese Minister of Science and Technology in Beijing, Mr. WAN Gang, with the Mayor of Chengdu Municipality Mr. GE Honglin and with several other French and Chinese officials at the 14th Western China International Fair and the 6th Western China International Cooperation Forum in Chengdu.

The 2nd Meeting of the “Club Santé Chine” in Shanghai

This was followed by attendance at the 2nd Meeting of the “Club Santé Chine” in Shanghai which intends to organize, in 2014, a major Chinese-French event in the healthcare sector within the overall framework of the celebration of 50th anniversary of the establishment of diplomatic relationships between the People Republic of China and France, a celebration which will occur throughout the year 2014. In this context he met with several representatives of small and large French companies (Merial, Institut Pasteur, Behrend Cent Degrés,  Aden Services, EthyPharm, Novacyt, Transgène, Cooper…) and institutions which conduct business in China and have located mainly in Shanghai or Beijing.

Finally Dr. Muller attended a Board Meeting of Qiagen Suzhou Translational Medicine Center and conducted some of his own business in Shanghai.

The major conclusions and analysis made from this business trip in China are:

1. China has been more immune to the economic crisis and its economy has regained momentum in the past few months, buttressed by a combination of the lagged effect of credit growth earlier in the year, improvements in the outlook for advanced economies and targeted government support. As a consequence the Chinese economy is still growing at a pace of 7.5% in 2013, with provinces such as Sichuan running at 13% of growth. All the forecasts indicate that in the years to come economic growth may be plateauing at around 6.5-7.0% depending on the wideness, the content and the scope of the expected reforms to be announced at the 3rd Plenum (see below)

2. Despite heavy investment in R&D, China is still lagging in innovation. Yearly R&D expenditure by the world largest public companies rose 5.8% when Chinese companies saw their R&D spending soar 35.8% in the same period. Chinese companies’ share of global R&D spending has risen from 0.4% in 2008 to 3.2% of the total in 2013– a seven fold increase. But still a lot of Chinese companies spent only between 1 and 2% of their sales on R&D, which is far under the proportion of the western counterparts. The gap is closing quickly as many international companies have set up an R&D facility in China: Roche, Novartis, Sanofi, GSK, Astra-Zeneca, Merck, Eli Lilly, Boehringer Ingelheim, Ipsen, Qiagen, Bayer Healthcare, …

3. To continue to grow at the pace indicated above, China will have to undergo major reforms. The Party’s 3rd plenum of the 18th Central Committee of the Communist Party of China, which is due in November, could announce unprecedented reforms. There are high expectations for profound transformations in the economy, society and other spheres. Historically third plenums in China have served as a springboard for key economic reforms. The reform agenda is likely to feature financial and tax, services and innovation but may also address issues such as land reforms and liberalizing the current household registration system. The role of the state owned enterprises (SOE) in their local ecosystem is also expected to be tackled but is not very likely to be clearly spelled out mainly because of its political impact.

Author : Jean-Claude MULLER, Special Advisor,Innovation & International Relationship (I&IR)

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