Research points to innovation depth

Multinational companies once measured their presence in China by the number of factories they operated and the scale of their supply chains. Today, those metrics no longer fully capture their footprint.

The number of research and development centers has emerged as a more telling indicator of how deeply foreign businesses are embedded in the Chinese market and how committed they are to long-term innovation.

As of March this year, Beijing had 332 foreign-funded R&D centers, with 55 newly established this year, while Shanghai had 647 such centers, including 15 new additions this year, data from the Ministry of Commerce showed.

That shift is also becoming more evident in capital flows. The actual use of foreign direct investment in China's high-tech industries rose 30.7 percent year-on-year to 102.73 billion yuan ($15.05 billion) in the first quarter of 2026, accounting for 41.2 percent of the country's total FDI, according to the ministry data.

Of this, the actual use of FDI in R&D and design services rose by 127.8 percent on a yearly basis.

Zhao Yang, an official with the Ministry of Commerce's department of foreign investment administration, said China's industrial and innovation strengths are translating into tangible advantages.

Foreign-funded R&D centers are entering a phase of both quantitative expansion and qualitative upgrading, shifting from local adaptation hubs to integral nodes in multinational companies' global innovation networks, said Zhao.

Yin Zheng, executive vice-president of China and East Asia operations at Schneider Electric, said that running businesses, especially in the manufacturing sector, is no longer about simply taking orders and scaling up production in China.

"For many multinational corporations today, the country has evolved from a cost-efficient production base into a critical hub for innovation, market expansion and long-term strategic positioning," Yin said.

The French industrial group is currently building two new plants in Xiamen, Fujian province, and Wuxi, Jiangsu province, while upgrading its Beijing R&D center, focusing on energy management, optimization, efficiency and digitalization.

Bai Ming, a researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said the trend reflects growing confidence among foreign investors in China's economic resilience and its capacity for sustained innovation.

As a result, investment decisions that were once seen as optional are increasingly being elevated to strategic imperatives, particularly in high-tech and consumer goods sectors, Bai said.

Sean Stein, president of the US-China Business Council, said the shift is evident.

"Twenty-five years ago, no one came to China to do R&D. Now, what I am seeing is that the best companies are doing some of their most important R&D in China," said Stein.

For example, US cosmetics group Estee Lauder is tailoring products for Chinese consumers, not only in packaging, but also in formulations and research and development. Tapestry Inc, the parent company of US fashion brands Coach and Kate Spade, has established an R&D center in Dongguan, Guangdong province, he added.