The issue isn't China's ranking per se, but what can -- and should -- be done to take advantage of China's R&D and engineering services outsourcing capabilities. Our firm is the outsourcing hub for Tsinghua University, China's MIT. We also have guanxi where it's needed MOST (pun intended), i.e., at the Ministry of Science and Technology. Hence, we're in the thick of things regarding R&D in China. Yes, it's true that China is better at "D" than "R." However, this really depends on which discipline is in play. Also, sometimes it's hard to draw a line between experimental and theoretical endeavors. As a result, there's probably more "R" in China than many in the West may think. The two real issues are China vs. India (yes, this is a key issue; R&D center location does matter) and IPR issues. Possibly toss national security concerns into the "IPR" hat. Regarding China vs. India, it's no contest: China wins. In BPO for English-speaking countries, it's no contest: India wins. In ITO for end users, it's no contest: India wins (and the gap is widening, not narrowing). In ITO for ISVs, it really depends on what is being done. Agile, embedded and open source I'd give to China, but this isn't a hard-and-fast rule. Also, let's not forget that many Indian globals are expanding their presence in China, although cultural issues (among other things) will impede their growth in China. But for R&D and engineering services outsourcing, China really does kick India's butt. I know that NASSCOM is claiming superiority for India in ESO, but it simply isn't so. India does have strong capabilities, but they can't touch China. Fact: According to a third-party monitoring service, there are more English-language technical conferences held each year in China than in India. Fact (and a more important fact): There are over four times as many English-language technical papers published in China versus India. That's right, over four times as many!! Take a look at this: 4456 records in Inspec for 2005-2007 ((india WN ALL) AND ((({B}) WN DI) OR (({C}) WN DI) OR (({D}) WN DI) OR (({E}) WN DI)) AND ((PRA WN TR) OR (EXP WN TR))) NOT (THR WN TR) {india} WN CO 20503 records in Inspec for 2005-2007 ((china WN ALL) AND ((({B}) WN DI) OR (({C}) WN DI) OR (({D}) WN DI) OR (({E}) WN DI)) AND ((PRA WN TR) OR (EXP WN TR)) AND (({English}) WN LA)) NOT (THR WN TR) {china} WN CO There's proof for you!! Regarding IPR issues, I don't want to lie and say that China is making great progress in IP protection. The problem is somewhat cultural; it transcends anything the government can do. Solution: Don't be an idiot!! Keep all core IP development in your home country; don't offshore it ... anywhere!! But if you're a SME (small/medium enterprise), look to China for R&D for exploring secondary and tertiary market opportunities that are simply too expensive to explore back home. Let's take the U.S., for example. The annual fully-burdened labor cost for a Ph.D. is about $250,000. In China it's less than $50,000 (and I'm being generous in my calculations; a Ph.D. for a top-tier school with a few years experience can often be had for as little as US$18,000 per year ... and burden rates are much lower in China, especially in areas with good incentives, like Suzhou, Tianjin, and Guangzhou). SMEs in the States cannot afford to explore secondary market opportunities. But with a China option, exploring secondary markets becomes doable. Often the best bet is to start as an ODC (offshore development center) and then convert the ODC with a BOT (build-operate-transfer) model to a CRC (captive research center). Flip a switch and you go from third-party outsourcing support to a full-fledged research center in China. Two cents (or fen) from somebody in China on the front lines of the R&D sector.