Tech companies building bridges with China

John Chambers, the chief executive officer (CEO) and president of Cisco Systems Inc., doesn't care when economists think China is going to become the world's largest economy. He's just thinking about what needs to be done for Cisco to tap into that market.

"We can have a healthy discussion about whether that's in 2020 or 2040, but it will (become the world's largest economy) and China will become the IT center of the world," Chambers said, speaking at a press conference in Beijing last week.

Chambers tied his comments about China's growing economy to the announcement of Cisco's plans to invest US$32 million in a research and development (R&D) center that will open next year in Shanghai. The center will employ a staff of 100 and focus on the development of VOIP (voice over IP) products and technology.

Looking ahead, Cisco plans to expand the Shanghai R&D center over time to include work on other areas of technology related to networking, Chambers said, outlining a long-term vision of a network of Cisco R&D centers spread across China.

Explaining why Cisco chose Shanghai for the site of an R&D center, Chambers was quick to note China's excellent infrastructure, a good university system that provides a pool of talent from which to recruit researchers and business-friendly policies implemented by the country's government. But Cisco's decision is about more than developing future VOIP products, it's about positioning Cisco for future growth in China.

"What we're trying to do is outline an entire strategy of becoming a Chinese company," Chambers said.

Part of that strategy means being responsive to requests for investment from the Chinese government. During his presentation in Beijing, Chambers noted that Cisco, of San Jose, California, has spent $38 million since 1998 to set up university training centers for software programmers -- a move he said was made at the suggestion of Chinese officials.

Cisco has also moved the manufacturing of many of its products, which is done under contract with other companies, to China at the request of Chinese government officials, he said.

"Our contract manufacturers, at my request, and candidly at the request of the leaders in your country, began to move our contract manufacturers here to China," Chambers said.

Today, Cisco manufactures $5 billion worth of products in China each year, employing around 10,000 people through the companies that manufacture products under contract for Cisco, Chambers said.

Of course, Cisco is not the only IT vendor to have made a conscious effort to build bridges that bring them closer to the government and customers in China. Most major IT vendors have at some point made a show of their commitment to China, through donations to universities, high-profile investments and similar activities.

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