Germany's BASF, one of the world's largest chemical companies, is banking on its China operations' innovation for future growth here.

Martin Brudermueller, a member of the BASF board of executive directors, explains, "Innovation without chemistry is like economic growth without Asia. You cannot have one without the other."

Brudemueller says at BASF "innovation is a core task and the lifeblood of every employee, not only in research and development, but also in marketing and sales."

Last year, the publicly traded company, founded in 1865, totalled sales of 42.7 billion euros (US$56.3 billion). Its 8,000 products come from its five industry groups chemicals, plastics, tailor-made "performance products," products for agriculture including fine chemicals, plus oil and gas.

The company approaches innovation from two ends: pulling new ideas out of the market through close interaction with customers and pushing new ideas from its laboratories into the market.

The company's global expenditure for R&D is projected to total 1.15 billion euros (US$1.51 billion) this year, with about 8,000 BASF employees working in the sector.

Innovation in China

Of the 170 countries where BASF does business, China is currently the third largest market, after Germany and the United States. "The 11th Five-Year Plan emphasizes innovation as one of the most important keys for China's future, and innovation is also a key element of our commitment to China," says Brudermueller.

He says that BASF does not just import technology to China or dump old technology in China. It increasingly generates innovation here, which Brudermueller describes as a precondition for being a favourite partner for innovation in the Chinese market.

For example, at the BASF nano-technology workshop in Shanghai, the industry giant shared its latest research results with the scientific community. "This was just one of several such seminars. BASF initiates these events to bring together top-calibre Asian scientists in the field of nano-technology and application," says Brudermueller.

At BASF's China headquarters in Shanghai, more than 100 people with advanced technical skills develop tailor-made solutions for the country's industrial needs. The areas range from textiles and leather to detergents and functional polymers.

"We will expand our development activities in Shanghai into engineering plastics and polyurethanes early next year, further underlining our commitment to innovation in China," Brudermueller says.

Daily patent applications

With increased BASF innovative technology in China, the company has seen rapid growth in its patent applications here. "Our company has been applying for more than one patent in China every day for the past two years," says Brudermueller.

"The number of patent applications throughout China increases rapidly every year. The good thing for BASF is that many of these patents come from our Chinese customers," he says.

For BASF, business expansion is another key factor for innovation. The company made a series of acquisitions this year.

"Our latest acquisitions of the Engelhard catalyst business, Degussa Construction Chemicals and Johnson Polymers' resin business are good examples of innovation," says Brudermueller. "All these acquisitions not only add resilience and above average growth perspectives to our portfolio but, even more importantly, BASF is moving closer to many new customers who offer us huge new innovation potential."

"These acquisitions give us a new edge in the areas of environmental technology for the automotive industry, construction chemicals and graphic arts. In addition, the acquisitions added around 1,400 researchers to our global team. With our enlarged portfolio we will boost our already significant presence in China and elsewhere in Asia."

Working with Sinopec

Last year, the company signed a US$500-million agreement with China Petroleum & Chemical Corporation (Sinopec) to expand their joint chemical project in Nanjing, capital of East China's Jiangsu Province.

The project, BASF-YPC Co Ltd, is one of the largest Sino-foreign petrochemical joint ventures in China. Investment totals US$2.9 billion in the first phase.

Following the successful start-up, Sinopec and BASF decided to extend their joint operations by expanding the capacity of their steam cracker and investing in additional downstream plants to further strengthen synergies at the site, says Brudermueller.

Both companies have agreed to integrate their second joint operation, Yangzi-BASF Styrenics (YBS) in Nanjing, into BASF-YPC Co Ltd to increase efficiency.

"BASF expects annual sales of more than 4 billion euros (US$5.27) from product innovations as of 2010," says Brudermueller.

Chinese companies' innovations

Like BASF, an increasing number of Chinese companies have realized the importance of integrating innovation into their business strategy.

An outstanding example is Haier Group, China's leading consumer appliance manufacturer and BASF's largest customer in China. Founded in 1984 in Qingdao, in East China's Shandong Province, Haier has succeeded because of its ongoing innovation, according to Haier President Zhang Ruimin.

With the company's entry into the global market, Haier set up its own intellectual property rights (IPR) management department in 1992.

"At present we invest more than 60 million yuan (US$7.6 million) in trademark registration and patent application annually," the company vice-president Yu Zida says.

Setting industry standards, Haier owns two international standards in the world household appliance industry, and it has taken part in the formation of 86 standards in China's household appliance industry.

(China Daily 12/04/2006 )