Sure, we all know that India is hot! But don’t sleep on China which has deep pockets and big connections. Check this out…

Hewlett-Packard Co. opened a research lab, HP Labs China, in November, joining Microsoft Corp. and IBM and other IT companies that have set up research labs in the country to tap the increasing number of technical graduates Chinese universities are turning out.

The result: cutting-edge technology that will challenge U.S.-based research counterparts for next-generation development leadership.

A visit to Microsoft’s Chinese research arm, known as MSR (Microsoft Research) Asia, in Beijing’s Haidian district, provides yet another indication of the software maker’s commitment to Asia.

MSR Asia employs about 200 researchers and has transferred more than 100 technologies from research to product teams for products such as Office XP, Office System 2003, Windows XP, Windows Server 2003, XP Media Center Edition, Windows XP Tablet PC Edition, Xbox, MSN and Vista. Wei-Ying Ma is a lead researcher at MSR Asia whose 18-person team is working on search and data mining technology. The sponsors of a recent technical conference said the group should really be called “Microsoft Research Army” because of the potent presence of Ma’s group, which published 12 of the 71 technical papers delivered at the conference.

Not far from MSR Asia, across the Haidian district of Beijing, and in the Zhongguancun zoneâ€â€?known as China’s Silicon Valleyâ€â€?sits IBM’s China Research Laboratory. Both IBM’s China Research Lab and the company’s Beijing Linux Technology Center reside in the Zhongguancun Software Park, an ultramodern area whose architecture looks like a Jetsons-meet-James-Bond scenario.

READ: Can China Top the U.S. in R&D?

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