Leverkusen, Germany - Bayer Group, the world's leading chemical and pharmaceutical company said its research and development (R&D) spending in 2010 is likely to record 3.1 billion euro ($4.03 billion), an increase of 13 percent year-on-year.

The company also said it plans to expand production capability in China through continued investment into a major plant in Shanghai.

The company has announced plans to invest 110 million euros to build five new downstream facilities in China by 2012 in November as part of an ongoing process to serve the booming manufacturing sector in the country. The facilities comprise three polyurethanes systems houses, a new polycarbonate sheet facility and a polycarbonate color compounding and design center. Each will be strategically located close to major customers in Shanghai, Qingdao, Chongqing and Guangzhou.

Bayer already intensified its presence in the R&D in China through the establishment of a healthcare center in Beijing and a material science center in Shanghai.

For the coming year, we are planning a budget corresponding to 2010 level and hopefully we can step up the investment in R&D in 2011, said Dekkers.

"We are intensifying our own international research activities with 'science hubs' in San Francisco and Beijing," said Wolfgang Plischke, Bayer's board member who is in charge of innovation.

"These hubs give us an outstanding foundation for collaborations with external partners," he said, "What's more, we are continuously strengthening our relations with universities, in part through more than 900 close contacts to leading scientists around the world."

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The company is expanding network with Chinese universities, including the Tsinghua University.

Driven by the megatrend of increasing energy efficiency and the conservation of natural resources, Bayer is working intensively on the use of new materials to obtain energy from renewable sources.

Its current product spectrum ranges from polyurethane sheathing for solar modules with integrated assembly systems to a sandwich composite of polycarbonate sheets with solar cells.

In the "Dream Production" project, Bayer is working with research institutions to realize the catalytic conversion of CO2 on a pilot plant scale for the first time. The green house gas is used as a raw material for high-tech materials replacing a portion of conventional fossil-based raw materials.

"Innovation is part of Bayer's DNA," the chairman said at the company's press forum on innovation in Leverkusen, Germany.

The company aims to invest its resources as a whole more consistently in growth and innovation capability in its three core businesses: healthcare, crop science and material science,

According to the company, the world population is set to grow from nearly seven billion today to more than nine billion in 2050. In the meantime, life expectancy is also rising.

For Bayer, that trend could translate into business opportunities where the company is devoting its R&D efforts.

It first means the need for health services will increase- from the diagnosis to the treatment of diseases, according to the company.

Healthcare accounts for the biggest share of planned expenditure for R&D in 2010, at 67 percent, with most of which spent on projects undergoing the third phase clinical trials.

"We address the trend with our healthcare business", said Dekkers, adding that healthy food for the growing population must also be ensured despite the fact that growing acreages are limited, to which, Bayer CropScience offers solutions for an increase in productivity.

Bayer CropScience has launched 23 new crop protection active substances since 2000, with six more to follow by 2012. It is pursuing 60 projects in various stages of development for improved plant traits and seed.

What's more, a more efficient approach to the use of energy and resources must be adopted, that is, high-tech materials offered by Bayer MaterialScience.

About 20 percent of sales at Bayer MaterialScience are generated from products launched since 2005, indicating the benefits brought by continuous innovation of new materials.

Despite of the promising prospects, the company said innovation also poses challenges.

The first question is whether society will be prepared to pay an appropriate price for innovations in the future, which applies particularly to healthcare.

It is often difficult to determine the value of a product because costs and profits are not the only factors. How much value a society places on the health or longer life of individuals is the key.

Bayer's innovations help patients, farmers and other customers all over the world, it said, "As a company, we need these innovations too. They are our lifeblood. To compete successfully, we depend on their development and marketing," said Dekkers.