Surging R&D spending in China narrows gap with United States

China’s total spending on R&D rose a robust 12.3% last year to a record 1.76 trillion yuan ($254 billion), according to a government report released yesterday. Already second in the world in R&D spending behind the United States, China has narrowed the gap.

Figures from the Organisation for Economic Co-operation and Development (OECD) show that in 2012, China spent about 34% as much as the United States, a figure that rose to 44% in 2016, the most recent year for which data are available. In terms of purchasing power parity, however, China’s 2016 spending was equivalent to 88% of U.S. spending.

"The year-to-year growth in R&D spending indicates firm governmental and social support for making China a scientific power," says Xie Xuemei, a specialist in innovation economics at Shanghai University in China. "However, there is still a long way to go" to match the research capabilities of developed countries, she adds.

The report from the ministries of science and finance and the National Bureau of Statistics highlights other notable trends in 2017, including a 12.5% increase in spending by businesses—including foreign-owned corporations—to 1.36 trillion yuan ($196.4 billion). "More and more enterprises realize that to improve their competitive advantage, they must rely on their independent innovation capabilities, [which] rely on greater spending on R&D," Xie says. Basic research expenditures were also up, hitting 97.55 billion yuan ($14.1 billion), an increase of 18.5%. For comparison, the United States spent $86.32 billion on basic research in 2016, according to OECD. A national innovation strategy that strives to harness R&D to economic growth has been driving the increase in both government and industrial R&D spending in recent years, Xie says.

Accounting differences between China and other countries make international comparisons tricky, says Cao Cong, a science policy specialist at the University of Nottingham Ningbo in China. China’s statistics lump R&D funding with a range of other science and technology expenditures, such as support for science communications, administration, and scientific exchanges and cooperation. On the other hand, when figuring spending on basic research, China often excludes capital investment in facilities and university faculty salaries, costs typically included in the basic category by other countries. But even if basic spending is undercounted, it is probably a smaller share of overall research spending than in the United States and other advanced countries, Cao says. And that level "is not enough for China to become a scientific power."

A government mid- to long-term science and technology plan sets a spending target for R&D of 2.5% of gross domestic product (GDP) by 2020, up from 2.13% in 2017. By comparison, the United States spent 2.7% of GDP in 2016, according to OECD. "The question is whether the increased amount of money spent on R&D is effective and efficient," Cao says. This spring the National People's Congress decided to merge the National Natural Science Foundation, which supported a large share of the country’s basic research efforts through reviewed grants, into the Ministry of Science and Technology, which has managed nationally important big science projects. The move has raised concerns that support for basic research by small groups might suffer. The future impact on science funding and management "is something worth paying attention to," Cao says.