R&D in China: Now and Future

What is R&D? Why important?

Research and development (R&D) is an important driver of economic growth as it spurs innovation, invention, and progress.

It is not only part of a company's operations to develop its products and services, but also a significant strategy for a country to develop its core competitive power.

In recent decades, countries are paying more attention to their R&D expenditures and regard it as an important measure of innovation and strategic development.

Cross Nations Overview

In the map graph on the right, we can see that basically, the developed countries in the world are likely to have a higher percentage of spending on R&D.

It's interesting to find out that Isreal has the top percentage of R&D spending of GDP in 2019, which is 5.14%, while Korea and Japan follow behind.

Source: OECD

Cross Nations Overview

The bar chart on the left shows the top 10 countries with the highest R&D expenditures in 2019.

The US has the most expenditure on R&D at 632,655 million dollars, and China follows at 514,798 million dollars.

Cross Nations Overview

In the past 20 years, China has overtaken Germany and Japan to become the world’s second-biggest R&D spender, after the United States.

This rapid increase is mainly because of the technology and innovation strategies initialed by the Chinese government. In the past decades of years, the government and companies not only want to make innovative products but also try to achieve technological independence.

Source: OECD

Where is the source of funds going？

The sector of performance and type of R&D

Photo by Sigmund on Unsplash

R&D is funded by three major sources: business enterprises, government, and foreign players. And the funds flow into business enterprises, government-led institutes, and higher education.

Most R&D performance is funded by the business enterprise sector, which is mainly for product innovation.

However, higher education doesn't take up the main R&D according to the value of funds.

Funds from the sector of performance to the type of research:

There are three R&D types: experimental development, basic research, and applied research.

In the graph on the right, we can see that most funds are used for experimental development, most of which is funded by the business enterprise sector.

However, basic and applied research only takes up less than 20% of the funding, most of which is from the government and higher education.

Source: OECD

Let's compare the R&D expenditure by type between the top 2 countries: US and China.

Both input most of the expenditure to experimental development.

However, the US spends more on basic and applied research than China, indicating that there is a potential possibility for China to adjust its R&D strategy and increase its spending on these types of research, since basic and applied research is the base of science and technology development.

Source: OECD

Policy Recommendations

Photo by Louis Reed on Unsplash

Increase expenditures on basic research and applied research

Basic and applied research is the strong base and driver of technology application.

Photo by Liam Charmer on Unsplash

Stimulate enterprises to develop innovation and technology

The business enterprise sector is the largest source of funds for R&D, and it is the powerful engine to put the technology into practice.

Photo by National Cancer Institute on Unsplash

Increase expenditures to support higher education and its research institutes

Higher education has the most talent and resources to invent, innovate, and develop advanced science.

Reference

1. OECD Science, Technology and R&D Statistics. Accessed October 10, 2022. https://www.oecd-ilibrary.org/science-and-technology/data/oecd-science-technology-and-r-d-statistics_strd-data-en

2. McKinsey&Company, "China’s digital R&D imperative", August 16, 2021. https://www.mckinsey.com/capabilities/operations/our-insights/chinas-digital-r-and-d-imperative

3. NSF. "Research and Development: U.S. Trends and International Comparisons". Accessed October 1, 2022. https://www.ncses.nsf.gov/pubs/nsb20225/introduction