China Rises to 2nd Place in R&D Investment
Dec 5, 2006
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China will spend more on research and development (R&D) than Japan in 2006 and therefore becomes the world's second-highest investor in R&D after the U.S., according to Organisation for Economic Co-operation and Development (OECD) projections.

"The rapid rise of China in both money spent and researchers employed is stunning," said Dirk Pilat, head of the OECD's Science and Technology Policy division. "To keep up, OECD countries need to make their research and innovation systems more efficient and find new ways to stimulate innovation in today's increasingly competitive global economy."

OECD estimates China will spend just over U.S. $136 billion on R&D in 2006, more than Japan's forecast $130 billion. The U.S. is predicted to remain the world's leading investor in R&D in 2006, spending just over $330 billion. The EU-15, which includes France, Germany and the UK, is predicted to spend just over $230 billion.

OECD figures for 2005 and 2006 were projected on the assumption of a continuation of growth in R&D spending last year and in 2006 at the same average rate as observed in 2000-2004.

China's spending on R&D as a percentage of GDP, known as R&D intensity, more than doubled from 0.6 percent of GDP in 1995 to approximately 1.2 percent in 2004. In current prices, this represents an increase from just over $17 billion in 1995 to $94 billion in 2004. And it is growing even faster than the economy, which is growing by between 9 percent and 10 percent a year.

The Science, Technology and Industry Outlook 2006 notes two clear trends in non-OECD countries in strengthening R&D and innovation activities and policies:

  • rapid absolute growth, from low starting points, in R&D and patenting
  • significantly growing shares in global R&D and patenting

The report finds that:

  • In China, the number of researchers increased 77 percent between 1995 and 2004. China now ranks second worldwide in the number of researchers, with 926,000.  The U.S. is first with more than 1.3 million.
  • The total number of globally important patents originating from non-OECD economies is small compared to the OECD total, but the numbers have grown rapidly in recent years. In 1991, Brazil, China, India, and South Africa accounted for 0.15 percent of the total share; by 2002 this had increased to 0.58 percent of the total.
  • Policy has yet to catch up with the globalization of innovation. To date, policies have largely been ad hoc and aimed at specific problems, such as inward investment. Few countries have worked out how to adapt national policy frameworks to today's more global innovation system - but small, open economies, such as Finland and Ireland, appear to be leading the way.

Note: (1) Figures for 2005 and 2006 are projected on the assumption that growth of R&D expenditure in 2005 and 2006 will be same as average growth over 2000-2004.
Source: OECD, Main Science and Technology Indicators, 2006-I.

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