Comparison of annual change in national R&D investment

In 2013, China is positioned as a location for cost-effective manufacturing, including for high-technology products. But efficient manufacturing alone is not adequate to maintain economic growth. Recognizing this, China intends to evolve from a manufacturing-centric model in 2013 to an innovation-based economy by 2020. Mirroring the approach taken by the U.S. Europe and Japan since World War II, China is making steady progress at building a research infrastructure and educating the scientists to operate it. Results are impressive so far, with leading indicators of innovation rapidly approaching parity with the west.

China’s R&D investment is linked to national goals for industrial growth, stable domestic evolution to an advanced economy, power projection and international prestige. These goals are manifested in large R&D-enabled projects like a Chinese space station and energy generation infrastructure spanning from renewable to nuclear power. In the latter, China draws on companies as well as public-sector research assets in the U.S. and Europe. This creates opportunities at a time when new unconventional fossil reserves have decreased emphasis on large-scale deployment of renewable energy technology in the U.S. Moreover, cost and public perceptions have weakened the outlook for nuclear energy in the U.S. Europe and Japan—all three of which, nevertheless, still have vast experience in nuclear engineering and operations. China’s program sustains these capabilities and accelerates its ability to address growing power requirements.

However, China has a number of significant challenges that must be overcome to reach the 2020 innovation-economy target. China has demonstrated that the ability to sponsor and perform R&D is not an impediment, and in fact is part of the solution to resource-based growth restraints like energy capacity and independence, water supply, agricultural productivity and environmental protection.

China’s continued strong economic growth—more than three times that of the U.S.—provides the resources to support its strong R&D investments and expansion of basic infrastructure as well. The ambitious program and globally enabled economic growth means that China has become an exporter of jobs into Asia to meet its own needs. Ten years ago, most foreign direct investment was being made in China. Today, China has grown to a point that it is now a foreign direct investor throughout Asia, and by 2017 it is expected to be a net outbound investor in the region.

China has Arrived

For the past forty years, the global R&D enterprise was dominated by Europe, the U.S. and Japan. In 2011, China surpassed Japan’s overall spending. By 2018, it is expected to surpass the combined R&D spending of Europe’s 34 countries. And by sometime around 2022, it will likely also exceed the R&D investments of the U.S. in absolute terms.

In addition to recognizing the strong linkage between R&D and economic growth, it is likely that the professional perspectives of China’s leadership are influential in science and innovation policy: eight of the nine members of China’s Standing Committee of the Political Bureau have engineering degrees.

As part of the aggressive funding program these leaders support, China is expanding its science and technology infrastructure through investments in its academic research institutions, the Chinese Academy of Sciences and its industrial research firms.

While taking its place among global R&D leaders, China recognizes the leverage available through international collaboration. Many of China’s R&D programs involve collaborations with European and/or U.S. research organizations. According to the Battelle/R&D Magazine Global Researcher Survey, about a third of China’s advanced R&D is pursued in collaboration with U.S. research organizations, and about a quarter in collaboration with European research organizations.