China’s R&D Expenditures Hit New High Amid Global Uncertainty

China’s spending on research and development (R&D) hit a record high at 2.23% of its gross domestic product (GDP) in 2019, up by 0.09% from the previous year, National Bureau of Statistics (NBS) data showed on Thursday.

China’s total expenditure on R&D amounted to 2.214 trillion yuan (about $321.3 billion) last year, an increase of 12.5% from that in 2018, according to a report jointly released by the NBS, the Ministry of Science and Technology and the Ministry of Finance.

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For the first time in history, investment in basic research – a cornorstone of innovations that have improved the country’s productivity and quality of life – stood at 133.56 billion yuan and accounted for over 6% of the total spending, the data showed. 

But even though R&D as a share of GDP reached a record high of 2.23%, the level remains behind that of the United States, which is 2.83%, and Japan, which is 3.26%, according to the bureau.

What’s more, the proportion of basic R&D research in total spending still has a large gap with the level of more than 15% in developed countries, and the phenomenon of high R&D output but poor quality needs to be improved, said Deng Yongxu, the bureau’s senior statistician.

Deng said the country’s total R&D expenditure had grown by double-digits for four consecutive years, and the spending has been the second-highest in the world since 2013, further closing the gap with the US.

“Tech-driven innovation (TDI) that is powered by R&D investment has become a key driver to accelerate digital transformation and address the new norm of uncertainty,” said Charlie Dai, a principal analyst at Forrester Research, Inc., an American market research company.

China is aiming to raise domestic expenditure on R&D to 2.5% of GDP by 2020, according to the Outline of the National Medium and Long-term Science and Technology Development Plan (2006-2020) issued by State Council of China back in 2006.

Dai said the latest statistics show that China is “on the right track in the strategy execution,” but it should strike the right balance in the national investment. 

“Given the increasing importance of technologies in the national reform as well as the challenges of geopolitical frictions, China should further prioritize R&D investment, shifting focus from quantity to quality, as well as from applications to digital infrastructure,” Dai said.

China and US have been in economic conflicts for more than two years. On Jan. 15, the two sides reached a phase one trade agreement, but tensions persisted. 

In the latest US move against China, the Trump administration on Wednesday blacklisted 24 Chinese companies over construction and military actions in the disputed South China Sea, escalating military and trade tensions.

Deng recommended that the government should continue to increase financial support for R&D in critical core technologies, broaden funding channels, and encourage all sectors of society to increase R&D funding. 

The report’s release came after Chinese President Xi Jinping’s remarks at a symposium on economic and social work in Beijing earlier this week. 

He underscored creating new growth momentum through scientific and technological innovation and “achieving breakthroughs in key and core technologies as soon as possible.”