China heads for top of world in R&D spending – OECD

China is forecast to overtake the European Union and the United States in research and development, or R&D, spending by the end of the decade, according to an OECD report on the global state of science, technology and industry published last Wednesday.

Squeezed research and development budgets in Europe and America have eroded the weight of advanced economies in science and technology research, patent citations and scientific publications, leaving China on track to be the world’s top R&D spender by 2019.

According to the biennial report, OECD Science, Technology and Industry Outlook 2014, China’s intensity in research and development is driven by economic dynamism and its long-term commitment to science and technology innovation.

China has the ambition to spend 2.5% of gross domestic product, or GDP, on research by 2020 – and already spent 1.98% in 2012, the period under review.

And it is not the only country in Asia that has been increasing spending on research and development.

South Korea has superseded Israel as the world’s most R&D intensive country, spending a whopping 4.36% of GDP on research and development. Other high performers in Asia included Japan at 3.35% and Chinese Taipei at 3.06%.

The crux of the matter is that deterioration of public finances in developed economies has caused research and development budgets to level off in many countries and even decline in others.

“For instance, from 2009 government budgets for research and development began to shrink markedly in France, Finland, Spain, Russia and Britain,” said Dominique Guellec, head of country studies and outlook in the OECD’s directorate for science, technology and industry.

According to the report, the impact of the recession on innovation had been considerable in the last decade and the global recovery had been too modest for innovation activities to be back on track.

“At 1.6%, yearly growth in gross expenditure on research and development in OECD countries over 2008-12 was half the rate for the years 2001-08,” according to Sandrine Kergroach, a senior analyst in the OECD’s directorate for science, technology and industry and one of the report’s authors.

The report predicts that under current economic conditions, a strong resurgence in research, development and innovation over the next two years is unlikely – but prospects could improve by 2015.

Global research system expanding

Still, according to the report, the global research system is expanding and despite the economic downturn, world investment in science, technology and innovation has increased steadily since 2007, with OECD spending reaching over US$1.1 trillion in 2012.

“Amid efforts to escape the middle-income trap, the BRICS bloc [Brazil, Russia, India, China and South Africa] spent an additional US$330 billion,” Guellec wrote.

In total, world research and development expenditure in 2012 could be some US$1.4 trillion in 2012, of which about 80% is attributable to 10 countries. The OECD would account for 70% of world research expenditure, compared to about 90% a decade ago.

The report revealed that China was the second largest R&D spender in 2012, allocating US$294 billion compared to top-spending America at around US$454 billion that year.

Patents, publications and a shift to universities

“This shift in research leadership is also apparent in patent citations and publications,” said Guellec.

The share of the United States and Japan in total world patents and scientific publications is on the decline, slowly giving way to science and technology production by the BRICS countries.

“BRICS produced 12% of top quality scientific publications globally in 2013, compared to 28% in the United States,” said Kergroach. The BRICS share is now almost twice what it was 10 years ago.

The report notes that the government and higher education sectors account for less than a third of R&D performed in OECD countries.

“In the decade since 2002, the growth of the science base in the United States and the European Union has been driven by universities, which have seen a robust increase in their expenditures. Over time, there has also been a shift towards university-based research across the OECD,” according to the report.

“In China, the growth of scientific activity has been driven by public research institutes, in particular by large investments by the Chinese Academy of Sciences. There are notable structural differences in countries’ public research systems.”

A question of quality

While China is ascending the global R&D ladder, it has work to do on improving the quality of its science, technology and innovation products.

According to the report, China has the world’s largest pool of human resources for science and technology but the tertiary-qualified share of the population remains extremely low.

China lacks world-class researchers, compared to the United States which has the world’s “largest and strongest science base”, says the report. For instance, the US is home to 35 of the world’s top 50 universities and accounts for 26% of world articles in science and engineering.

In his assessment of the current state of Chinese science, Guellec wrote: “The quality of Chinese science is still behind the world average, which is reflected by citation indicators and the share of PhDs among researchers.”

But there could be a turn-around. Researchers at the OECD, using bibliometric indicators, noted that there had been an upward rise of scientific authors from the United States migrating to China, South Korea and Chinese Taipei.

An emerging brain drain from the United States to Asia is perhaps being exacerbated by a drop in Chinese graduates showing the intention to stay in America after being awarded PhDs or other doctorates. According to the report, between 2005 and 2012 this cohort dropped from 90% to 83%.

Undoubtedly, the early return of Chinese graduates could have a significant impact on American research capacity, particularly in science and engineering, as it has long relied on foreign-born talent.

In order to enhance its research capabilities, Japan has established a programme whose aim is to provide young researchers with career prospects and ensure full employment of science and technology doctorate holders.

Other countries with similar programmes include Austria, Britain, Canada, Denmark, France and Germany, while Norway has new measures to strengthen the position of women in academia.

Wake-up call

But probably more than anything else, the current biennial report serves as another wake-up call for developed economies to realise that emerging economies are breathing down their necks in the race for excellence in science, technology and innovation.

There has been rapid expansion of higher education systems in major emerging economies. For instance, in 2011 the BRICS fraternity granted more than 7.3 million university degrees, compared with 8.5 million in the OECD area.

Russia trained more engineers than the United States, while Indonesia trained more engineers than Germany.

“Chinese universities awarded over 27,000 doctorates in science and engineering in 2011, possibly more than their American counterparts (24,792). The doctoral graduation rate in all disciplines in China (2.2%) is now equivalent to that of Denmark (2.2%) and Austria (2.1%),” says the report.

The numbers graduating from universities in emerging economies might mean very little, taking into account the quality of education – but the OECD notes that it is something for developed economies to be wary about, especially when there are deliberate moves to catch up.