China Closes Gap with U.S. on R&D Investments, But Hasn’t Caught Up

By Eugene Kiely

Posted on May 25, 2021

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China has been rapidly closing the gap with the United States when it comes to research and development investments, experts tell us. But President Joe Biden left the impression in a Michigan speech that the U.S. has already fallen far behind China.

“You know, we used to invest more in research and development than any country in the world and China was number eight — or, excuse me, number nine. We now are number eight and China is number one,” Biden said on May 18 at a Ford plant, where he pitched his American Jobs Plan, which the administration has reduced to $1.7 trillion over 10 years in an attempt to gain congressional support.

We asked the White House for the source of the president’s claim, but received no response.

Experts we consulted told us that China has been heavily investing in research and development and may soon surpass the U.S. — but it hasn’t done so just yet.

“As far as I can assess there is no way you can say that China is ahead of the U.S. in R&D,” Robert D. Atkinson, president of the Information Technology and Innovation Foundation, told us.

Atkinson cowrote a 2019 analysis of federal funding for research and development that said the U.S. government invests about $125 billion per year in R&D. In 2017, the federal government invested about $26 billion more than the Chinese government in “absolute and purchasing power parity terms (controlling for each nation’s cost of living),” the report said.

In total R&D funding, which includes private business and nonprofit investments, the U.S. is also ahead of China.

“In total, the U.S. still leads, investing $543 billion in R&D in 2017 to China’s $496, but that is a far cry from 2003, when the U.S. invested over five times as much as China,” the report said.

The ITIF analysis argued for increased federal support for R&D, citing the “dramatic” investments that China has made since 2003. “At this pace, ITIF estimates the United States will fall behind China in R&D investment by 2021,” the report said.

But that hasn’t happened yet, Atkinson told us.

Atkinson pointed us to the most recent data from the Organization for Economic Cooperation and Development for R&D investment as a percentage of gross domestic product, which the ITIF analysis said is “the more relevant measure.”

The OECD data show government-financed gross domestic expenditure on R&D was 0.66% of GDP (2018) for the U.S. and 0.46% for China (2019).

The U.S. also led China when it came to total R&D investments, which include public, private and nonprofit investments, the OECD data show. Total R&D spending as a share of GDP was nearly 3.1% for the U.S. in 2019 and about 2.2% for China.

“In the United States, R&D intensity surpassed the 3% milestone for the first time, while the R&D intensity of China grew from 2.1% to 2.2%,” the OECD said in a March report. (“R&D intensity” is another term for domestic expenditure on R&D as a percentage of GDP.)

After the OECD report was released, the American Association for the Advancement of Science celebrated the U.S. hitting what it called the 3% “symbolic milestone” — which it said then-President Barack Obama had promised to reach 10 years ago.

“China remains second in total R&D expenditures at $526 billion to the United States’ $657 billion, but narrowed the gap somewhat in 2019,” Matt Hourihan, director of the R&D Budget and Policy Program at the AAAS, wrote in the March 25 blog post about the OCED data.

The U.S. is not the highest in R&D intensity; that would be Israel, at 4.9%. But the U.S. is ahead of China.

“The U.S. is either 8th or 9th in R&D intensity as a share of GDP — Switzerland MIGHT still rank ahead of us but they haven’t reported 2019 data yet,” Hourihan told us via email.

“China also hit an all-time high in R&D intensity at 2.2%, moving up to 14th (or 15th including Switzerland, which as mentioned above has not yet reported newer data),” Hourihan wrote in his blog post.

Biden does have a point that the Chinese government has accelerated its R&D spending.

In the 2019 report on federal support for R&D, Atkinson wrote that between 2003 and 2017 “China’s government R&D has increased by 330 percent from $23 billion to $98 billion while U.S. government R&D grew by just 2 percent from $121 billion to $124 billion.”

Will China surpass the U.S. in 2021, as Atkinson predicted in his 2019 report? “I do think that China will catch up soon,” Atkinson told us.

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