The Organisation for Economic Co-operation and Development (OECD), the leading source for international data on science, technology, and innovation, updates its Science and Technology Indicators twice a year. Here’s a look at major trends in R&D, patenting, and the research workforce with the most recent update: download brief.
Global R&D Expenditures: China Continues to Gain
Spending on research and development (R&D) – activities to generate new knowledge and create new technology – is a cornerstone input for innovation. The United States has long led the world in R&D spending, but China has gained rapidly in recent years. From 1995 through 2018, Chinese R&D investment from public and private sources increased by over 15% a year on average, an astounding figure roughly double the increases achieved by Korea, which had the second-highest growth among major funders (figure 1).
As a result of this growth, Chinese R&D reached $463 billion in 2018 according to OECD data, $89 billion behind the U.S. (figure 2). The U.S. currently accounts for less than 30% of the global total.
Up until recently, many analysts believed Chinese R&D spending would catch up with the U.S. as early as last year. Yet the data in figure 2 suggests this hasn’t happened yet. Why not? The simple answer is that prices in China have risen, pushing up the cost of research more than had been previously estimated. OECD adjusts its international comparisons to achieve purchasing power parity, eliminating the differences in prices between countries and allowing for something closer to apples-to-apples comparisons. OECD had been relying on 2011 prices to make these adjustments but, earlier this year, updated its methodology to capture 2017 price levels. Over these six years, the prices of goods in China drifting upwards, approaching the global average.[i]
For R&D activities, the upshot is that China continues to increase spending substantially, but those expenditures are buying less actual R&D than they would have when prices were cheaper. It also doesn’t change the core fact that Chinese R&D has seen staggering increases over the past two decades, and remains an undeniable leadership rival to the U.S.
R&D Intensity: U.S. is 10th
R&D intensity – or R&D as a share of gross domestic product, or GDP – indicates the relative share of resources devoted to R&D in an economy. This provides another indicator of how innovative an economy is. For instance, Israel and Korea, the two countries with the most R&D-intensive economies, spend far less than the United States or China on R&D in total dollars. But they also spend more on R&D per each dollar of GDP than others, indicating stronger relative focus on science and innovation.
In R&D intensity, the U.S. is now 10th in the world, dropping out of the top 5 following the mid-1990s. In that time, Korea, Taiwan, Germany, and others have surpassed U.S. R&D intensity (Figure 3). China has gained ground as well, though still lagging somewhat behind the U.S. As of 2018, Chinese R&D intensity stands at 2.1% and U.S. intensity at 2.8%. Israel and Korea are the global leaders, each above 4.5%.
The preceding section refers to public and private spending. Limited to only public R&D, the U.S. has similarly fallen in the leadership tables. As of 2017, the U.S. ranks 14th, again compared to top 5 in the mid-1990s. This decline appears to be a product of the federal R&D spending slowdown after the financial crisis (figure 4).
For more on research workforce and patenting, download the full brief.
[i] See the World Bank’s International Comparison Program, which analyses these price changes: https://www.worldbank.org/en/programs/icp