BOFIT Viikkokatsaus / BOFIT Weekly 2018/11

Preliminary figures released by China's National Bureau of Statistics show that Chinese entities spent 1.750 trillion yuan ($260 billion) on research & development (R&D) in 2017, an increase of 12 % y-o-y (11 % in 2016). Firms accounted for 78 % of R&D spending, while 14 % was made by research institutes.

The ratio of R&D spending to GDP remained at 2.1 % due to rapid growth in nominal GDP. China's leaders want to increase R&D spending to 2.5 % of GDP by 2020, so it is expected that state will promote spending on R&D more aggressively this year. Much of the growth in R&D spending reflects evolution of the Chinese economy, which now strives to move from low levels of value added in goods production to high-tech goods production and services.

China still lags behind the OECD R&D spending average, which was 2.4 % of GDP in 2015. China also lags its regional competitors, Japan and South Korea. In 2015, Japan's R&D spending corresponded to 3.3 % of GDP, while South Korea spent a stunning 4.2 % of GDP. China, however, surpassed the EU average in 2012. Finland's R&D spending is about 2.8 % of GDP. Russian R&D spending has long been stuck at slightly over 1 % of GDP.