Warning that the country is too dependent on industry research that lacks novelty

Although China has dramatically increased its science and technology (S&T) spending in recent years, the country’s funding system is still opaque and the proportion of the research budget being spent on basic and applied research is shrinking. There are also warnings that China is too dependent on industry’s R&D spending, much of which is pedestrian and lacking in innovation.

These are the conclusions of a study co-authored by Yutao Sun and Cong Cao at the University of Nottingham, UK, who analysed China’s different departmental annual spending in research and development (R&D) in 2011 – the first year when such data were available.

China’s heavy dependence on industry for almost 80% of its R&D spending could cause the country problems

Despite China’s rapid growth in R&D spending in the past two decades, resulting in more money being spent on R&D as a proportion of GDP than the EU average (1.98% versus 1.96%), China has revealed few details of its government departmental S&T spending until 2011.

Based on data for 71 central government agencies, including the three leading science funders – the Ministry of Science and Technology (MOST), the Chinese Academy of Sciences and the National Natural Science Foundation of China – Sun and Cao discovered that these agencies spent Yuan73.73 billion (£7.3 billion) on R&D, accounting for 8.5% of China’s total R&D expenditure of Yuan868.7 billion in 2011.

‘We tried to understand who spent how much on what in China,’ Cao says. ‘The study will be a big contribution if it can promote greater transparency in the country’s R&D expenditure.’

Industry dependent

The authors further argue that the proportion of spending on R&D by the Chinese government on basic and applied research is noticeably lower than developed nations. The Chinese government only accounted for 21.7% of R&D spending in 2011, while the average in Organisation for Economic Co-operation and Development countries was 30%. In 2011, China’s outlay for basic and applied research was 4.7% and 11.8% of total R&D spending, respectively. This is far less than the 19% and 17.8% that the US and 12.5% and 22.3% that Japan spent on basic and applied R&D in that year.

Cao says that China’s heavy dependence on industry for almost 80% of its R&D spending could cause the country problems. He explains that much of this money is spent at the end stage of R&D on product development, so is far less innovative than the research going on in universities and ‘may weaken China’s goal to become an innovation driven nation’. However, Cao says industry spending on R&D may be inflated thanks to tax exemptions for research intensive firms.

Liang Zheng at the China Institute for S&T Policy at Tsinghua University welcomes the research as a reflection of a consensus to reform China’s S&T system. He says that the study shows that there has been an improper rush among researchers to publish results and a lack of coordination between Chinese agencies. ‘Basic research should be promoted to encourage innovative studies, while MOST should perform an upstream coordinating role instead of trying to fund technology development as it does now,’ says Liang.  But he also counters that inflated R&D spending in industry may not be rife at all, as there are strong incentives for the tax authorities to spot fraudulent R&D spending claims.