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China ‘on track to lead world in research and development spending’, says OECD

China is set to overtake the EU and US in science and technology spending, according to a new report by the Organisation for Economic Cooperation and Development (OECD).

According to the OECD's Science, Technology and Industry Outlook 2014 “squeezed research and development budgets in the EU, Japan and US are reducing the weight of advanced economies in science and technology research, patent applications and scientific publications”.

The report said this leaves China “on track to be the world’s top research and development (R&D) spender by around 2019”.

According to the OECD, annual growth in R&D spending across OECD countries was 1.6% from 2008 to 2012, half the level from 2001 to 2008, as public R&D budgets “stagnated or shrank in many countries and business investment was subdued”.

However, China’s R&D spending doubled from 2008 to 2012, the report said. Gross domestic expenditure on R&D in 2012 was $257 billion in China, $397bn in the US, $282bn across the 28 member nations of the EU and $134bn in Japan.

The report, which draws on data from a policy survey conducted every two years in more than 45 OECD and emerging economies, said that in most countries 10% to 20% of business R&D “is funded with public money, using various investment instruments and government targets”.

The ability of governments to compensate for lower business R&D with public funding, “as they did during the worst of the economic downturn, has become more limited”, the report said.

According to the report, overall business spending on R&D has “regained its pre-crisis annual growth rate of 3% since 2011, but from a lower base than before the 2009-10 cuts”. The report said: “The prospects for growth here are better than for investment in physical assets because companies, anticipating weak demand, are improving products and processes, but are not expanding production capacity.”

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