Feature Report | 3.6 Trillion Yuan a Year: What Are the Structural Characteristics of China's R&D Spending? (AI Translation)

特稿｜一年3.6万亿元，中国研发经费有何结构性特点？

China's research and development (R&D) investment achieved significant milestones in 2024, surpassing 3.6 trillion yuan, a year-over-year increase of 8.3% [para. 1]. The "China R&D Expenditure Report (2024)" by Dalian University of Technology details the rapid growth of R&D spending from 1.97 trillion yuan in 2018 to over 3.6 trillion yuan in 2024—a remarkable 84% increase. While China's R&D intensity, the ratio of R&D to GDP, is projected to reach 2.68% in 2024, exceeding the 13th Five-Year Plan target since 2022, the gap between northern and southern regions in R&D funding widens [para. 1][para. 3][para. 5].

Corporate contributions dominate R&D funding, accounting for around 79% of total expenditures in 2022, up from roughly 32% in 1995. Companies like Huawei are notable drivers, with Huawei's 2022 R&D expenditure being roughly 148.153 billion yuan, exceeding the combined R&D budgets of China's northeastern provinces. Yet, regional discrepancies persist, with southern and eastern areas garnering 67% of national R&D spending, highlighted by provincial leaders Guangdong and Jiangsu [para. 3][para. 5][para. 15].

Enterprises remain crucial in driving growth, specifically in sectors like electronics and telecommunications, where corporate R&D spending surpasses other industries by a significant margin. State-owned enterprises (SOEs) and private companies have contributed equally to R&D growth between 2020 and 2022, though private companies, particularly those listed overseas, remain underrepresented in available data. Large corporations such as Huawei and Tencent play a leading role, with Huawei alone accounting for 56.88% of the top ten Chinese firms’ combined R&D expenditure [para. 3][para. 12][para. 17].

Government contributions to R&D funding grew from 25 billion yuan in 1995 to approximately 547.1 billion yuan in 2022 but now make up only 17.77% of total national spending. Central and local governments primarily fund basic and applied research, while enterprises drive experimental development. Basic research spending has steadily increased, representing 26% of government-funded R&D activities. For instance, Zhejiang's R&D model of focusing government investment on basic research while enterprises lead technological advancements showcases a complementary approach toward innovation [para. 3][para. 17][para. 23][para. 25].

While total R&D spending is considerable, China's per capita R&D expenditure remains lower than global peers like the United States. With 6.3536 million R&D personnel, 2.63 times that of the U.S., competition for limited resources has intensified. The fierce contest for funding, such as National Natural Science Foundation of China (NSFC) projects, reflects this pressure. The NSFC-backed projects have become critical for career advancements in academia and research, highlighting the need for resource reallocation and a focus on research outcomes rather than project quotas [para. 7][para. 9].

Regional disparities in R&D spending have deepened over the years. Southern regions allocated 2.24178 trillion yuan in R&D funding in 2023, constituting approximately 67% of the national total, with provinces like Anhui breaking into the top ten spenders. Beijing and Shandong are the only northern regions in the top ten. The eastern part of China continues to dominate, accounting for 65% of total R&D expenditure and hosting a significant share of corporate R&D activity. In contrast, northeastern regions have experienced a notable decline in their share of national R&D investment [para. 15][para. 27].

Going forward, balancing scale and efficiency is critical for China’s R&D strategy, especially amidst global economic challenges. Enhanced collaboration across regions and a focus on the commercialization of research outcomes are essential for fostering inclusive development and addressing regional imbalances in R&D funding and capacities [para. 29].