Learn mandarin - China's spending for research outpaces the US

WORLD / Wall Street Journal Exclusive

China's spending for research outpaces the US

By GAUTAM NAIK (WSJ)
Updated: 2006-09-29 15:06

http://online.wsj.com/public/article/SB115949196271377533-vEXPMj4hv_90SRdiO
V5_e8pIn0Q_20061006.html?mod=regionallinks

An unprecedented surge in research and development spending is helping
China catch up with the two longstanding leaders in the field, the US and
Japan, a new study found.

R&D spending in China has been growing at an annual rate of about 17%,
and is far higher than the 4% to 5% annual growth rates reported for the
US, Japan and the European Union over the past dozen years. China's
massive investments in education are also bearing fruit. In 2002, its
industrial-research work force was 42% the size of the equivalent US work
force, up from 16% in 1991.

China is increasingly making its mark with scientific discoveries and
patents held by its scientists. In 2003 China became only the third
country, after the US and Russia, to put a person into orbit on its own.
Yesterday, Michael Griffin, administrator of the National Aeronautics and
Space Administration, returned to the US after a visit to China -- the
first time a NASA administrator has visited that country -- to explore
and expand space-program cooperation.

"China's significant investment in R&D is predicated on the assumption
that they want to be a player and competitor both economically and
militarily," said Jules Duga, senior analyst at Battelle Memorial
Institute, a nonprofit trust in Columbus, Ohio, that runs labs for the
government and industry.

The study, co-written by Mr. Duga, was conducted by Battelle and R&D
Magazine and is being published today. The study included in its measure
expenditures such as scientists' salaries and lab equipment in both the
public and private sector, but excluded long-term capital expenditures
such as buildings and major equipment.

China's technology-driven rise could heighten worries that the US is
ceding some of its competitive edge in science and technology to Asia's
new power. America's share of total global R&D is estimated to slip
slightly to 31.9% in 2007 from 32.7% last year, according to the study.
Japan and Europe are projected to show similar declines, while China's
share of global R&D is set to increase to 14.8% in 2007 from 12.7% in
2005.

But the US remains an R&D powerhouse, investing $320 billion in such
efforts last year, compared with $236 billion invested by the EU and $125
billion by Japan. Though China's R&D spending now makes up about 1.6% of
its gross domestic product, up from about 1% five years ago -- it's still
a far cry from the 2.6% of GDP that the US invests, and the 3.2% of GDP
that Japan invests.

In the last few years, the increase in US R&D investment has been driven
by military-related research. Roughly 60% of America's research and
development originates from the private sector. In a ranking of the top
five R&D-spending companies, four are American, including Pfizer Inc.,
Ford Motor Co., Microsoft Corp. and General Motors Corp. The other is
Toyota Motor Corp. of Japan.

American firms also make the biggest biotechnology investments, according
to the Battelle report. One spur: a continuing decline in the number of
new drug approvals by large pharmaceutical companies.

Despite the shifting R&D landscape, "there's no need for the US to
panic," said Mr. Duga. Instead, he said, "the US needs to be prepared for
a change. We need to figure out how we can keep ourselves in a strong
position" in crucial areas of science and technology. His prescription:
Spend more on math and science education, and invest more in pure
research, which US industry increasingly has shunned.

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