Ramping up R&D investment

R&D spending in China has grown at "an average annual rate of 20 percent per year over the last decade", he says. Much of the investment is concentrated in six regions: Beijing, Shanghai, Guangdong, Tianjin, Shaanxi and Zhejiang.

While the US still leads the world in R&D spending, China has started to "narrow the gap", according to a report released early this year by the National Science Board. It adds that knowledge-based economic activity is gradually shifting toward Asia, particularly China.

Biswas confirms this assessment.

"A number of Asian countries are experiencing rapid growth in R&D spending, with India having become a fast-growing hub for foreign multinationals to conduct R&D," he says.

"South Korea is also a rapidly growing R&D hub, driven by strong R&D spending by Korean companies as well as supported by the South Korean government's strong strategic policy focus on R&D spending."

Analysts say Asia's share of total global R&D spending has risen from 25 percent a decade ago to the present 34 percent, reflecting rapid economic growth in the region.

They say many large Asian economies are boosting R&D expenditure to build their competitive advantage in leading-edge industries such as technology and pharmaceuticals.

"A key driver for the increasing importance of the region in R&D is the rapid growth of the Chinese economy and the strong R&D spending growth in China," Biswas says.

Global R&D this year is expected to top $1.6 trillion, according to R&D Magazine. Biswas from IHS says China's R&D accounts for around 12.7 percent of the world's total, Japan 11.5 percent, and India 1.2 percent.

"India, however, is quite competitive with China and Japan in terms of attracting foreign multinationals' R&D expenditure," Biswas says. "For example, comparing R&D expenditure by US multinationals abroad, the amount spent annually by US multinationals on R&D in China and India is quite similar."

He says that this reflects India's fundamental competitiveness as a global R&D hub due to its large talent pool of skilled graduates.

"However, India remains far behind China in terms of total R&D spending in the whole economy mainly because the size of its total GDP is only 20 percent that of China."

Japan is the only other country in the region whose R&D expenditure is comparable to China's. R&D spending in Japan, the world's third-biggest economy, as a share of GDP is 3.4 percent, very high by international standards, says Biswas.

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