Global R&D expenditures over the past decade have grown faster than global GDP, an indication of widespread efforts to make economies more knowledge and technology intensive. The global total rose from an estimated $522 billion in 1996 to approximately $1.3 trillion in 2009, with the rate of growth slowing in the 2008–09 recession years (figure
R&D investments of Western countries slowed markedly in the face of adverse economic conditions. After 2008, R&D growth stopped and decreased for both the United States and the EU, after accounting for inflation. Growth for the Asian region (China, Japan, and the Asia-8) and the rest of the world slowed somewhat in 2008 and 2009, but from very high rates in earlier years.
The United States remained by far the single largest R&D-performing country, with an R&D expenditure of $400 billion in 2009. For the first time, the Asian region's total of $399 billion matched the U.S. total in 2009 (figure
China's 2008–09 R&D growth increased by a record 28%—well above its 1997–2007 trendline growth of 22%—and propelled it past Japan into second place. 2010 data released by China's National Bureau of Statistics show a further 22% increase.
R&D expenditures can be viewed as long-term investments in innovation. The R&D/GDP ratio is a convenient indicator of how much of a nation's economic activity is devoted to innovation through R&D. A U.S. goal in the 1950s was to achieve an R&D investment of 1% of GDP by 1957. More recently, many governments have set their sights at 3% of GDP in pursuit of developing knowledge-based economies, a figure the EU has formally made its long-term planning target.
However, decisions affecting the bulk of R&D expenditures are generally made by industry, thus removing achievement of such a target from direct government control. In the United States, industry funds about 62% of all R&D. The EU average is 54%, but with considerable range (e.g., nearly 70% for Germany, but 45% for the United Kingdom). In China, Singapore, and Taiwan, industry funding ranges from 60% upward. Nevertheless, government planners monitor the R&D/GDP ratio as an indicator of innovative capacity, even as few countries reach the 3% mark.
Over the past decade, many developing economies in Asia have exhibited increased R&D/GDP ratios; conversely, the United States and the EU ratios have broadly held steady. Japan's comparatively high R&D/GDP ratio reflects the confluence of contracting GDP and flat R&D.
China's R&D/GDP ratio almost tripled, from 0.6% in 1996 to 1.7% in 2009, a period during which China's GDP grew at 12% annually—an enormous, sustained increase. The gap in China's R&D/GDP ratio relative to those of developed economies suggests that there is room for China's R&D volume to continue to grow rapidly (figure
The decade-long (1996–2007) R&D growth rates of mature S&T economies were lower than those of developing ones. Growth of R&D expenditures in the United States, the EU, and Japan were in the 5.4%–5.8% range while growth ranged from about 9.5%–10.5% for Singapore and Taiwan, to 12% for South Korea.
The effect of the global economic slowdown on R&D expenditures is dramatic—a sharp drop in growth in most locations in 2008–09 that is in stark contrast to a 28% rise in China's R&D spending, its highest growth rate since 2000 (figure
The relatively greater R&D growth rates of Asian economies (excluding Japan) resulted in changes in the global distribution of estimated R&D expenditures. Compared to 1996, the North America region's (United States, Canada, and Mexico) share of estimated world R&D activity decreased from 40% to 36% by 2009; the EU's share declined from 31% to 24%. The Asia/Pacific region's share increased from 24% to 35%, Japan's low growth notwithstanding (figure