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That China has become the second-biggest spender on research and development (R&D) behind the United States must have come as a big surprise to most Chinese people.

 

However, instead of taking it for granted, the conclusion reached by the Organization for Economic Cooperation and Development (OECD) is that it should be considered a goal China is yet to achieve.

 

A recent OECD report revealed that China is expected to invest US$136 billion in R&D this year, up 20 per cent over last year. That will surpass Japan's forecasted US$130 billion expenditure on R&D, though well behind the US$330 billion the United States will invest this year.

 

If it is true, the surge in Chinese research is indeed stunning.

 

For a nation like China, which is eager to build itself into an innovative country, this really would be welcome news.

 

China has witnessed rapid economic growth since it adopted reform and opening-up policies in the late 1970s. And its entry to the World Trade Organization five years ago also contributed a lot to its recent rise as a global trading power.

 

Nevertheless, while reaping a huge trade surplus, the country is increasingly uncomfortable about its reliance on labor-intensive and low value-added exports.

 

More important, extensive growth driven by investment and exports has placed a huge burden on the country's environment and resources.

 

To pursue sustainable development, a consensus has been reached across the country that the efficiency of economic growth must be put above its speed. And to that end, enhanced investment in R&D is a must.

 

That explains why Chinese research investment has been growing rapidly in recent years.

 

But a leap in R&D as dramatic as the OECD report described, though very desirable, is anything but real in China now.

 

According to the Ministry of Science and Technology, China spent 245 billion yuan (US$30.6 billion) on R&D in 2005, with about 55 per cent invested by the central government.

 

The huge gap between China's official figure and the OECD's forecast may partly be a result of the differences in their statistical approaches.

 

Yet, a more telling fact against the OECD's high forecast on China's R&D spending is Chinese enterprises' die-hard fever to expand capacity. It shows that domestic companies are still more interested in making quick money through capital investment than from sharpening their long-term competitiveness through R&D spending.

 

Admittedly, the Chinese Government has resolved to encourage innovation, and domestic businesses are also aware of the necessity to strengthen their R&D.

 

But a favorable environment for innovation cannot be cultivated overnight. And even when R&D investment is increased considerably, the more demanding task is to ensure that it will be spent efficiently.

 

(China Daily December 6, 2006)