China Climbs International R&D Spending League

by Mary Swire, Tax-News.com, Hong Kong

31 October 2003

A report from the OECD measuring trends in the knowledge-based economy has found that China has climbed to third in the world in terms of the amount of money invested in research and development.

In the report, which is published every two years, the OECD found the total amount spent on R&D in China reached almost $60 billion in 2001, behind only the United States (spending $282 billion) and Japan (spending $104 billion), and ahead of Germany where R&D expenditures were $54 billion.

It is thought the chief factor behind China’s rise is investment from the business sector. The report found that 60% of R&D spending was contributed by foreign and domestic firms, with the remainder coming from the government.

In recent years, global firms such as General Electric, and chip maker Infineon have set up operations in China to take advantage of low costs and an educated work force.

However, China’s tax policies with regard to the chip manufacturing sector have recently come under criticism from the US based Semiconductor Industry Organisation which argues that China competes on an un-level playing field internationally due to VAT rebates given to domestic producers.

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