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Investing in R&D allows countries to generate productivity-enhancing innovations that raise living standards. Depending on whether one measures purchasing power or total output, China’s economy has either already grown bigger than the U.S. economy, or soon will. But in terms of investment in R&D, the figures are clear: China still lags far behind. In 2015, the United States invested $497 billion in R&D (2.8 percent of its GDP) while China invested $373 billion (2 percent of its GDP). China is catching up quickly, though. Based on projections by the Industrial Research Institute (IRI), China’s annual R&D investment growth of between 6 percent and 7 percent outpaces the U.S. R&D growth rate of 3 percent to 4 percent. If these trends hold, China’s total R&D investments will exceed those of the U.S. by 2025.
Still, R&D investments are only as good as the returns they produce, and China appears to have a ways to go in making its R&D investments more productive. In 2015, IRI surveyed researchers around the world on the subject of American and Chinese R&D output, and 68 percent of respondents felt that the quality of U.S. R&D output was superior while only 8 percent felt that Chinese R&D output was superior.
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