In almost 20 years, China's Research  &  Development (R&D) expenditure as a percentage of its gross domestic product has more than tripled, reaching 1.98 percent in 2012. 

That is a big improvement, it surpasses all 28 countries that make up the European Union, which collectively managed 1.96 percent. But where is the money going? 

Applied research, which transforms science into practical human benefit, plummeted by over 50 percent (from 26.4 percent of spending to 11.8 percent) and basic research also dropped, from 5.2 percent in 1995 to 4.7 percent in 2011.

A new paper in Science calls on China to increase its transparency, because recent reforms have decentralized distribution of China's R&D spending but there is still a lack of top-level design, effective coordination and transparency in budgeting and spending.

Credit: University of Nottingham
This has led to a both an overlap between agencies and even a rush to spend funds in certain programs.  That is not a criticism of China alone, America also has the National Science Foundation funding energy, the Department of Energy funding biology and the National Institutes of Health funding social science - and each has half a dozen programs spending hundreds of millions of dollars on "STEM outreach".  We spent tens of billions of dollars on solar energy in the belief that spending a lot all at once would lead to a breakthrough. 

While the improved transparency does bring China's R&D reporting processes in line with international norms, the authors criticize the fact that the Chinese government embeds its R&D expenditure in its broader S&T expenditure statistics. Instead, they argue, China's government should switch its reporting from S&T to R&D expenditure, as well as ensuring the government's R&D expenditure is cited in the country's R&D statistics.

"It is a key step to bringing transparency to government R&D funding and helping reduce corruption, as well as harmonizing with international norms," say the authors,  Dr. Cong Cao of the University of Nottingham and Dr. Yutao Sun, from the Dalian University of Technology in China. 

A missing link?

The authors believe the shift from spending on predominantly applied research to development research may be attributed to China's innovation policy, which favors development over scientific research.

Cao said, "The low share of scientific research expenditure has negatively affected China's innovation capability and may jeopardise China's ambition to become an innovation-oriented nation. Shrinking of applied research is a serious problem, because applied research links basic and development research." 

The authors recommend that, ultimately, if China wants its research and development to compete on a world stage, its government needs to increase its contribution from 21.7 percent in 2011 of gross expenditure in R&D to 30 percent by 2020, bringing it in line with competing nations.