A recent report by Paris-based Organization for Economic Cooperation and Development (OECD) says that China now ranks third in the world in the amount of money it spends on research and development, with total R&D spending in China in 2001 reaching nearly $US60 billion, behind only the United States and Japan who had expenditures of $US282 billion and $US104 billion respectively.

China came in ahead of both Germany ($US54 billion) and India ($US19 billion). The OECD data, which measures trends in the knowledge-based economy, said that spending in China has grown rapidly, from 0.6 percent of gross domestic product in 1996 to 1.1 percent in the latest year.

Most of the rise in research and development expenditure is due to higher business investment, a sign that China has moved quickly towards developing its knowledge-based industries. In the past two years multinationals such as Alcatel, General Electric and computer chip manufacturers such as Infineon have set up research centers in China in order to take advantage of lower costs and a comparatively cheap, educated labor force.

Most research goes into applied technologies, such as the development of new cell phones or auto technology that then uses conventional engineering techniques.