Interpretation of the Communiqué on National Expenditures on Science and Technology in 2022 by the National Bureau of Statistics: Rapid Increase Seen in the R&D Investment with Further Consolidation of Enterprises' Principal Role in R&D Investment

      Recently, the National Bureau of Statistics, the Ministry of Science and Technology and the Ministry of Finance jointly issued the Communiqué on National Expenditures on Science and Technology in 2022. Zhang Qilong, Statistician of the Department of Social, Science and Technology and Cultural Statistics, National Bureau of Statistics, has interpreted the results.

       I. The total amount of research and experimental development (R&D) funds has reached a new level, and the investment intensity has continued to increase.

       According to the data of the Communiqué, in 2022, China's total R&D fund entered a new level exceeding RMB 3 trillion, reaching RMB 3,078.29 billion; an increase of 10.1% over the previous year, continuing the rapid growth momentum. At constant prices, R&D fund increased by 7.7% over the previous year, which is higher than the target of the 14th Five-Year Development Plan to "scale up spending on R&D by more than 7% annually". It took 8 years for China's R&D fund to increase from RMB 1 trillion to RMB 2 trillion, and only 4 years to climb from RMB 2 trillion to RMB 3 trillion, which fully reflects the effectiveness of China's accelerated implementation of an innovation-driven development strategy with innovation as the first driving force in recent years.

       In terms of investment intensity, China's R&D investment intensity (ratio of R&D funds to GDP) in 2022 was 2.54%, an increase of 0.11 percentage points over the previous year [1], and the second-highest increase in the past 10 years. The level of R&D investment intensity ranks 13th in the world, between the average level of the European Union (2.2%) and OECD countries (2.7%) [2], indicating that the gap between China and OECD countries has been further narrowed.

       II. The principal position of enterprises was further consolidated, and investment in key areas continued to increase.

       Enterprises, government-affiliated research institutions and institutions of higher learning are the three main subjects of R&D activities in China. In 2022, the R&D fund of the three main subjects was RMB 2,387.86 billion, RMB 381.44 billion and RMB 241.24 billion, an increase of 11.0%, 2.6% and 10.6% respectively over the previous year. Among them, the contribution of enterprises to the growth of R&D fund reached 84.0%, an increase of 4.6 percentage points over the previous year, presenting the main driving force of enterprises for the growth of R&D fund. The proportion of funds for enterprises accounted for 77.6% of the total R&D fund in China, an increase of 0.7 percentage points over the previous year, indicating that the principal position of innovation was further consolidated.

       In 2022, industrial enterprises above designated size reported R&D funds of RMB 1,936.18 billion, an increase of 10.5% over the previous year; the investment intensity (ratio to operating income, the same below) was 1.39%, an increase of 0.06 percentage points over the previous year. The intensity of R&D investment in key areas increased steadily, creating conditions for key core technology research and industrial basic capability improvement. Among the industries above designated size, the R&D fund of the high-tech manufacturing industry was RMB 650.77 billion, and the investment intensity was 2.91%, an increase of 0.20 percentage points over the previous year; The R&D fund of the equipment manufacturing industry was RMB 1,193.55 billion, and the investment intensity was 2.34 percent, an increase of 0.15 percentage points over the previous year.

       III. New breakthroughs were made in basic research investment, and the proportion continued to rise.

       According to the types of activities, in 2022, China's basic research fund, applied research fund and experimental development fund were RMB 202.35 billion, RMB 348.25 billion and RMB 2,527.69 billion respectively, an increase of 11.4%, 10.7% and 9.9% over the previous year. Among them, the growth rate of basic research fund was 1.3 percentage points faster than that of R&D fund, continuing to maintain rapid growth; the total amount exceeded RMB 200 billion for the first time, ranking second in the world; the proportion of R&D fund reached 6.57%, maintaining the upward trend. Institutions of higher learning and government-affiliated research institutions contributed 44.8 percent and 38.3 percent respectively to the growth of basic research fund, making them the main force in carrying out basic research activities in China.

       IV. Steady growth was seen in the fiscal expenditure on science and technology, with more diversified innovation support policies.

       According to the national financial final account data, the state's fiscal expenditure on science and technology in 2022 was RMB 1,112.84 billion, an increase of RMB 36.17 billion or 3.4% over the previous year. Among them, the central and local fiscal expenditure on science and technology was RMB 380.34 billion and RMB 732.50 billion respectively, accounting for 34.2% and 65.8% of the national total fiscal expenditure on science and technology respectively. Fiscal expenditure on science and technology maintained steady growth, effectively guaranteeing the demand for funds for basic research and key core technology research.

　　With the sustained expansion of the scope of preferential tax policies such as R&D deductions, the government's supports for scientific and technological innovation became more diversified. In 2022, the number of enterprises above the designated size that enjoy the preferential additional tax deduction and exemption policies for R&D expenses and high-tech enterprises increased by 16.3% and 11.7% respectively compared with the previous year, effectively motivating enterprises to increase R&D investment. According to the questionnaire survey of entrepreneurs, in 2022, the average approval rating of enterprises above designated size for the five innovative financial support policies, including the preferential additional tax deduction policy for R&D expenses, the preferential income tax policy for high-tech enterprises, the accelerated depreciation policy for special instruments and equipment for enterprise R&D activities, the preferential policy for VAT exemption and income tax reduction and exemption for technology transfer and technology development income, and the relevant policies for financial support, reached 83.4%, showing an improved policy system for encouraging and supporting enterprise innovation.

       V. A leading growth rate was seen in the central and eastern regions, highlighting the guiding effect of innovation.

       In 2022, the R&D funds in China's eastern, central, western and northeast regions[3] were RMB 2,023.75 billion, RMB 555.76 billion, RMB 396.18 billion and RMB 102.60 billion respectively, an increase of 10.4%, 11.9%, 7.6% and 4.8% over the previous year, among which, the growth rate of R&D expenditures in the eastern and central regions was significantly ahead. The R&D funds in the Beijing-Tianjin-Hebei Region and the Yangtze River Delta Region were RMB 426.09 billion and RMB 938.63 billion, an increase of 7.9% and 11.4% respectively; The R&D fund for the Yangtze River Economic Belt reached RMB 1,478.89 billion, an increase of 10.4%, maintaining a double-digit growth rate in recent years.

       In 2022, the number of provinces (municipalities) with R&D funds exceeding RMB 100 billion was 12, up 1 from the previous year. There are 7 provinces (municipalities) with R&D investment intensity exceeding the national average, up 1 from the previous year, which are Beijing (6.83%), Shanghai (4.44%), Tianjin (3.49%), Guangdong (3.42%), Jiangsu (3.12%), Zhejiang (3.11%) and Anhui (2.56%).

       Overall, in 2022, in the face of a complex and severe domestic and international environment, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at the core, and with the persistent implementation of high-quality economic and social development through scientific and technological innovation in the whole country, both the total amount of R&D fund and basic research investment entered a new level. In the next stage, on the one hand, we should further improve the diversified investment mechanism of R&D funds, increase financial support, expand the effectiveness of other aspects in the policies for tax deduction and exemption of R&D fund, improve the financial support system such as direct financing and guidance funds, and encourage local governments to continuously increase R&D investment. On the other hand, we should focus on providing targeted support for key technologies and key areas, continue to increase investment in basic research and achievement transformation, and strive to improve the efficiency of capital utilization.

Note: [1] According to the final verification data of GDP in 2021, the investment intensity of R&D funds in 2021 has been revised to 2.43%.

       [2] The data are from the official website of the Organization for Economic Cooperation and Development (OECD) (https://data.oecd.org), and the latest data are for 2021.

       [3] The eastern region includes Beijing, Tianjin, Hebei, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong and Hainan; The central region includes Shanxi, Anhui, Jiangxi, Henan, Hubei, and Hunan; The western region includes Inner Mongolia, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Xizang, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang; The northeast region includes Liaoning, Jilin, and Heilongjiang.