China now spends 2.8% of its economy on research, passing the OECD average for the first time: Could US science cuts reshape the global AI and semiconductor race?

China’s research and development spending rose 8.2% in 2025 to 3.93 trillion yuan, about $584.5 billion, the National Bureau of Statistics said on October 16. Only the United States spends more.

The share of the economy is the more telling number. R&D spending reached 2.8% of GDP, above the OECD average of 2.72% for the first time, which ranks China 12th in the world. Over the five years of the 14th Five-Year Plan, from 2021 to 2025, spending grew by an average of 10% a year.

Companies pay for most of it

Businesses, not the state, carry the load. Company R&D spending passed 3 trillion yuan for the first time, or 77.4% of the total, which works out to roughly $450 billion. Firms also supplied 73.7% of the year’s growth. Government research institutes accounted for 11.6% of spending and universities for 8.7%.


Public budgets grew more slowly. Government spending on science and technology reached 1.32 trillion yuan, up 4.4%, about half the pace of total R&D growth.

Local governments provided 66.1% of it and the central government 33.9%.

The type of research matters as much as the total. Most of the money goes to experimental development, which means turning known science into products and processes. That category reached 3.2 trillion yuan, up 8.4%. Applied research grew 3.2% to 444 billion yuan.

Basic research is the open-ended kind, done without a product in mind. It grew fastest, up 13.3% to 283.46 billion yuan, or about $42 billion. That is still only around 7% of the total. An SCMP editorial pointed out that private-sector spending on basic research in China lags the US. So the growth is real, but it starts from a low base.

SCMP’s reporting says China’s total is 3.4 times Germany’s and 3.5 times Japan’s. The same newspaper’s editorial makes a sharper claim; measured in purchasing power parity terms, China’s R&D spending has gone from about 72% of the US level a decade ago to roughly parity. That is a fair way to compare, but it is not the same as the dollar totals, where the US is still ahead.

The Trump administration’s 2026 budget request called for cutting NIH by about 39% and the National Science Foundation by more than half.

Congress set NSF funding at $8.75 billion, far above the $3.9 billion the president asked for. NIH, which faced a roughly 40% proposed cut, ended up with an increase. The last of the 2026 funding bills was signed on February 3. Lawmakers also barred the administration from changing the indirect cost rates paid to research institutions on its own.

Beijing has set a clear target. The government work report for 2026 to 2030 aims for an average increase of at least 7% a year in national R&D spending. Growing 7% a year from 3.93 trillion yuan would take spending to roughly 5.5 trillion yuan by 2030.

The quality of the spending may matter more than the size. Analysts quoted by SCMP expect the focus to shift toward using funds better and getting more out of research. The same report says Beijing plans to put more weight on basic research, cutting-edge technologies and scientific talent as it pushes for self-reliance in technology.

The sectors Chinese officials have named include chips, industrial machinery and high-end scientific instruments, all areas where China still depends on imported technology.

Three things will show whether the strategy works. The first is whether basic research climbs well above 7% of the total. The second is whether companies start funding long-term science and not only product development. The third is whether the US keeps research funding steady in its next budget round, since another round of proposed cuts could bring the old contrast back.