Research and development (R&D) spending in China was around Yuan 184.3 billion (about E 18 billion) in 2004 (fig. 1). Spending on R&D thus accounts for 1.35 percent of gross domestic product (GDP), which is well below the OECD average and extremely low compared with Europe, the United States and Japan with R&D spending between 2 and 3 percent. Especially in high-technology sectors is the R&D intensity in China very low compared to the OECD countries. There are more than 1,600 universities in China, 72 of which are run by the central government. The others are run by local authorities and various other organizations. Additionally, there are approximately 380 research institutes run by the central government and about 4,000 run by provincial governments and local administrations. In 1999 and 2000, the research landscape was completely restructured, which included the reorganization of many research institutes. Nevertheless, the country's R&D activities are still essentially state-dominated and shifting to a market-oriented system is a major task for the Ministry of Science and Technology (MOST). In 2004, over 60 percent of national R&D spending in China was provided by companies compared to 10 years ago when state R&D institutes accounted for the bulk of R&D spending and the corporate sector only accounted for 30 percent of the total. By far the largest proportion of R&D spending is specifically for product development and only a small proportion is spent on basic research. In 1986, the Natural Science Foundation of China (NSFC) was set up to promote basic research.
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