ABSTRACT
This chapter discusses China's research and development (R&D) intensification using results based on aggregate and firm-level data. It explores the empirical methodology and the hypotheses. The supply-push hypothesis suggests that the rate and direction of R&D activities is driven by the availability of new technology opportunity. The Schumpeterian hypothesis conjectures that large firms are responsible for a disproportionate share of total R&D expenditures of an economy. The gap between China's actual R&D to GDP ratio and what is implied by its GDP per capita through the fitted line increased over time. Using a firm-level database of large and medium-sized Chinese industrial enterprises, the chapter examines the R&D intensity, measured by R&D to sales ratio, and shares of overall R&D of Chinese enterprises by ownership. Private enterprises and Hong Kong, Macau and Taiwan, invested firms conduct the least amount of R&D as a proportion of sales revenue, averaging less than 30 percent of that of the state-owned enterprises.
