Companies have become the main driving force behind scientific and technological innovation in China and account for more than 70 percent of research and development investment, according to a new report.

Corporate spending on R&D soared to CNY1.9 trillion (USD274 billion) in 2020 from CNY30 billion (USD4.3 billion) in 1995, accounting for 77 percent of total R&D investment, according to the findings of the study published earlier this month by Innovation and Entrepreneurship in Industrial Transit at Dalian University of Technology.

Government spending on R&D has fallen to account for less than 20 percent in 2020, the report said.

Telecoms equipment giant Huawei Technologies is the biggest investor in R&D in China, with its spending second only to Google worldwide. Huawei accounts for 7 percent of all Chinese corporate investment in R&D, the report said, adding that e-commerce titan Alibaba Group Holdings and internet giant Tencent Holding ranked second and third, respectively, in China.

China’s R&D spending ranked second globally in 2020, coming in at half that of the United States and twice that of Japan, which ranked third. But China’s R&D intensity -- R&D expenditure as a percentage of gross domestic product -- remained middle-ranking compared with G7 countries, falling behind the US, Japan, and Germany, according to the report.

The position of companies in China’s innovation system has changed greatly, Wang Zhigang, science and technology minister, said on March 5 during the Two Sessions. Firms should be the main players in generating scientific and technological innovation, not just the primary users of innovation results, he said, and they should participate in the whole process from basic research to the application of results.

Companies still need to improve their R&D investment in basic research, Sun Yutao, a professor at Dalian University of Technology and author of the report, told Yicai Global.

In 2020, enterprises contributed only 6.5 percent of the basic research funds in China, while the proportions in the US and Japan were 32 percent and 47 percent respectively, Sun added.

Many companies have not yet realized the importance of basic research, as they can learn about existing advanced technologies before they become leading firms, but companies like Huawei need to conduct cutting-edge research on their own, he said.

China’s R&D investment reached CNY3.1 trillion last year, up 10.4 percent from a year earlier, with R&D intensity hitting 2.6 percent. Investment in basic research was CNY195.1 billion, accounting for 6.3 percent of total R&D expenditure, according to data from the Ministry of Science and Technology.

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