A comparative analysis of public R&I funding in the EU, US, and China.
Date: 2025-06-06
Institutions: Directorate-General for Research and Innovation
Subjects: China, EU Member State, EU research policy, United States, comparative analysis, innovation, research and development, research expenditure (EU), research infrastructure

A comparative 
analysis of public 
R&I funding in the 
EU, US, and China 

Jan-Tjibbe STEEMAN, Océane 
PEIFFER-SMADJA and Julien RAVET    

 
 
 
 
 
A comparative analysis of public R&I funding in the EU, US, and China  

European Commission 
Directorate-General for Research and Innovation 
Directorate G — Common Policy Centre 
Unit G.1 — Common R&I strategy and foresight service  
Contact      Erik Canton 
                Jan-Tjibbe Steeman 
Email 

  Erik.CANTON@ec.europa.eu 
  Jan-Tjibbe.STEEMAN@ec.europa.eu  
  RTD-ECONOMIC-ANALYSIS@ec.europa.eu  
  RTD-PUBLICATIONS@ec.europa.eu  

European Commission 
B-1049 Brussels 

Manuscript completed in April 2025  

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EUROPEAN COMMISSION 

A comparative analysis of public 
R&I funding in the EU,  
US, and China  

Authors: 

Jan-Tjibbe STEEMAN, Océane PEIFFER-SMADJA, Julien RAVET    

2025 

Directorate-General for Research and Innovation

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TABLE OF CONTENTS 

1. 

2. 

Introduction ....................................................................................... 5 

Research and innovation expenditures and trends....................... 6 

2.1.  What is the size of EU public R&D funding compared to the US and 

China? ......................................................................................................... 6 
2.2.  Who and what is funded? ........................................................................ 11 
The different layers of public R&D funding within the EU ..................... 13 
2.3. 

3. 

Research and innovation funding mechanisms and priorities ... 16 

3.1.  European Union ....................................................................................... 16 
3.2.  United States ............................................................................................ 19 
3.3.  China ......................................................................................................... 22 

4. 

5. 

6. 

Selection of policy actions related to research and innovation . 25 

Conclusion ...................................................................................... 28 

References ...................................................................................... 31 

2 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ABSTRACT  

Research  and  innovation  (R&I)  are  essential  for  countries’  competitiveness,  prosperity,  and 
societal  resilience.  Therefore,  governments  around  the  globe  have  established  extensive  R&I 
programmes to enhance R&I funding. This paper compares public R&I funding across the EU, US, 
and China - the world's largest R&I spenders – over recent years and identifies five key findings 
and their policy implications for the EU. First, all three economies have implemented strong R&I 
policies to boost investments in strategic areas, maintaining global leadership and safeguarding 
national interests, urging the EU to keep pursuing a strategic and balanced approach in line with 
'promoting,  protecting  and  partnering’.  Second,  China  and  the  US  have  surpassed  the  EU  in 
leveraging public R&D investments into private sector funding, suggesting the EU should reflect 
on its economic structure and focus more on disruptive innovations and advanced technologies. 
Third,  EU  public  R&D  funding  is  fragmented,  indicating  a  need  for  better  coordination, 
simplification, and potential consolidation. Fourth, despite relying more on public funding, the EU 
allocates  less  in  absolute  amounts  to  public  R&D  compared  to  the  US,  and  EU’s  Framework 
Programme (EU FP) budgets lag behind those of the US and Chinese counterparts, emphasising 
the  need  for  EU  R&D  budget  prioritisation.  Fifth,  R&D  funding  distribution  varies:  the  EU 
emphasises research efforts, while the US and China invest more on later R&D stages, prompting 
policy reflections on aligning means with objectives. 

3 

 
 
 
 
 
 
 
 
KEY MESSAGES  

• 

In  recent  years,  the  EU,  the  US,  and  China  have  rolled  out  significant  policy  packages  to 
advance research and innovation (R&I) investments in targeted science and technology (S&T) 
areas. These initiatives aim to enhance competitiveness, secure technological leadership, and 
safeguard sovereignty. 

•  The US leads the EU and China in terms of the absolute amount of public R&D funding, with 
China showing the largest growth in recent years. The US also outperforms all other major 
economies in total R&D funding, more than doubling the amounts spent by China and the EU, 
although recently China has outpaced both the US and EU in growth. 

•  Since 2000, when the EU’s Lisbon Strategy formally set the 3% R&D target, the EU has seen 
a slight increase in total R&D intensity, from 1.8% to 2.2%. This increase is lower than that of 
China and the US which grew from 0.9% to 2.6% and 2.6% to 3.6%. Public R&D intensity of 
the EU (0.7%) and the US (0.7%) is slightly above that of China (0.5%).  

•  The  EU  is more  dependent on  public  R&D funding  compared  to  the  US  and  China,  whose 
economies attract more private R&D funding. Private R&D intensity in the EU is below the US 
and China, and lags behind in growth, representing the main cause of the EU’s trailing total 
R&D intensity.  

• 

•  The year 2010 marks a turning point in the composition of the US R&D funding mix, in line 
with the digital boom and the consequent increase in private R&D funding. The turning point 
marks a shift from a share similar to that of the EU (relatively high share of public R&D funding) 
towards a composition akin to China’s (relatively low share of public R&D funding). 
Indirect R&D support (i.e., tax incentives) have gained relevance in the EU, US, and China 
over the last decade, with the US doubling this type of support and levelling slightly above the 
EU.  
In  the  EU,  public  R&D funding  is  predominately  allocated  to  the  higher education institutes 
sector (HEIs) in contrast to the US and China where the public sector is the main performer of 
public  R&D  funding.  The  EU’s  Framework  Programme  (FP)  diverges  from  this  general  EU 
pattern, with a relatively higher share for the private sector at the expense of HEIs. 

• 

•  The EU places greater emphasis on research efforts (both basic and applied), while the US 
and China focus more on the latter stages of R&D (experimental development). However, the 
US’s emphasis on experimental development can largely be attributed to the R&D funding for 
defence.  

•  Public R&D spending in the EU is fragmented across Member States, in contrast to the US, 
where  the  vast  majority  of  public  R&D  is  financed  through  the  federal  budget.  This 
fragmentation is reinforced by the variety of innovation funding programmes at Union level, in 
addition to the EU FP, which is the core programme to support R&I activities. 

•  The  importance  of  EU-level  financing  to  support  R&I  activities  varies  widely  among  EU 
Member  States:  for  some  Member  States  (MS)  EU-level  funding  plays  a  major  role,  while 
some other MS can rely more on their national funding.    

•  Despite  their  differences,  the  EU,  US  and  China  share  equivalent  public  R&I  mechanisms, 
such as agencies dedicated to funding groundbreaking basic research and the use of public-
private partnerships.  

•  Each economy has its own characteristic features. The EU FP stands out as a globally unique 
cooperative R&I initiative, providing funding to over 40 countries and encompassing a diverse 
array of instruments and support for various thematic areas. The US R&I landscape features 
agencies like DARPA that focus on developing disruptive innovations and new technologies, 
facilitating  the  rapid  transformation  of  ideas  into  successful  innovations.  China  has  quickly 
strengthened  its  high-tech  development,  particularly  in  areas  like  AI  and  quantum 
technologies, by investing in ‘Major S&T projects’ that concentrate efforts and blend public and 
private resources. 

4 

 
 
 
1. Introduction 

In  today’s  world,  knowledge  and  technological  advancements  are  key  for  a  country’s 
competitive  edge,  sovereignty,  and  ability  to  tackle  societal  challenges.  Research  and 
innovation (R&I) play a vital role in driving socio-economic progress, enhancing competitiveness, 
and  boosting  productivity  growth.  It  offers  solutions  to  both  current  and  future  challenges, 
facilitating  the  creation  of  new  knowledge  and  the  enhancement  of  existing  technologies. 
Additionally, R&I contributes to the formulation of informed policies and regulations, ensuring that 
societal needs are met with evidence-based solutions, and promotes skill development, preparing 
future generations to adapt and thrive in a rapidly evolving global landscape. Embracing R&I is, 
therefore, essential for building a resilient and prosperous society (Steeman et al., 2024). 

Governments around the globe have established extensive R&I programmes to ensure that 
R&I efforts reach optimal levels and aligned with strategic goals and societal needs. Such 
public  interventions  are  justified  by  various  factors,  including  addressing  'market'  and  'system' 
failures (Mitra et al., 2024). In the EU, Horizon Europe stands as the ninth European Framework 
Programme  (EU FP)  for research  and  innovation  for 2021-2027,  officially launched in  February 
2021 with a budget of 95.5 billion EUR. While Horizon Europe serves as the primary source of EU-
level  R&I  funding, it  is  not  the  only  one.  Additional  EU programmes  such  as  the  Recovery  and 
Resilience Facility (RRF), InvestEU and European Defence Fund also contribute to funding R&I 
activities.  Beyond  EU-level  funding,  EU  Member  States  implement  their  own  R&I  funding 
programmes  and  mechanisms,  thereby  creating  dual  layers  of  funding  at  both  the  Union  and 
national levels.  

However,  it  is  important  to  note  that  private  entities  significantly  shoulder  public  R&I 
investments, often boasting substantial annual R&I budgets. For instance, Alphabet allocated 
39 billion EUR in 2023, and Meta spent 33 billion EUR the same year (European Commission, 
2024).  The  objectives  of  private  and  public  R&D  funding  are  distinct;  public  funding  primarily 
addresses market failures and broader societal interests, while private R&D funding focuses on 
achieving shareholder returns through sustained business growth and maintaining a competitive 
market  edge.  Both  types  of  funding  are  crucial,  each  serving  its  unique  purpose  in  driving 
innovation and economic progress. 

The  rapid  advancements  in  artificial  intelligence  (AI)  illustrate  how  countries  and 
businesses are competing for technology leadership, fostering a policy landscape marked 
by  both  collaboration  and  competition.  As  this  paper  is  written,  uncertainty  looms  over  the 
global directions of R&I policy. In the EU, the installation of a new EU College at the end of 2024, 
led  by  President  Ursula  von  der  Leyen,  underscores  a  renewed  focus  on  competitiveness 
(European Commission, 2025a). This in a response to an influential report by Mario Draghi (2024), 
potentially  reshaping  the  EU's  stance  on  international  collaboration  and  other  policy  priorities. 
Meanwhile,  the  second  Trump  presidency  in  the  United  States  signals  a  fundamental  different 
policy approach to public R&I (Tollefson, 2025). The level of R&I collaboration is further troubled 
by restrictive policies on the trade of sensitive technologies, such as semiconductors and AI, which 
limit US and EU exports to China (Reuters, 2024). Despite these limitations, China's technological 
advancements  remain  rapid  and  noteworthy,  as  demonstrated  by  the  launch  of  the  AI  tool 
DeepSeek (Conroy and Mallapaty, 2025). This dynamic landscape highlights the complex interplay 
of competitive and cooperative efforts shaping the coming years of R&I on the global stage. 

In  an  uncertain  policy  landscape,  gaining  comparative  insights  is  crucial  to  forming  a 
robust evidence base for new policies and budget decisions. The EU's long-term budget is 
established through the Multiannual Financial Framework (MFF), which outlines strategic priorities, 
programmes,  and  budget  allocations.  In  July  2025,  the  European  Commission  is  anticipated  to 
present the proposal for the next MFF, covering the period beyond 2027. This proposal will serve 
as a basis for negotiations between EU institutions and Member States, who will collaborate to 
finalise and approve the budget prior to its implementation (European Commission, 2025b). 

5 

 
Given these considerations, this paper seeks to provide comparative insights into how the 
EU  and  governments  of  major  economies  organise  and  allocate  their  R&I  funding.  What 
types of mechanisms are applied, and which priorities are chosen for funding? To address 
these  questions,  the  paper  conducts  a  benchmarking  analysis  of  the  scale,  design,  and  main 
features of public R&I funding in major global economies. Specifically, it compares the current EU 
FP, Horizon Europe, with the R&I mechanisms of the US and China, two of the largest research 
and  development  (R&D)1  spenders  in  the  world,  alongside  the  EU.  To  provide  a  more 
comprehensive view, some figures also highlight other R&D-intensive economies, such as Japan, 
South Korea, and the UK. Additionally, insights into the overall EU R&I landscape are discussed, 
given the EU's complex landscape of dual layers of funding.2 

The analysis delivers five main findings. First, all three economies have put in place strong R&I 
policies to boost investments in strategic science and technology (S&T) areas, maintaining global 
leadership and safeguarding national interests, urging the EU to adopt a strategic and balanced 
through  promoting  innovation  and  cooperation  while 
international  engagement  strategy, 
safeguarding its interests and sovereignty in a competitive global landscape. Second, the US and 
China have surpassed the EU in leveraging public R&D investments into private sector funding, 
suggesting  the  EU  should  reflect  on  its  economic  structure,  focussing  more  on  disruptive 
innovations and advanced technologies. Third, EU public R&D funding is fragmented, indicating a 
need for better coordination, simplification, and potentially consolidation of funding. Fourth, despite 
relying more on public funding, the EU allocates in absolute amounts less to public R&D compared 
to the US, and the EU FP budgets lag behind US and Chinese counterparts, emphasising the need 
for  EU  R&D  budget  prioritisation.  Fifth,  R&D  funding  distribution  varies:  the  EU  emphasises 
research  efforts,  while  the  US  and  China  focus  more  on  later  R&D  stages,  inducing  policy 
reflections on aligning means with objectives. 

The remaining of this paper is structured as follows: In section 2, a comparison of general R&I 
investments and trends between the EU and other major global economies is presented. Section 
3 presents the main funding mechanisms and priorities in public R&I support of the EU, US, and 
China. Section 4 introduces a selection  of policy initiatives related to R&I. The paper concludes 
with section 5 providing a synthesis and the main outcomes.  

2. Research and innovation expenditures and trends 

This  section  begins  with  a  comparative  analysis  of  the  magnitude  and  trends  of  (public)  R&D 
funding in the EU and other major economies, specifically the US and China. Following this, the 
sectors of performance and type of R&D funded are explored. The section is completed with an 
assessment of the different layers of public R&D funding in the EU. 

2.1.  What is the size of EU public R&D funding compared to the 

US and China?  

The US leads the EU and China in terms of the absolute amount of public R&D funding, with 
China showing the largest growth in recent years. The US’s expenditures amount EUR 159 
billion in 2022 and EUR 130 billion in 2021, while the EU reports EUR 106 billion in 2021 (no data 
for 2022) and China EUR 77 billion in 2022 and EUR 69 billion in 2021. Public R&D spending has 

1 R&D and R&I are related wordings and often used interchangeable, though R&I is a broader concept 
compared  to  R&D.  R&D  is  the  scientific  and  technological  foundation  for  innovation,  where 
innovation also includes efforts to create value out of R&D. This paper uses R&D when discussing 
data for example of Eurostat or US statistic centre. R&I is used is for discussing policies and the full 
system.  

2 The study is performed with data and information with a cut-off date of January 2025. 

6 

 
 
increased by 69% for China between 2017 and 2022, compared to 39% for the US in the same 
period, and 22% for the EU between 2017 and 2021 (Figure 1).  

The  US  also  outperforms  all  other  major  economies  in  total  R&D  funding,  more  than 
doubling the amounts spent by China and the EU, although China has outpaced both the 
US  and  EU  in  growth  between  2017  and  2022.  The  US  reports  EUR  877  billion  in  R&D 
expenditures in 2022, followed by China with EUR 435 billion and the EU with EUR 357 billion. 
Since 2020, China has overtaken the second place at the expense of the EU and subsequently 
widened  the  gap.  Between  2017  and  2022,  China’s  total  R&D expenditures  have  increased  by 
88%, compared to 75% for the US and 27% for the EU (Figure 1). 

Figure 1: R&D expenditures 
GERD in EUR billion by source of funding, all sectors of performance, years 2017-2022 

Source: Authors elaborations based on Eurostat data.  
Note: R&D expenditures labelled as ‘private’ is funded by the business enterprise sector; the label ‘public’ combines 
funding  by  the  government  sector  and  European  Commission  as  part  of  the  rest  of  the  world;  the  label  ‘other’ 
combines funding by the higher education, private non-profit and the remaining parts of the rest of the world. The UK 
is not depicted as there is no data since 2019. For the EU no granular data is available for 2022. The numbers in the 
figure are rounded, yet growth rates are calculated with the original data. 

For years, the EU has trailed behind the US in terms of total R&D spending as a percentage 
of  GDP, also referred to as R&D intensity. Since 2020, it has also fallen behind China. In 
2022, the R&D intensity of the EU stands at 2.2%, lagging behind China (2.6%), the US (3.6%), 
Japan (3.4%), and South Korea (4.9%) (Figure 2).  

Since 2000 when the EU’s Lisbon Strategy formally set the 3% R&D target3, the EU has seen 
a slight increase of total R&D intensity, from 1.8% to 2.2% (representing a 22% growth). The 
EU’s  improvement  is  minor  compared  to  that  of  China  and  South  Korea,  which  managed  to 

3  A  brief  overview  of  the  history  of  the  3%  target  can  be  found  here:  https://ec.europa.eu/invest-in-

research/action/history_en.htm  

7 

 
 
 
increase their R&D intensity from 0.9% to 2.6% (representing a 188% growth) and 2.1% to 4.9% 
(representing a 137% growth) respectively, and the US from 2.6% to 3.6% (representing a 37% 
growth) (Figure 2).  

Public R&D intensity has been relative stable over the decades for the EU, in slight contrast 
to  the  trends  in the  US  and  China.  The  EU has  maintained  a  public  R&D intensity  of  around 
0.7% over the last decades, remaining higher than the 0.5% reported by China, Japan and the UK. 
The US’s public R&D intensity increased from 0.7% in 2000 to 0.9% in 2010 and subsequently 
decreased to 0.7% in 2022, while China reports an upwards trend from 0.3% in 2000 to 0.5% in 
2022 (representing a 50% growth). South Korea differentiates itself from the other economies with 
a public R&D intensity of 1.1% in 2022, which is a notable increase from the 0.5% reported in 2000 
(representing a 124% growth) (Figure 2).  

Private R&D intensity in the EU is below and lags behind in growth compared to China and 
US, representing the main cause of the Union’s trailing total R&D intensity. In 2022, EU’s 
private  R&D  intensity  stands  at  1.3%,  behind  China  (2.0%),  the  US  (2.5%),  Japan  (2.7%),  and 
South Korea (3.7%). For the EU, a total growth of 24% is reported over the two decades, in sharp 
contrast to China’s growth of 296% over the same period. Notably, the US experienced a decrease 
in  private  R&D  intensity  between  2000-2010  but  has  seen  a  substantial  increase  from  1.6%  in 
2010 to 2.5% in 2022, representing a 62% growth over the 2010-2022 period, while public R&D 
intensity decreased during the same time (Figure 2). 

Figure 2: R&D intensity 
GERD as % of GDP, by source of funding, all sectors of performance, years 2000, 2010 and 2022 (or latest available) 

Source: Authors elaborations based on Eurostat data.  
Note:  R&D  expenditures  labelled  as  the  ‘private’  is  funded  by  the  business  enterprise  sector;  the  label  ‘public’ 
combines spending by the government sector and European Commission as part of the rest of the world; the label 
‘other’ combines spending by the higher education, private non-profit and the remaining parts of the rest of the world 
sectors. The numbers in the figure are rounded on one decimal, yet growth rates are calculated with the original data.  

8 

 
 
The EU is more dependent on public R&D funding compared to the US and China, whose 
economies attract more private R&D funding. Within the EU, public R&D funding constitutes 
32% of the total R&D funding mix. This contrasts sharply with other major economies including 
China and the US, both at 18%, and Japan at 15%. These figures are mirrored by the percentages 
of private R&D funding, with China, Japan, and South Korea ranging between 76% and 80% and 
the US at 70%. In the EU, private R&D funding amounts to 58% of the total, similar to the UK with 
55% (Figure 3). 

Figure 3: R&D expenditures by sector  
GERD by source of funding, all sectors of performance, year 2022 (or latest available) 

Source: Authors elaborations based on Eurostat data.  
Note:  R&D  expenditures  labelled  as  the  ‘private’  is  funded  by  the  business  enterprise  sector;  the  label  ‘public’ 
combines spending by the government sector and European Commission as part of the rest of the world; the label 
‘other’ combines spending by the higher education, private non-profit and the remaining parts of the rest of the world 
sectors. 

The year 2010 marks a turning point in the composition of the US R&D funding mix, as it 
shifted from a share similar to that of the EU (relatively high share of public R&D funding) 
towards a composition akin to China’s (relatively low share of public R&D funding). In 2010, 
the share of R&D funded by the public sector was similar between the US at 33% and the EU at 
36%.  However,  since  2010,  aligning  with  the  digital  boom,  the  US  has  moved  towards  a  lower 
share of public R&D funding aligning with China at 18% public R&D funding, which stands in sharp 
contrast to the current share of the EU at 32% (Figure 4). As illustrated by Figure 2, this change in 
composition  is  attributed  to  the  increase  in  private  R&D  intensity,  while  public  R&D  intensity 
decreased during the same period.  

9 

 
 
 
 
Figure 4: Share of public R&D expenditures 
Public R&D expenditures as % of total R&D expenditures, years 2000-2022 

Source: Authors elaborations based on Eurostat data.  
Note: Public R&D funding combines spending by the government sector and European Commission as part of the 
rest of the world. 

Since 2010, tax incentives have gained relevance as a government R&D support measure in the 
US, EU, and China. As incentive, governments can provide tax relief for R&D expenditures, primary, 
though not exclusively, for businesses. An increase of this support measure would logically lead to an 
increase of private R&D spending. Over the past decade, this form of public support has risen, with the 
US more than doubling its support (from 0.06% of GDP to 0.12% GDP). The EU has also increased this 
type  of  support,  but  since  2017,  a  smaller  growth  and  slight  dip  is  observed,  creating  a  potential 
divergence  from  the  US.  For  China,  no  recent  data  is  available;  however,  data  up  to  2017  shows  a 
continuous upward trend, albeit with a level of support still below that of the US and EU (Figure 5).  

10 

 
 
 
 
 
Figure 5: Government R&D support through tax incentives 
Indirect  government  support  through  R&D  tax  incentives  (GTARD),  percentage  of  GDP,  2010-2021  (or  latest 
available) 

Source: Authors elaborations based on OECD Tax Incentives data 

2.2.  Who and what is funded? 

In the EU, public R&D funding is predominately allocated to the higher education sector (HEIs), 
in contrast to the US and China where the public sector is the main performer of public R&D 
funding. The higher education sector is the primary recipient of EU’s public R&D funding, receiving 56% 
of the total, followed by the public sector with 31%. In the US and China, most of the public R&D funding 
is allocated to the public sector, with respectively 44% and 65%, followed by the higher education sector 
with 32% and 24%. The public R&D funding allocated to the private sector is similar across the three 
economies, with EU and China both 12% and the US with 16% of the funding (Figure 6).   

11 

 
 
 
 
 
 
Figure 6: Sector of performance of public R&D funding 
GERD by sector of performance, public R&D funding, as share of total, year 2021 

Source: Authors elaborations based on Eurostat data.  
Note: The sector labelled as ‘private’ is the business enterprise sector, as ‘public’ is the government sector, as ‘higher 
education’ is the higher education sector and ‘private non private’ the private non private sector. Public R&D funding 
includes the funding by the government sector.   

The EU places greater emphasis on research efforts (both basic and applied), while the US 
and  China  focus  more  on  experimental  development.  Available  data4  indicates  that  R&D 
funding of the EU is concentrated on research efforts, with 21% of total R&D expenditures allocated 
to basic research, 39% to applied research, and 40% to experimental development. This contrasts 
with the US and China. The US allocates 14% to basic research, 18% to applied research, and 
68%  to  experimental  development.  China's  funding  predominantly  focuses  on  experimental 
development (83%), with minimal allocation to basic research (6%) and applied research (11%) 
(Figure 7). No granular comparative data is available to analyse the type of R&D funded by the 
public  sector.  Therefore,  chapter  3  will  analyse  the  available  information  for  each  economy 
independently.   

4  Concerning  the  composition  of  R&D  across  all  sectors  (GERD),  aggregate  data  for  the  EU  is 
incomplete, as it lacks information from four countries, including Germany and the Netherlands.  

12 

 
 
 
 
 
Figure 7: Type of R&D funded 
GERD by type of R&D, all sectors of performance, in EUR billions and as % of total 

Source: Authors elaborations based on Eurostat data 
Note: Aggregate data for the EU is incomplete, as it lacks information from four countries, Denmark, Germany, The 
Netherlands  and  Sweden.  The  x-as  represent  the  totals,  while  the  shares  are  presented  within  the  columns.  No 
granular data is available by source of funding.  

2.3. 

The different layers of public R&D funding within the EU  

In  the  EU,  public  R&D  intensity  varies  widely  between  Member  States.  The  public  R&D 
intensity ranges from a lower bound of 0.2% in Romania, Ireland, Malta, and Bulgaria to an upper 
bound of 1.0% in Austria (Figure 8).  

Five out of twenty-seven Member States meet the 3% target. In terms of total R&D intensity, 
there  is  a  wide  variation.  Five  countries  meet  the  3%  target:  Sweden  (3.4%),  Belgium  (3.4%), 
Austria (3.3%), Germany (3.1%) and Finland (3.0%), whereas six countries have an R&D intensity 
below  1%:  Romania  (0.5%),  Malta  (0.6%),  Bulgaria  (0.8%),  Latvia  (0.8%),  Cyprus  (0.8%)  and 
Slovakia (0.9%) (Figure 8). 

Remarkably,  some  EU  Member  States  succeed  in  leveraging  their  public  R&D  spending 
substantially more than others, reaching a multiplier similar to the US and China. Notably 
Ireland and Belgium record a multiplier (total R&D intensity relative to the public R&D intensity) 
close to 5, while Sweden has a multiplier of more than 4, which are closer to the multipliers of other 
major economies such as the US and China (see Figure 2), contrary to Latvia, Lithuania, Cyprus 
and Greece with multipliers below the 2 (Figure 8).  

13 

 
 
 
 
 
 
Figure 8: R&D intensity per EU member state  
GERD as % of GDP, by source of funding, all sectors of performance, year 2021 (or latest available) 

Source: Authors elaborations based on Eurostat data.  
Note:  R&D  expenditures  labelled  as  the  ‘private’  is  funded  by  the  business  enterprise  sector;  the  label  ‘public’ 
combines spending by the government sector and European Commission as part of the rest of the world; the label 
‘other’ combines spending by the higher education, private non-profit and the remaining parts of the rest of the world 
sectors. 

Public R&D spending in the EU is fragmented across Member States, in contrast to the US, 
where the vast majority of public R&D is financed through the federal budget. The US has a 
highly centralised public R&D funding system. Of the public R&D funding, 96% comes from the 
federal budget, with 4% of the public R&D funding coming from State (and local) resources. This 
stands in stark contrast to the situation of the EU. According to the available Eurostat data, public 
R&D  funding  predominately  comes  from  the  budgets  of  the  27  Member  States  (94%), 
complemented by a small portion of Union-level resources (6%) (Figure 9).  

14 

 
 
 
 
Figure 9: State versus federal R&D funding in EU and US 
For the year 2021, as share (%) of the total governmental R&D funding 

Source:  Authors  elaborations  based  on  Eurostat  data  (EU)  and  National  Center  for  Science  and  Engineering 
Statistics data (US). 
Note: For the EU, Union funding is measured as funding by the European Commission as part of rest of the world. 
For the US, non-federal government is funding by state and local governments. Depending on the data year used, 
the percentage of Union level funding may be higher, potentially close to 10%.  

The importance of EU-level financing varies widely among EU Member States. The share of 
EU-level  R&D  funding  as  part  of  the  total  public  R&D funding  differs  across  Member  States.  In 
2021, EU-level R&D funding, primarily funded through the EU FP for R&I, constituted circa 6% of 
total publicly funded R&D in Europe. However, this portion varies widely per country. For instance, 
EU  funds  accounted  for  48%  of  public  R&D spending  in  Lithuania,  compared  to  just  4%  in  the 
Netherlands,  Hungary  and  France  (Figure  10).  This  finding  suggests  that  for  certain  Member 
States, EU-level funding plays a major role in supporting R&I activities.  

15 

 
 
 
 
 
 
 
 
 
 
 
 
 
Figure 10: R&D expenditures financed by the EU as share of total public R&D funding  
GERD, for the year 2021, or latest available 

Source: Authors elaborations based on Eurostat data 
Note: R&D expenditures by the governmental sector combines spending by the government sector and European 
Commission as part of the rest of the world. EU spending is European Commission as part of the rest of the world. 

3. Research and innovation funding mechanisms and 

priorities 

Based on the levels and trends in (public) R&I funding presented in Section 2., section 3 will further 
analyse the mechanisms, approaches and priorities in public R&I support of the EU (focussing on 
the  EU FP,  Horizon  Europe),  the  US,  and  China.  This  analysis  will  be  conducted  through  case 
studies for each economy.  

3.1.  European Union 

In the EU, Member State organise their public R&I funding independently, which fragments 
the R&I landscape across  the Union. As shown in Figure 9, public R&D funding in the EU is 
fragmented,  with  only  small  portion  funded  on  EU-level.  Member  States  adopt  their  individual 
mechanisms,  approaches  and  strategic  priorities  to  fund  R&I  activities.  This  is  primarily  done 
through annual budget allocations to national agencies or dedicated R&I programmes and funds. 
Noteworthy examples of multiyear R&I funding programmes of EU Member States are the ‘National 

16 

 
 
 
Growth  Fund’  (EUR  11  billion) of  the  Netherlands  and  the  ‘France  2030  programme’  in  France 
(EUR 54 billion).5  

The  current  EU  FP,  Horizon  Europe,  is  the  primary  tool  for  funding  R&I  activities  at  the 
Union level, with an annual budget of approximately 14 billion EUR. EU FP-funding is granted 
competitively based on the criteria of excellence and impact. Other sources of EU-level R&I funding 
include the Recovery and Resilience Facility, InvestEU and the European Defence Fund (8 billion 
EUR of initial R&D budget, 1.1 billion EUR per year). The EU FP was established in 1984 as an 
initial 5-year programme with a budget of 3.3 billion EUR, and its budget has gradually increased 
to an (initial) 95.5 billion EUR (13.6 billion EUR per year) for the 2021-2027 period (Horizon Europe 
programme) (Cavicchi et al., 2023). Centralising R&I funding at Union level has added value by 
pooling  resources  -  ideas,  capital  and  talent  -  potentially  creating  spillover  effects,  reducing 
duplication, strengthening the competition base, and increasing administrative efficiency (Mitra et 
al., 2024).  

The EU FP is a cooperative R&I programme that offers equal R&I funding opportunities to 
entities  from  over  40  countries,  enabling  global  R&I  cooperation.  Association  to  Horizon 
Europe  represents  the  closest  form  of  cooperation  with  non-EU  countries,  allowing  them  to 
participate on equal terms to (parts of) the programme, although restrictions may be applied when 
necessary.  In  addition  to  neighbouring  countries  including  Ukraine,  Türkiye  and  Norway,  global 
R&I actors such as Canada, New Zealand and the UK have also been associated in recent years.6  

Horizon Europe supports a wide range of technology readiness levels (TRLs 1-9)7, with a 
budgetary  emphasis  on  applied research.  The  programme  incorporates  multiple instruments 
aimed at various objectives (see Box 1). The majority of the budget is allocated through Pillar 2 
(56%, 53.5  billion  EUR, 7.6  billion  EUR per year)  which  focuses  on  applied  research  efforts.  A 
quarter  of  Horizon  Europe’s  7-year  budget  (26%,  25  billion  EUR,  3.6  billion  EUR  per  year)  is 
directed  through  Pillar 1,  which  concentrates  on  fundamental  research,  including  the  European 
Research Council (ERC) that funds the world’s most prestige researchers. Most of the remaining 
budget  (14%,  13.6  billion  EUR,  1.9  billion  EUR  per  year)  is  allocated  through  Pillar  3,  which 
primarily  supports  experimental  development  efforts,  including  start-up  and  scaleup  funding 
through the European Innovation Council (EIC), one of Europe’s largest deep tech investors. A 
small portion is dedicated to EU member state capacity building (4%, 3.4 billion EUR, 0.5 billion 
per year) (Figure 11). 

Horizon Europe demonstrates a thematic focus on digital, industry, space, health, and the 
green  areas,  including  clean  tech,  when  analysing  the  budget  of  Pillar  2  and  European 
Innovation Council funding. Of the total 7-year Pillar 2 budget available for the thematic clusters, 
the funding is directed primarily towards the clusters ‘Digital, Industry and Space’ (30%, 15.3 billion 
EUR,  2.2  billion  EUR  per  year)  and  ‘Climate,  Energy  and  Mobility’  (29%,  15.1  billion  EUR,  2.2 
billion  EUR  per  year),  followed  by  ‘Food,  Bioeconomy,  Natural  Resources,  Agriculture,  and 
Environment’ (17%, EUR 9 billion, 1.3 billion EUR per year) and ‘Health’ (16%, 8.3 billion EUR, 1.2 
billion  EUR  per  year)  (Figure  11).  The  EIC  Impact  Report  2025  reveals  that  EIC’s  current 
investment  portfolio  is  in  ‘health’  (41%)  and  ‘digital,  industry,  and  space’  (31%),  and  ‘clean 
tech/other’ (28%) (European Commission, 2025c). 

5  See  for  more  information  on  the  ‘France  2030  programme’:  https://www.economie.gouv.fr/france-

2030#;  and the ‘National Growth Fund’: https://www.nationaalgroeifonds.nl/  

6  The  full  list  of  countries  associated  to  Horizon  Europe  can  be  found  here:  https://research-and-
innovation.ec.europa.eu/strategy/strategy-research-and-innovation/europe-world/international-
cooperation/association-horizon-europe_en#countries-associated-to-horizon-europe  

7 TRL is a measurement system to assess the maturity level of a particular technology, or stage of R&I 
more generally. There are nine technology readiness levels. TRL 1 is the lowest (basic principles 
observed) and TRL 9 is the highest (actual system proven in operational environment). See also: 
https://ec.europa.eu/research/participants/data/ref/h2020/wp/2014_2015/annexes/h2020-wp1415-
annex-g-trl_en.pdf. 

17 

 
 
 
Figure 11: Horizon Europe initial budgets by Pillar and Pillar 2 thematic clusters 
Breakdown per Pillar (left), and Pillar 2 thematic clusters (right), initial budgets 7-year period, % of total and billions 
EUR 

Source: Authors elaborations based on DG Research and Innovation data 
Note: Numbers in parentheses represent absolute values in billions EUR 

Box 1: Horizon Europe main features 

Horizon Europe (EUR 95.5 billion, 2021-2027) 
•  Pillar 1: 'Excellent Science' (EUR 25 billion, EUR 3.6 billion per year) has a focus on basic 
research  and  the  lower  TRLs  (fundamental  research,  1-3),  including  the  European 
Research Council (EUR 16 billion, EUR 2.3 billion per year) to fund “bottom-up” research, 
Marie-Sklodowska  Curie  Actions  (EUR  6.6  billion,  EUR  0.9  billion  per  year)  to  foster 
researcher mobility, and Research Infrastructures (EUR 2.4 billion, EUR 0.3 billion per year) 
to fund facilities.  

•  Pillar 2: 'Global Challenges and European Industrial Competitiveness' (EUR 53.5 billion, 
7.6  billion  EUR  per  year)  is  established  through  six  thematic  clusters  funding  typically 
projects  in  the  mid-range  TRLs  (applied  research,  3-6),  and  supporting  collaborative 
research and innovation activities between scientists, industry, public and research bodies, 
including through the EU Partnerships. The pillar also includes five Missions that target key 
societal challenges.  

•  Pillar 3: 'Innovative Europe' (EUR 13.6 billion, EUR 1.9 billion per year), focuses efforts on 
the  higher  TRLs  (applied  research  and  experimental  development  3-9),  emphasising 
breakthrough  innovations,  start-up  funding,  scaling-up,  and  strengthening  ecosystems, 
though the European Innovation Council (EUR 10.1 billion, EUR 1.4 billion per year), the 
European Institute of Technology (EUR 3 billion) and the European Innovative Ecosystems 
(EUR 0.5 billion, EUR 0.1 billion per year). 

•  Horizontal part: ‘Widening participation and strengthening the European Research Area 
(ERA)’  (EUR  3.4  billion,  EUR  0.5  billion  per  year)  contributes  to  strengthening  the  R&I 
capacity of EU members states lagging behind on R&I performance, in line with the policy 
objectives of the ERA.  

18 

 
 
 
 
 
 
EU FP funding is fairly evenly distributed among organisation types, although the relative 
high share for private entities stands out. A substantial portion of the Horizon Europe funding 
has been allocated to governmental organisations, including research organisations (28%)8, while 
higher  education  organisations  are  the  primary  beneficiaries  of  the  EU  FP  funding  (35%). 
Nonetheless,  the  share  dedicated  to  the  private  entities  is  notable  (28%),  especially  when 
considering the results shown in Figure 6 (Figure 12).   

Figure 12: Horizon Europe contribution by organisation type 
Net contribution per organisational type, % of total, cut-off date 06/01/2025 

Source: Authors elaborations based on Eurostat data.  
Note: Horizon Europe net contribution. The labels stand for Higher or Secondary Education entities (HES), Private 
for-profit entities (PRC), Research Organisations (REC), Public bodies (PUB) and other entities (OTH). Total signed 
HE grants by 6/1/2025 stands at EUR 43.2 billion. 

3.2.  United States  

US public R&D funding is concentrated among a handful of public agencies, highlighting a 
strong thematic focus on defence and security, health, energy, and aeronautics and space. 
Data  on  US  R&D reveals  that  most  of  the  US  federal  budget,  totalling  USD 197  billion  in  2022 
(EUR 187 billion9), is allocated to five federal agencies. These are the Department of Health and 
Human Services (HHS) with USD 74 billion (38% of federal R&D budget, EUR 71 billion), which 
encompasses  the  R&D  funding  agency  National  Institutes  of  Health  (NIH,  with  a  budget  of 
approximately USD 45 billion in 2022, EUR 43 billion); the Department of Defence (DoD) with USD 
73 billion (37%, EUR 69 billion); the Department of Energy (DoE) with USD 18 billion (9%, EUR 

8  The  organisational  types  used  to  label  EU  funding,  differs  from  the  organisational  types  used  by 
Eurostat. The main difference is for labelling ‘research organisations’ which are primarily labelled 
as government entity in Eurostat, though for some a minor extent also as private non-profit.  
9 For the conversion to EUR, the OECD conversion rate for EUR/USD of 2022 is used (0.949624) 

19 

 
 
 
 
17 billion); the National Aeronautics and Space Administration (NASA) with USD 12 billion (6%, 
EUR 11 billion); and the National Science Foundation (NSF) with USD 7 billion (4%, EUR 7 billion) 
(Figure 13). 

Nearly half of the US federal R&D budget is allocated to in-house R&D performers, including 
funding  for  Federally  Funded  Research  and  Development  Centres  (FFRDCs),  while  the 
remaining is distributed to out-house performers, such as universities and businesses. In 
2022, 46% of the federal budget was directed towards in-house (governmental) performers, such 
as FFRDCs. These centres are public-private partnerships that conduct R&D on behalf of the US 
government  and  are  overseen  by  one  of  the  US  federal  agencies.10  The  remaining  54% of  the 
budget  in  2022  was  allocated  to  out-house  (external)  performers.  This  support,  primarily  R&D 
conducted  by  businesses  and  universities,  is  typically  provided  through  competitive  grants, 
contracts, or cooperative agreements, depending on the US agency. The distribution between in-
house  and  out-house  performers  varies  widely  among  US  agencies.  For  instance,  94%  of  the 
NSF’s R&D budget and 66% of NASA’s R&D budget go to out-house organisations, while 73% of 
the DoE R&D funding is allocated to in-house performers (NCSES, 2024).  

Figure 13: US federal R&D funding 
Budget obligations per agency, % of total and billions USD  

Source: Authors elaborations based on National Center for Science and Engineering Statistics data.  
Note: Numbers in parentheses denote the budget in USD billions.  

A vital part of the US R&I system includes R&D funding agencies that concentrate efforts 
on specific areas, exemplified by the NIH for health, NASA for space and aeronautics, and 
the NSF for basic and applied research. The NIH, the R&D funding agency of the Department 
of HHS, comprises 27 institutes and centres specialising in medical research. Most of its budget is 
awarded through competitive grants for extramural research, with the remaining funds used for in-
house research at the NIH campus laboratories. NASA funds R&I related to space and aeronautics 
and consists of 20 centres and facilities across the US and a laboratory in space. The NSF funds 
basic and applied research across all fields except health, awarding most of its research funding 
through competitive grants. It is responsible for approximately a quarter of all federally supported 
basic research conducted by US colleges and universities. These agencies offer opportunities for 

10  National  Center  for  Science  and  Engineering  Statistics,  List  of  Federally  Funded  R&D  Centers: 

https://ncses.nsf.gov/resource/master-gov-lists-ffrdc  

20 

 
 
 
 
  
 
international  cooperation,  although  they  are  typically  targeted  towards  specific  countries, 
organisations, and/or specific calls.11 

Uniquely, the US R&I system includes several agencies dedicated to focusing on disruptive 
innovations  and  technology  development,  with  DARPA  being  the  best-known  example. 
These agencies have a mission to safeguard US national security and technological sovereignty 
by concentrating on disruptive innovations. Although they have relatively limited R&D resources 
compared  to  the  overall  federal  R&D  budgets,  these  agencies  have  successfully  developed 
innovative  technologies.  This  success  can  be  partly  attributed  to  their  setup,  which  is  non-
hierarchical,  ecosystem-based,  and  challenge-driven,  as  well  as  their  ability  to  scale  up 
innovations, including through procurement, via their parent agencies such as the DoD and DoE 
(Box 2). 

Box 2. DARPA and alike US agencies. 12  

❖  Objective: R&D agencies focussing on developing emerging technologies and disruptive 

innovations to safeguard the US national security and technological sovereignty. 

❖  Approach:  These  agencies  employ  an  R&I  ecosystem  approach,  integrating  knowledge 
and capacities from various sources, including academia, businesses, and public bodies. 
Key  characteristics  include  a  non-hierarchical  structure  with  empowered  programme 
managers, a willingness to take risks (high-risk, high-reward), challenge-based methods, 
and technology adoption through public procurement. 

❖  Areas: The first and most well-known is the Defense Advanced Research Projects Agency 
(DARPA), founded in 1958 as part of the DoD. While DARPA focuses on military technology 
applications,  many  of  its  innovations  have  dual-use  benefits,  impacting  civil  society  and 
integrated  into  daily  life,  such  as  unmanned  aerial  vehicles  (drones)  and  the  Global 
Positioning  System  (GPS).  In  recent  decades,  similar  US  federal  agencies  have  been 
established,  modelled  after  DARPA.  These  include  the  Intelligence  Advanced  Research 
Projects  Activity  (IARPA),  focusing  on  AI,  quantum  computing,  machine  learning,  high-
performance  computing,  and  synthetic  biology,  and  the  Advanced  Research  Projects 
Agency-Energy (ARPA-E), part of the DoE, concentrating on solar, batteries, transportation, 
radiation,  grid,  and  energy  conversion.  Additionally,  the  Homeland  Security  Advanced 
Research Projects Agency (HSARPA) works on R&I and technology development related 
to border, maritime, and cybersecurity, as well as chemical and biochemical defence. The 
Advanced Research Projects Agency for Health (ARPA-H), part of the National Institutes of 
Health (NIH) and launched in 2022, focuses on biomedical breakthroughs. 

❖  Budgets: Annual budgets range from USD 0.5 billion for ARPA-E to approximately USD 4 

billion for DARPA. 

In the US, half of public R&D funding is directed towards experimental development, with 
the remaining funds evenly split between basic and applied research, highlighting a focus 
on the later stages of R&D. Specifically, in 2022, the US federal government, encompassing all 
agencies, allocated 51% (USD 97 billion, EUR 92 billion) of its total R&D funding to experimental 
development, in contrast to the 24% (USD 45 billion, EUR 43 billion) for basic research and 25% 
(USD 48 billion, EUR 46 billion) for applied research (Figure 14). 

The US emphasis on experimental development can largely be attributed to the funding by 
the  Department  of  Defence,  which  allocated  USD  62  billion  (EUR  59  billion)  to  experimental 
development in 2022, representing 86% of its total R&D budget. The type of R&D funded varies 
considerably across US agencies. The DoD prioritizes experimental development, while the HHS 
maintains an even distribution across all three R&D types, and the NSF primarily focuses on basic 
research activities, dedicating approximately USD 6 billion, or 85% of its R&D budget, to this area. 

11  For  more  information,  see  on  the  NIH:  https://www.nih.gov/;  NASA:  https://www.nasa.gov/  NSF: 

https://new.nsf.gov/about.   

12 For more information on DARPA and the model applied see Bonvillian et al. (2019)  

21 

 
 
 
Notably,  more  than  half  (51%,  USD  48  billion)  of  the  total  federal  research  funding  (combining 
basic and applied research) is allocated to the HHS (Figure 14). 

Figure 14: US federal R&D budgets per type of R&D 
R&D budget obligations, percentage of total and in USD billion, year 2022 

Source: Authors elaborations based on National Center for Science and Engineering Statistics data. 
Note: Numbers in parentheses denote the budget in USD billions.   

3.3.  China 

Government-affiliated R&D institutions receive more than half of the R&D funding from the 
Chinese government, highlighting their significance in the Chinese R&I system. Data from 
2023 indicates that 53% of the Chinese government's budget (RMB 299 billion, approximately 42 
billion  EUR13)  is  allocated  to  these  institutions.  This  is  followed  by  higher  education  institutions 
(HEIs) with 27%, and other organisations, including enterprises, receiving 20% (Figure 15). China 
hosts numerous government-affiliated R&D institutions, totalling 2890 in 2023. Most of these are 
affiliated  at  the  local  level  (2139)  as  opposed  to  the  national  level  (751).  However,  recent  data 
shows a trend towards centralisation, with a decrease of about 350 institutions at the local level 
and an increase of 25 institutions at the national level (Figure 16).  

Although Chinese R&D institutions are primarily funded by the government, a substantial 
portion of their funds supports the later stages of innovation. These institutions receive 94% 
of their budget from the government. Of this funding, 44% (RMB 169 billion, approximately EUR 
24 billion) is allocated to experimental development, 35% (RMB 137 billion, approximately EUR 19 
billion)  goes  to  applied  research,  and  21%  (RMB  80  billion,  approximately  EUR  11  billion)  is 
dedicated to basic research activities (Figure 16). 

13  For  the  conversion  to  EUR,  the  OECD  conversion  rates  of  the  latest  year  available,  2022,  for 

RMB/USD (6.737158) and EUR/USD (0.949624) are used.  

22 

 
 
  
 
 
 
 
 
 
 
 
Figure 15: China government R&D funding  
China R&D funding, by performer, % of total and RMB billions, 2023 

Source: Authors elaborations based on National Bureau of Statistics of China, Yearbook 2024. 
Note: Numbers in parentheses denote the budget in RMB billions.  

Figure 16: China government R&D institutions 
Total governmental institutions (left), source of funding (centre), type of R&D in RMB billions and % (right), 2023 

Source: Authors elaborations based on National Bureau of Statistics of China data, Yearbook 2024. 
Note: Numbers in parentheses denote the budget in billions RMB.  

China's HEIs allocate nearly half of their R&D funding to applied research. In 2023, Chinese 
HEIs  spent  47%  of  their  budget  (RMB  130  billion,  approximately  EUR  18  billion)  on  applied 
research  activities.  This  was  followed  by  41%  (RMB  114  billion,  approximately  EUR  16  billion) 
allocated  to  basic  research  and  12%  (RMB  32  billion,  approximately  EUR  5  billion)  directed 
towards experimental development. Notably, over one-third (36%) of the R&D resources for HEIs 
come from enterprises, which may explain the substantial portion of funding dedicated to the later 
stages of research and innovation by these institutions (Figure 17). 

23 

 
 
 
 
 
 
 
 
 
Figure 17: China Higher Education Institutions 
Type of R&D (left), source of funding in RMB billions and % (right), 2023 

Source: Authors elaborations based on National Bureau of Statistics of China data, Yearbook 2024. 

China's  governmental  R&D  is  predominantly  funded  through  five  key  mechanisms, 
including the National Natural Science Fund (NNSF) which focuses on basic research, and 
the  'Major  S&T  Projects'  which  support  strategic  technology  areas.  With  a  budget  of 
approximately RMB 42 billion for 2022 (EUR 6 billion), the NNSF stands as China's largest fund 
supporting  basic  research  and  scientific  frontier exploration  in  natural  sciences  (CSET,  2022a). 
The  Key  R&D  Programmes  (NKPs)  emphasise  the  transformation  and  commercialization  of 
scientific research through public-private partnerships, integrating basic, applied, and experimental 
development  in  several  critical  areas  such  as  new  energy  vehicles  and  cloud  computing.    The 
Major  S&T  Projects  are  ambitious  large-scale  initiatives  that  address  strategic  science  and 
technology challenges and aim to support China’s innovation capabilities. Some of these projects 
have a (partly) military focus, such as those related to earth observation and the manufacture of 
large aircraft (see also Box 3). Beyond these mechanisms, the Technology Innovation Guidance 
Funds provide financial support, including loans and equity, to invest in innovative start-ups and 
SMEs within priority and strategic areas. Additionally, the Bases and Talents Programme supports 
research  infrastructure  and  talent  development.  While  these  programmes  sometimes  offer 
opportunities for international organisations, participation does not appear to be straightforward or 
easily accessible (Development Solutions Europe, 2018). 

Box 3. China’s Major S&T Projects (“Mega Projects”) 14 

❖  Objective: These initiatives are geared towards large and ambitious R&I challenges 
pivotal  for  China’s  mid-  and  long-term  development.  The  projects  focus  on  key 
products, engineering tasks, and technologies of strategic importance. 

❖  Approach:  The  projects  utilise  public-private  S&T  cooperation,  effectively 

leveraging both public and private resources. 

❖  Funding: While exact figures on public funding are not available, studies suggest 
approximately USD 75 billion has been allocated for the initial set of sixteen national 
megaprojects alone. 

❖  Projects:  In  2006,  sixteen  projects  were  launched,  including  three  with  partial 
military  applications  and  three  with  fully  military  applications  that  are  not  publicly 
disclosed. In 2021, seven new priority areas were identified through the 14th Five-
Year Plan. 

14 For more information, see Bazavan (2024), Poo (2021) and Sun and Cao (2021).  

24 

 
 
 
 
 
Source: Authors elaborations 

4. Selection of policy actions related to research and 

innovation  

In recent years, the EU, the US, and China have rolled out significant policy  packages to 
boost R&I investments in targeted science and technology  (S&T) areas. These initiatives 
aim  to  enhance  competitiveness,  secure  technological 
leadership,  and  safeguard 
sovereignty (see Table 1). 

In the wake of the COVID-19 pandemic and the war in Ukraine, the EU has introduced several 
legislative  measures  to  advance  R&I  developments  and  reduce  dependencies  that 
undermine its competitiveness. Notably, the Recovery and Resilience Facility, with a budget of 
EUR  650  billion,  offers  loans  and  grants  to  support  EU  Member  States  through  reforms  and 
investments. This initiative drives economic recovery from the pandemic and promotes green and 
digital transitions, dedicating at least 37% of the budget to green actions and 20% to digital actions 
(European Commission, 2020). 15 Additional key EU initiatives include the RePowerEU Plan, which 
addresses the energy crisis by reducing reliance on Russian energy and stimulating breakthrough 
innovations in renewable and low-carbon hydrogen (European Commission, 2022). The EU Chips 
Act  further  directs  R&D  efforts  into  semiconductor  technologies  and  applications,  amplifying 
production capacity and investments (European Commission, 2023). At the start of 2025, the EU 
published the Competitiveness Compass, building on Draghi's report on the future of European 
competitiveness. This roadmap aims to boost EU competitiveness for the upcoming Commission 
period, closing the innovation gap with the US and China (European Commission, 2025). Besides 
the  RRF,  the  other  initiatives  are  financed,  regarding  public  contributions  at  the  Union  level, 
through prioritisation of the existing Multiannual Financial Framework budget for the period 2021-
2027. 

Since 2021, the US has enhanced policy interventions to stimulate R&I efforts in strategic 
technologies  and  to  foster  domestic  manufacturing  and  supply  through  a  variety  of 
instruments, including tax incentives and grants. Through the Inflation Reduction Act (2022, 
USD 400 billion), the US employs investments and tax benefits to address climate change, boost 
the  clean  energy  supply,  and  strengthen  US  competitiveness,  innovation  performance,  and 
industrial productivity (McKinsey, 2022a).  Meanwhile, the US Chips and Science Act (2022, USD 

15  See  for  current  information  on  the  RRF  also  https://commission.europa.eu/business-economy-

euro/economic-recovery/recovery-and-resilience-facility_en.  

25 

 
 
 
 
 
280  billion)  aims  to  address  global  semiconductor  shortages,  enhance  US  technological 
leadership,  and  ensure  economic  security  through  increased  domestic  production  and  capacity 
building,  as  well  as  R&D  and  skill  investments  (McKinsey,  2022b).  With  the  Infrastructure 
Investment and Jobs Act (2021, USD 1.2 trillion), the US aims to revitalise and modernise critical 
infrastructure  across  the  country.  R&D  resources  have  been  freed  to  boost  infrastructures, 
including rail, energy, air, and water (McKinsey, 2021). Before this, in 2021, to ensure continued 
US  leadership  in  AI  developments,  the  US  government  put  forward  the  National  Artificial 
Intelligence  Initiative  Act  to  prioritise  and  boost  AI  R&D,  infrastructure,  and  skills  training  (US 
Congress,  2020).  These  strategies  and  investment  packages  exemplify  the  assertive  industrial 
policy currently seen in the US, though a change in presidency could lead to a shift in the type of 
public interventions, moving from direct public investments to an increased focus on deregulation 
and tax benefits. 

China  has  launched  ambitious  strategies  and  increased  its  international  presence  to 
establish  itself  as  a  leading  country  in  R&D,  focusing  on  investments  and  building 
capacities  in  key  and  strategic  technological  and  scientific  areas.  A  decade  ago,  China 
introduced  the  Made  in  China  (MIC)  2025  strategy  to  become  a  leading  global  technological 
superpower by 2049. The MIC 2025 strategy outlines ten priority sectors, including aerospace and 
aeronautics,  biopharmaceuticals  and  high-end  medical  equipment,  next-generation  IT,  energy-
efficient and new energy automobiles, and new and advanced materials (CSET, 2022b). China's 
14th Five-Year Plan for National Economic and Social Development and Long-Range Objectives 
for  2035,  launched  in  2021,  reinforces  these  initiatives  through  the  establishment  of  several 
national laboratories in strategic S&T areas, including quantum information, photonics, micro- and 
nano-electronics, network communications, AI, biotech and pharmaceuticals, and modern energy 
systems. Additionally, new Major S&T Projects have been initiated in key industries, as set-out in 
Box  3  (CSET,  2021).  Aligned  with  these  strategies  is  the  more  recent  initiative  to  foster  the 
domestic market and reduce reliance on exports, known as the Dual Circulation Plan. This plan 
aims  to  shift  the  country’s  economic  growth  model  toward  more  sustainable  and  self-sufficient 
industries  by  stimulating  national  consumption  and  investments  in  R&I  as  a  driver  for  growth 
(CSET, 2022c). Another significant Chinese strategy is the Belt and Road Initiative, launched in 
2013,  which  promotes  infrastructure  development  and  strengthens  cooperation  in  Asia,  Africa, 
Latin America, and Europe through Chinese lending and supply (Hirakawa, 2024).  

26 

 
 
 
 
Table 1: Overview of selected R&I policies in the EU, US, China 

EU 

US 

China  

Competitiveness Compass 
(2025) 

Inflation Reduction Act 
(2022, USD 400 billion) 

China’s 14th Five-Year plan 
(2021) 

Guiding and enhancing the EU's 
competitiveness in the context of 
rapidly evolving tech landscape 
and geopolitical shifts, including 
through closing the innovation 
gap with the USA and China 

Address climate change, 
strengthening US 
competitiveness and support 
clean energy initiatives, through 
tax incentives and investments 
for renewable energy projects 

Strengthen the Chinese national 
economy between 2021 and 2025, 
emphasizes high-tech innovation, 
including by prioritising strategic 
S&T areas including digital and 
health tech 

Recovery and Resilience 
Facility  
(2021, EUR 650 billion)  

US Chips and Science Act  
(2022, USD 280 billion)  

Dual Circulation Plan  
(2022) 

Foster a stronger and more 
resilient recovery of the EU from 
the COVID-19 crisis via support 
(reforms and investments) to EU 
member states that drive 
economic recovery and promote 
the green and digital transitions 

Strengthen US semiconductor 
sector, by addressing 
shortages and technological 
leadership through increased 
domestic production and 
capacity building, and R&D and 
skill investments 

Shift China’s economic growth 
model towards sustainable and 
self-sufficient, reducing export 
reliance, including by stimulating 
national consumption and R&I 
investments 

RePowerEU Plan 
(2023) 

Reduce EU’s energy dependency 
and socio-economic needs 
caused by Russians invasion of 
Ukraine, by accelerating the 
transition to a clean energy 
system and diversification 

EU Chips Act 
(2023) 

Infrastructure Investment and 
Jobs Act  
(2021, USD 1.2 trillion)  

Made in China Strategy  
(2015) 

Revitalising and modernising 
critical infrastructure across the 
US. R&D investments to boost 
infrastructures including rail, 
energy, air, and water 

Make China a leading global 
technological superpower by 2049, 
through priority investments in 
several key S&T areas to boost 
national capabilities and industries 

Artificial Intelligence Initiative 
Act 
(2021) 

Belt and Road Initiative 
(2013) 

Boost Europe's competitiveness 
and resilience in semiconductor 
technologies and applications, by 
boosting production capacity and 
(R&I) investments 

Ensuring continued US 
leadership in AI, including 
through prioritize AI R&D, 
infrastructure, and skills training 

Promote infrastructure 
development and strengthen 
cooperation in Asia, Africa, Latin 
America and Europe through 
Chinese lending and supply 

Source: Authors elaborations.  
Note: This table provides a selection of policies on EU-level, while EU Member States in parallel also have introduced 
relevant policy. 

27 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5. Conclusion  

Figure 18: Key dimensions and considerations 

In recent decades, the EU, US, and China have each developed robust R&I policies aimed 
at boosting investments and prioritising strategic science and technology areas to maintain 
global  leadership  and  safeguard  national  interests.  This  paper  emphasises  that  all  three 
economies have implemented over recent years strategies to enhance industrial competitiveness 
in key sectors. Notable examples include initiatives to advance the semiconductor industry and the 
development  of  renewable  energy  resources  and  clean  technologies,  which  are  central  to  the 
global  quest  for  leadership  and  managing  of  dependencies.  The  fragile  and  rapidly  developing 
global political landscape calls for the EU to continue to respond appropriately, through a balanced 
and  strategic  approach,  to  international  engagement.  This  can  allow  EU’s  economy  to  thrive 
through  innovation  and  cooperation  while  safeguarding  its  interests  and  sovereignty  in  a 
competitive global landscape through a 'promoting, protecting and partnering’ approach (European 
Commission, 2023b).  

In  the  past  decade,  China  and  the  US  have  outpaced  the  EU  in  leveraging  public  R&D 
investments  into  robust private sector  funding.  Our  analysis  reveals  that since  2010,  these 
countries have seen significant growth in private R&D funding, aligning with the digital boom and 
the  rise  of  enterprises—primarily  from  the  US  and  China—in  the  digital  (IT)  sector  that  heavily 
invest in R&D. In contrast, the EU boasts a different economic structure, characterized by greater 
diversity but a concentration in medium high-tech industries. This explains partly the disparities in 

28 

 
 
private  R&D funding  (European  Commission,  2024).  Given  that  digital  technologies are notably 
complex and may contribute to lagging productivity and unwanted dependencies for the EU (Di 
Girolamo et al., 2023) and considering that the EU's target of 3% for R&D investments remains 
elusive due to insufficient private investment, reflecting on the EU's economic structure could be 
justified.  This  could  include  a  stronger  emphasis  on  disruptive  innovations  and  advanced 
technologies (Draghi, 2024). Policies play an important role in incentivise enterprises and ensuring 
an  innovation-friendly  environment.  Encouragingly,  some  EU Member  States  have  successfully 
leveraged public R&D funding to private investments, offering valuable insights and pathways for 
best  practices.  Additionally,  the  balance  between  direct  and  indirect  R&D  support  should  be 
considered in these reflections, as indirect support (through tax incentives) gained importance in 
recent years. Currently, the US exceeds the level of indirect support as seen in China and the EU, 
pointing to potential strategies for enhancing private investment. 

With private R&D funding trailing behind that of other major economies, the EU finds itself 
increasingly  reliant  on  public  funding.  This  dependency  underscores  the  importance  of 
ensuring the efficiency of the EU's currently fragmented public funding system. Given the 
constraints on public resources, optimising their allocation is vital. This paper shows that EU public 
R&D  funding  is  fragmented  across  multiple  governmental  layers,  among  Member  States  and 
between EU and Member State levels, as well as programmes. Only a fraction of R&D funding is 
funded on Union level. This fragmentation stresses the relevance of a comprehensive assessment 
of the current structures of public EU R&D funding. Strengthening coordination can help allocate 
funding  more  effectively,  by  creating  economies  of  scale  and  minimising  potential  duplications. 
Additionally,  exploring  the  benefits  of  more  consolidated  budgets  for  EU-wide  needs,  while 
respecting  the  subsidiarity  principle  as  well  simplification  efforts,  can  improve  accessibility  and 
impact.   

Size matters. Although the EU relies more on public funding, the actual amounts allocated 
to public R&D fall short compared to the US, and EU FPs’ annual budgets are below those 
of their US and Chinese counterparts. To effectively compete on the global stage for talent and 
knowledge,  it  is  crucial  to  allocate  sufficient  R&D  funding  to  strategic  priorities.  This  paper 
illustrates that, in concrete terms, EU's public R&D funding is outmatched by that of the US. This 
disparity extends to the budgets of key EU FP instruments: for instance, the ERC operates with 
fewer  resources  than  both  the  NSF  and  the  NNSF,  while  the  EIC  remains  comparatively  small 
even in relation to DARPA alone. Moreover, the combined R&D funding at US federal level for the 
NIH, NASA, and NSF alone is more than four times the annual budget of the entire EU FP. These 
insights  are  particularly  relevant  when  examining  thematic  areas,  as  EU  FP  funding  is  only  a 
fraction of what the US government dedicates to similar fields. This highlights the importance of 
better coordination and prioritisation of EU R&D budgets to areas with the highest EU added value. 

Policy reflections should touch upon the distribution of EU public R&D funding, including 
the actors and the stages of R&D supported, to assess the alignment between means and 
objectives.  This  paper  shows  that  the  EU,  US  and  China  have  different  mechanisms  and 
allocations regarding the organisations and type of R&D funded. Two aspects stand out. First, the 
US  and  Chinese  governments  channel  more  public  R&D  funding  through  public  sector 
organisations,  while  EU  public  R&D  funds  are  primarily  directed  towards  higher  education 
institutes. Interestingly, the EU FP diverges from this general EU pattern, with a relative lower level 
of  funding  to  universities,  while  the  share for the  private  sector is  noticeably  higher. This  could 
reflect the gap in private sector funding (in particular related to riskier innovation activities) that the 
EU FP tries to fill, for example through the EIC. Second, the EU seems to place greater emphasis 
on research efforts, while the US and China focus more on the later stages of R&D. Interpreting 
these results need care. For example, US defence R&D funding skews the public funding to the 
later stages. Also, the type of sector performing R&D can influence the stages of R&D funding, as, 
for example, universities are by nature more established in research efforts. Though, reflections 
can help in optimising the current EU funding design, assessing if the current means are suited for 
EU’s objectives, including to lead new innovation waves. One aspect that could be touched upon 
is  whether  the  later  stages  of  R&I  are  sufficiently  supported  to  ensure  that  research  can  be 

29 

 
translated into market-ready and scalable innovations, including ensuring an adequate innovation 
ecosystem.  

Overall, the EU, China, and the US each  have  distinct as well as similar mechanisms  for 
advancing their R&I capabilities. The EU FP stands out as a globally unique cooperative R&I 
initiative, providing funding to over 40 countries and encompassing a diverse array of instruments 
and support for various thematic areas. This comprehensive and integrated approach makes it a 
strategic tool for enhancing international collaboration and fostering key thematic areas. The US 
R&I landscape features agencies like DARPA that focus on developing disruptive innovations and 
new technologies, facilitating the rapid transformation of ideas into successful innovations. This 
model has inspired other economies to establish similar agencies.16 Meanwhile, China has quickly 
strengthened its high-tech development, particularly in areas like AI and quantum technologies, by 
investing in ‘Major S&T projects’ that concentrate efforts and blend public and private resources. 
Despite  their  differences,  the  three  economies  also  share  equivalent  mechanisms,  such  as 
agencies  dedicated  to  funding  groundbreaking  basic  research  and  the  use  of  public-private 
partnerships. 

16 For example, the Advanced Research and Invention Agency (ARIA) in the UK and the Federal Agency 

for Disruptive Innovation (SPRIND) in Germany are inspired by the principles of DARPA. 

30 

 
 
 
 
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33 

 
GETTING IN TOUCH WITH THE EU 

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This paper provides comparative insights into how the EU and 
governments of major economies organise and allocate their R&I 
funding. The paper conducts a benchmarking analysis of the 
scale, design, and main features of public R&I funding in major 
global economies. Specifically, it compares the current EU FP, 
Horizon Europe, with the R&I mechanisms of the US and China, 
two of the largest research and development (R&D) spenders in 
the world, alongside the EU. The paper identifies five key findings 
on public R&I funding and their policy implications for the EU, in 
regard to global policy developments, the size of and strategic 
prioritisation, ecosystem phases and actors, fragmentation and 
leveraging the private sector. 

Studies and reports