The U.S. still leads the world in absolute R&D spending, now investing some trillion dollars annually in R&D each year. By 2027, the U.S. is on track to spend in the ballpark of $1.2 trillion on R&D. But its dominance isn’t secure. In 2025, America’s scientific enterprise faces significant headwinds, and other regions, particularly Asia, are rapidly closing the gap. China’s annual investment has crossed the half-trillion-dollar mark, rapidly closing in on America’s intensity and roughly equating the R&D spending of all of Europe. South Korea and Japan continue punching above their weight, sustaining consistently high levels of investment relative to GDP. Europe remains a key player—Germany foremost among its peers—but the data clearly signals that Asia’s accelerating R&D investments, both in scale and intensity, pose a real challenge to traditional Western leadership. When adjusted for local cost differences — that is, purchasing power parity (PPP) — China is already close to U.S. levels of overall R&D expenditure, and could eclipse America in the coming years, as Nature has noted.
Economies like Japan, Germany, and the U.K. consistently surpass 3% of their GDP dedicated to R&D, but their absolute spending still lags behind China’s scale. By 2027, Japan could spend around 3.5% of its GDP or roughly $163.1 billion in nominal R&D. Germany, similarly, will likely maintain a roughly 3.1% R&D intensity, translating to about $163.4 billion in nominal R&D spending, while the U.K. will likely be in the same ballpark in terms of R&D intensity, spending roughly $111.4 billion by 2027. But while China could spend slightly less in terms of overall intensity, its nominal R&D spending by 2027 could surpass $600. India is rising, too, despite a relatively modest intensity (under 1%) and current spending slightly above $30 billion; it is rapidly expanding its R&D footprint.
Several countries spend considerably more than the U.S. when it comes to R&D intensity. There is Israel, which spends more than 6% of GDP—nearly double the OECD average. Although data are scant, Liechtenstein reportedly spends a similar level.
While there is a clear country-based story here, cities and Metro areas continue to be drivers of innovation. Beijing, Seoul, Tel Aviv, and Bangalore are rapidly solidifying their positions as global R&D hubs, while stalwarts like Boston and Silicon Valley hold their own.
While there is a clear East vs. West dynamic when looking at the overall innovation ecosystem, the picture is more nuanced when breaking things down by industry. When examining sector-specific R&D investment, the automotive industry presents a contrast to overall R&D patterns. As the U.S. and Asia vie for global R&D supremacy, the real battlegrounds are emerging in sector-specific innovation, where regional strengths, ranging from Germany’s automotive dominance to China’s electronics surge, signal a future of fierce, specialized competition.
