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R&D spending in Canada declined an average of 1.2 per cent between 2005 and 2010, with sharp drops in 2008 and 2010, a report from the OECD says.

Kevin Van Paassen/The Globe and Mail

Chalk up another win for China.

Research-and-development spending has been tumbling in Canada, and virtually every other wealthy country since the economic crisis hit in 2008.

Not China. Spending on R&D doubled between 2005 and 2010 to $179-billion (U.S.), ranking it second only to the United States, according to a report Thursday by the Organization for Economic Co-operation Development.

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"The gap between countries that grow and innovate and those that do not is widening," the report concluded.

China is now spending more than Canada on R&D relative to the size of its economy (1.77 per cent of GDP versus 1.74 per cent).

Overall, China now accounts for 13 per cent of global R&D spending, double its share in 2004. R&D spending by companies grew 30 per cent in 2010.

It was a different story among the wealthy countries that make up the OECD. Business spending on R&D fell a record 4.5 per cent in 2009 and hasn't yet recovered. Only France and South Korea bucked the trend, according to the report.

Canada continues to move in the wrong direction, the OECD said. R&D spending declined an average of 1.2 per cent between 2005 and 2010, with sharp drops in 2008 and 2010. Total spending now sits at $24-billion.

The report warned that falling investment in R&D could have a lasting impact on "innovation and long-term growth."

An OECD scorecard of 22 measures of innovation capacity shows Canada generally above the OECD median, including government spending on R&D, quality of its universities, trademarks, published scientific work, patents and college graduates, and science scores by 15 year-olds.

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But it lags other wealthy countries is several key areas, such as business spending on R&D, leading corporate spenders, venture capital, and patents by start-ups and wireless broadband subscribers.

The OECD also pointed out that Canada's labour productivity has been growing slowly for most of the decade to 2010.

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