Northrop CEO Says China's R&D spending could 'leapfrog' U.S.

NEW YORK | By Alwyn Scott

China could "leapfrog" the United States in certain technological capabilities in coming years, thanks to its burgeoning investment in research and development, the head of Northrop Grumman Corp (NOC.N) warned on Thursday.

"Although the United States is still the leader overall in research and development spending, that is changing quickly," the defense company Chief Executive Wes Bush said in an address to the Wings Club, an aviation organization in New York.

U.S. spending growth is lagging behind China's, he said, "a situation that acts like a break on progress and even places our nation's technological lead in jeopardy."

Measured in purchasing power parity, China is expected to surpass the United States in R&D spending by around 2022, he said, adding that "the quality of R&D is China is impressive.

U.S. Defense Undersecretary Frank Kendall has been critical about the high level of share buybacks among defense companies, which put a drain on capital resources, and recently said he hoped new research funding in the Pentagon's fiscal 2017 budget proposal would help motivate companies to invest more in internal research and development, or IRAD.

Bush said he thought defense companies are striking the right balance between research spending and rewarding investors, but acknowledged Kendall's frustration. "Defense R&D has taken a very brutal hit" in recent U.S. budgets, he said.

Bush said numerous emerging technologies where China is investing "represent avenues for potential leapfrogging." Among them, he cited cyber technology and synthetic biology as areas where China could assume global leadership.