Lack of funding and cooperation among research institutes has formed major hurdles in China's efforts to transform from the world's manufacturing center into an innovation-oriented economy, an official study has revealed.

The current economic downturn, which severely dampens the country's export sector, also highlights the need for Chinese enterprises to break away from unsustainable growth on simply producing goods for foreign companies that hold key technologies.

The conclusions were made by a working group of the Standing Committee of the National People's Congress (NPC), China's top legislative body. This week, the group finished a two-month study on how special funds from central budget have been used to boost technological innovation.

The Chinese central government in March announced an expenditure of 20 billion yuan (2.94 billion U.S. dollars) this year, from its 908 billion yuan of annual budget on public sectors, to help enterprises upgrade technology, and improve energy efficiency and innovation.

Experts said Friday that the funding showed the government was encouraging enterprises to make more efforts in enhancing their innovative capacities, even though the funding was still quite small.

The 20 billion yuan funding will help some enterprises to sharpen their innovative edge. But it cannot dramatically boost China's research and development capabilities, said Mu Rongping, director of the Institute of Policy and Management of the Chinese Academy of Sciences.

Shi Xiushi, a member of the NPC Standing Committee and of the working group, also believed the central funding was not a once-and-for-all solution. It should be used as seed money to attract more investment from enterprises and local governments.

Enterprises must play the major role in technological and scientific innovation, Shi said.

However, enterprises in northwest China's Shaanxi Province only contributed 37 percent of the province's annual investment in new technology development in 2007, compared with the national level of 67 percent.

In northeast China's Liaoning Province, an old industrial base, the working group found a bearing factory could produce high-quality bearing products, but with high-priced bearing steel and machine tools imported from Germany and the Republic of Korea.

As long as we make no breakthroughs in key technologies of basic raw materials and manufacturing equipment, our industry's development will continue to be restrained by developed countries, Shi said.

The study also found some new technologies never made their way from laboratories to production lines, largely due to lack of cooperation among research institutes.

Shaanxi Province has many scientific research institutions but has fallen behind the equally research-resources-rich Hubei Province in terms of exploiting those resources.

Hubei's provincial government encourages cooperation and information sharing among universities, research institutions and enterprises, which helps put the newly developed technologies into use.

The sharing of scientific and technological resources is important in shifting from 'Made in China' to 'Created in China',said Tong Guohua, president of Hubei-based Fenghuo Technology Group, a manufacturer of optical communication sets. 

                                                                                                            Source:Xinhua