The central government has urged both the public and private sectors to up their investment in innovation.
National Bureau of Statistics of China (NBS) Commissioner Xie Fuzhan told a conference in Suzhou over the weekend that innovation is a key factor fuelling China's sustainable economic growth and the transformation of its growth pattern.

Xie spoke as the NBS released its latest survey on the levels of innovation in various industrial centres around the country.

The survey shows that domestic enterprises currently spend an average of about 10 per cent of their revenue on product and technological innovation. It predicts that the average ratio will rise to 18 per cent by 2008.

Private enterprises' income from innovation accounts for an average 13 per cent of their revenue, a figure that is expected to increase to 22 per cent by 2008. State-owned firms currently spend 9 per cent of their revenue on innovation, while foreign-invested companies invest 8.5 per cent.

In the next three years, 87 per cent of the surveyed enterprises plan to raise capital to help pay for research and development talents they hope to attract. Separately, the survey revealed that 73 per cent of surveyed enterprises said they were taking steps in the introduction of new facilities, while 15 per cent plan to step up their patent purchases, and 12 per cent want to intensify their acquisition activities.

Per capita innovation expenses in 2004 in China accounted for only 0.71 per cent of total per capita expenses, much lower than 1.2 per cent in the United States and 1.1 per cent in Japan.

With growing pressure on natural resources and greater attention being paid to the state of the environment, economic innovations, especially those initiated by enterprises, play a pivotal role in the healthy and stable growth of China's economy.

"An institutionalized invention environment should be established to tolerate more risks and failures from innovations. A stimulus mechanism to encourage and finance innovation is also what China urgently requires," said Adrian Dillon, chief financial officer and executive vice-president of finance and administration at US firm Agilent Technologies, a world-leading measurement company.

Research also shows that costs generated by innovative activities are largely digested within enterprises, which make up more than three-quarters of the full capital resource, while 12 per cent of capital is covered by loans and the remaining 5 per cent of capital comes from government financial support, the capital market and co-operation with domestic and overseas partners.

Zhu Congjiu, president of the Shanghai Stock Exchange, called for "a mechanism to encourage various means of raising capital including venture capital and private equities to direct social capital into the research and development section of enterprises."

A total of 1,600 companies in 40 cities were surveyed in September by the NBS. A total of 60.5 per cent of these firms were in East China, an area noted for its dynamic economic growth and innovative activities.

Editor: Yan