The Ministry of Education has ordered Chinese universities and colleges to overhaul their start-up business units following a series of lawsuits and problems in school-funded enterprises.

School leaders must withdraw from posts in school-affiliated firms, according to the ministry.

"Many Chinese universities create companies in order to rapidly transfer the fruits of scientific research into actual products. In this way they contribute to scientific and technological innovation in China," said educational minister Zhou Ji on Thursday.

Some high-tech university enterprises, such as the Founder Group of Peking University and Unisplendour Corporation Limited of Tsinghua University, have become famous in China, further burnishing their university's reputation.

However, in other cases substandard practices and commercial problems have affected the healthy development of university enterprises not to mention school stability, Zhou said

The latest case concerns the Kaiyuan Group, affiliated to north China's Shaanxi-based Xi'an Jiaotong University, which has been on the verge of bankruptcy since 2004. The majority of Kaiyuan's start-up capital was provided by school teachers who have since demanded to be reimbursed.

Zhou called on all university heads to ensure that school enterprises function according to modern standards and build mechanisms that can efficiently manage company assets.

All university enterprises should ensure that the necessary adjustments have been made by June 2007, according to the ministry.

China had more than 2,300 universities and colleges by the end of 2005.

Editor: Wing