While still a small part of the overall economy, private technology firms are attaching more importance to innovation as they grow, a national survey said.

"In the 1990s, most private technology companies valued market development but were weak in research and development," said Peng Shutang, a researcher on private enterprises. "But now, they pay more attention to innovation and some of them have made remarkable achievements, realizing that patents are the key weapon to increase their competitiveness."

An example is Huawei, a telecom equipment manufacturer that has invested 15 percent of sales revenue into research and development (R&D) each year. Its number of patent applications increased by over 100 percent annually, so that by the end of 2005, the company had filed for 8,000 patents. 

Ways of acquiring technologies differ by companies. Some private technology firms, including Huawei, Haier and Lenovo, set up R&D centers of their own and conduct most of their own research.

Others refine and upgrade patents purchased from foreign rivals. Some cooperates with universities and research institutes at home in bid to adopt their research.

"Private high-tech enterprises enjoyed a healthy development between 2001 to 2005 in terms of scale and human resources, as the government provided them with better policies and legal environment," Peng said.

By the end of 2005, China had 143,991 private technology firms, up 1.87 percent from a year earlier. Their revenue totaled 6.12 trillion yuan in 2005, up 27.32 percent from 2004.

Peng and his group found that over 70 percent of the enterprises in national economic and technology development zones are privately owned firms.

Beijing and Shenzhen, in south China's Guangdong Province, have grown into main centers for private high-tech enterprises, while private companies in Shanghai lead the pharmaceutical and health product industries.

Like other private companies, technology firms, in particular small and medium-sized companies, also had difficulties with financing, overseas investment and land approval.

Although most private technology enterprises started through innovation, they do not have a long-term, Peng said. They own a number of patents for design but are short of patents for invention, he noted.

(China Daily February 10, 2007)