Premier Zhu Rongji's state-of-the-nation call for intensifying enterprise technological innovation at the just-concluded National People's Congress session got a prompt response from the State Economic and Trade Commission (SETC).

All of the country's 520 key State-owned enterprises (SOEs) must establish research and development (R&D) centers by the end of this year, the commission announced. An additional 40 ones will be created at city levels to shore up expansion of smaller businesses.

Currently, the SETC has assessed and approved 221 national level R&D centers in the top SOEs.

The SETC had earlier warned that if the country's key SOEs failed to create the centers, they would lose their bank-loan and material-supply privileges. Also at stake was their market competitive ability, experts warned.

Realizing that accelerating development of new technology and products was the only way to save SOEs in financial difficulty, China is upgrading traditional industries and racing to control booming and high-tech segments, according to Wang Jianzeng, a director of the SETC.

Wang, of the commission's Technical Innovation and Equipment Department, said the efforts will break the bottleneck holding back the country's progress in optimizing product mix and industrial structure. It will also aid Chinese enterprise groups in strengthening their foothold in the global market, he said.

China's large and medium-sized industrial SOEs spent 21.6 billion yuan (US$2.6 billion) in 1998 for R&D activities, representing 2 per cent of their annual sales, according to the latest statistics from Wang's department.

Analysts noted that funds allocated for technological innovation are expected to edge up this year.

To speed up technological innovation, companies should further buoy co-operation with universities and science research institutes, Wang said. He pointed out that such institutions own 70 per cent of the country's annual high-tech research achievements.

Between 1992 and 1998, such co-operation had led to the signing of more than 30,000 technology transfer contracts valued at 2.83 billion yuan (US$188.6 million), according to the SETC statistics.

He said a national technological innovation fair is scheduled to open in Suzhou, Jiangsu Province on May 27, to demonstrate the accomplishments in setting up an enterprise-centered technological innovation system.