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China will encourage more foreign enterprises to set up research and development (R&D) institutes in China, Sun Peng, deputy director of the foreign investment department of the Chinese Ministry of Commerce said in Beijing on Thursday.

"We will encourage multinationals to set up research and development institutes in china and attract more foreign investment into the sector," said Sun.

Sun told the International Forum on Globalization of R&D, that the Ministry of Commerce is now drawing up a set of regulation on foreign-funded research institutes. The regulations will be based on a wide-ranging investigation of existing R&D departments launched by multinationals in China.

"The regulations will solve problems of foreign-invested research institutes, such as importing raw material, customs declaration and recruitment," he added.

According to Sun, China will revise its list of hi-tech products in which foreign investment will be encouraged.

"We will provide favorable policies to encourage and support foreign-invested companies to conduct research on the products listed," Sun said.

Sun noted that direct foreign investment has turned to high-end manufacturing and research and development sectors in recent years, bringing new opportunities for developing countries to speed up their industrial upgrading.

To cope with the new situation, the Chinese government has adopted a series of policies favorable to foreign investment, and the efforts have paid off, Sun said.

According to a survey by the United Nations Conference on Trade and Development, China has become a major R&D base, with 61.8 percent of the world's multinationals considering China as their first choice to launch overseas R&D institutes.

"We should not only introduce foreign investment in R&D sector, but also help more multinationals to transfer their R&D strategy in China and join hands with their Chinese counterparts," said Sun.

He stressed that China would push forward foreign investment in hi-tech research field.

Statistics showed that in 2005, hi-tech companies with foreign investment spent 15.26 billion yuan (around 1.9 billion U.S. dollars) on R&D, 19.19 billion yuan (around 2.4 billion U.S. dollars) in new product development.

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